As in any business process, sometimes mistakes in accounting creep up. Even the most professional, focused, and reliable accountants are not completely error-proof. If you discover an error made by your accountant, it’s important to take immediate action to fix the issue.
This can be an emotional thing to deal with. Below are some crucial steps to take to ensure your error gets fixed and handled appropriately.
Gather Relevant Information and Documents
Before you do anything else, gather all of the information and documents related to the mistake (including how you discovered it). This should include any statements, reports, or financial documents. Take note of the specific error in as much detail as possible (i.e. what was the error, what was the date, amounts), reference any documents that show evidence of the mistake, and also make note of any consequences and fallout (i.e. fees, fines, etc.).
Bring the incident to your accountant
Once you are aware of an error, or something that doesn’t look right, it’s important to bring this up with your accountant right away. The sooner your accountant is made aware, the sooner it can investigate and remedy the issue.
The first step is communicating the mistake. Explain what you’ve discovered, provide any documents or evidence of the mistake, and explain the issue clearly and directly. Try to stay calm and professional, and be sure to give your accountant an opportunity to explain the situation.
You might want to ask something like, “Can you get me a detailed explanation of the mistake and how it occurred?”
You may also want to take notes.
Actively listen and do your best to understand the situation
There’s no denying that accounting is complex! Fortunately, because of this, most CPAs will want to take a closer look, and it’s important to give your accountant an opportunity to review the issue. They may need time to investigate the mistake on their end and identify what happened. Of course, there are sometimes circumstances where it appears a mistake has been made but hasn’t (i.e. it seems you missed the tax deadline, but your federal taxes were paid on time even if the paperwork wasn’t filed, because you filed an extension). However, if it turns out there is a mistake, it’s important to understand how this occurred, and to give yourself space to hear an explanation and correction.
Have an honest conversation about how this affected you
It is important to explain how this issue affected you. Mistakes can cause extra stress, in addition to final consequences. Offer details on any financial impact this has have (i.e. monetary losses, penalties, legal consequences). If the mistake has significant financial implications, you may want to reach out to a third party for additional support.
Discuss steps forward
Now that your accountant has analyzed the issue and can offer an explanation, it’s important to talk about next steps forward. This includes how the error will be corrected, what will be done in the future to prevent it, and any other potential solutions for rectifying the error. This will depend on your situation, options, and what makes the most sense for the unique terms of the mistake.
Remember that conversations about money are always going to feel emotional
Money is a huge stressor for most people, and no one likes paying fees, fines, or finding any hiccups in statements, balances, and reports. If you’re feeling anger or frustration, know that conversations about money almost always bring up complex feelings and reactions. It’s perfectly fine if you need to take a few days to process your emotions around the incident and approach the conversation later. If the mistake has immediate consequences, however, it’s important to heed your CPAs advice and work quickly.
Remember that taxes and accounting systems are complicated
Accounting mistakes can be frustrating and have potential repercussions, but good accountants take proactive steps and have checks and balances to prevent mistakes. Of course, sometimes errors do happen. It’s important to remember that an occasional mistake is very different from a regular habit of mess ups.
Consider getting a second opinion
Calling another CPA for a second opinion can be a good idea. It doesn’t mean you have to switch accountants, but it can be good to get a second set of professional eyes on your system to identify any other potential errors you might be missing.
Consider bringing on a CPA consultant
If the error was made by an in-house team, something that can be helpful is bringing in a CPA consultant. A consultant is typically hired for a specific project or window of time, often to establish best practices, create checks and balances, and advise on accounting processes going forward.
When is it a mistake and when is it time to switch?
It’s really hard to know whether a mistake means you should change your system.
If your in-house team has made a mistake or two, but you still want to keep the relationship, bringing in a consultant for training, third-party analysis, and system auditing can get your team where it needs to be.
If your in-house team isn’t working out, rather than going through the hiring process, you may want to consider outsourcing your accounting to a CPA. This will grant you a team of experts that can cover everything from bookkeeping to payroll, while bringing additional expertise on entity structure, reporting, and how to maximize deductions.
If you’re working with a CPA-for-hire, switching can be a difficult decision to make. Learning new communication standards and platforms, as well as re-explaining how your business and industry work can be a headache. Of course, if you like your current CPA and this mistake was uncharacteristic, they worked quickly to remedy it, and, in your eyes, handled it appropriately, it may be worth sticking it out.
