Working with Your Family Business Accountant

Posting by Geoffrey D. Brown, CPA, Principal

Embedded (n): to incorporate or contain as an essential part or characteristic.

The Family Firm Institute recently published a fascinating study that looked at the relationship between family businesses and their accountants. How should a family business interact with its accountant? Many people (especially accountants) would assume that an accountant has an important role to play in the success of a family-owned enterprise.

It turns out that assumption is correct, but not in every circumstance. The research found that, for family businesses, your CPA’s involvement is most successful when your accountant is embedded in your family and your family business. While you might think of your accountant as just the person who oversees the books and numbers, when you allow your accountant to understand your broader goals, challenges, and plans, the research shows that your family business can experience increased growth and survival rates.

What Do You Mean By Embedded?

These findings immediately raise the question of what it means to embed your accountant into your family business. The word “embed” may produce some negative connotations; you think of an over-involved advisor who may also be over-charging you. In explaining the concept, the researchers use the word “familiarity.”

An accountant who is familiar with more than just the numbers can offer significant benefits to your family and your business. Not only will he/she be more able to align your financial strategies with your broader business goals, but there will be more opportunities to help you find the right resources and advisors for the unique nuances of your situation.

Working with Your Family Business Accountant

So, what’s the best way to involve your accountant so that he/she is embedded in, or familiar with, your family business? There are three key steps you can take to help facilitate this process:

Talk About the Numbers. Don’t just take the latest numbers or report from your accountant and review on your own. Talk through it with your CPA to make sure you understand the details. This conversation will facilitate information sharing and will allow your accountant to provide important insights while also giving you a forum to discuss issues. You should regularly update your accountant regarding your goals, as well as progress towards those goals.

Develop and Discuss Your Strategic Plan. Your CPA should be deeply familiar with your strategic plan and know not only your financial goals, but other aspects of your business strategy, as well – including your mission statement and your company values. As an accountant, when I have a 360-degree view of a company, that allows me to more accurately tailor my financial advice to help achieve all of the company’s objectives, whether they be related to finances or growth, or even something as seemingly unconnected as customer service.

An experienced accountant can also offer you key insights when he/she is involved in the planning process. Your CPA should act as an outside voice on market and industry conditions, offering value-add strategies from his/her experience with other similar companies.

Plan for Succession. No one likes to plan for the worst, but creating a succession plan is essential for carrying on your family business legacy. Succession planning with your accountant is about more than finding the most tax-advantageous estate planning strategies – it involves looking at what you want to accomplish, who the next generations of leaders are, and how you will get to and take your next steps. Your CPA’s involvement in the process will not only set you up for financial success, but can also help you navigate the deep waters of choosing the next leaders and transition the reins.

It’s important to note that any worthwhile accountant will bring all of these items to your attention, proactively working with you to go beyond the numbers for business success. If you find that you always have to push and prod your CPA to work with you, or that he/she only contacts you at tax time, it might be time for a change.

While we accountants can get a bad rap as boring number crunchers, when deeply involved in your family business, we can pull on our expertise and experience to help you create goals and strategies for long-term success. Working with your accountant should be an interactive process. Don’t just hand over the documents and glance at the numbers – sit down with your accountant and let him/her in on your family business’s goals, challenges, and unique features.

For more information on the study referenced in this post, click here (PDF).

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