When you own a business, there are many aspects of your business where you will want to be proactive vs. reactive.  For example, you may be proactive in managing your monthly cash flow, or you may be reactive when you run out of money! In this article, we’ll discuss some of the ways you can determine if your accountant is proactive or reactive, and why it matters.

In a reactive business, the tendency is to respond to events after they occur, while proactive strategies are designed to anticipate possible challenges and plan ahead.  At Emerald Financial Partners, we believe that the accounting of your business should always have a proactive element.

By definition, the word proactive is, “creating or controlling a situation by causing something to happen rather than responding to it after it has happened.”  What does this all of this mean when it comes to accounting?

A reactive accountant addresses issues after they’ve happened and, in some cases, performs routine crisis management.  That can be stressful on the business! Often, the accountant is dealing with numbers as a historical event; that is, the income and expenses that have already happened.  They are responding only after something else has caused a concern to arise.  At tax time, they put numbers in boxes, perform calculations and provide a synopsis of what could be changed going forward, based on this history.  This is reactive accounting.

A proactive accountant, on the other hand, is working side by side with the owner, collaboratively to help them grow their business.  A proactive accountant is an adviser that is looking for opportunity to position the business for profitability, tax savings, expense reduction, and more.  A proactive accountant addresses the client’s needs before they become urgent issues.

In 2018, the difference between a proactive accountant and a reactive accountant was never more obvious.  With all of the tax changes affecting small businesses, a proactive accountant, like Emerald Financial Partners, suggested a review with their clients to ensure that the business was pivoting to take advantage of new tax benefits before year end.  Some of the ideas we reviewed with our clients included:

• Whether their business was categorized under the proper entity based on new tax laws,
• Would be impacted by the new Qualified Business Income deduction,
• That the salary calculations and requirements for business owners was being met

In addition, we meet with clients regularly and advise them on ways to grow their business.  Is your accountant:

• Focused on real-time tax planning or just a once a year look-back?
• Knowledgeable about your specific industry and/or challenges? Able to make recommendations, based on this knowledge, about ways to grow your business or increase profitability?
• Providing ideas to save you taxes for the coming year?
• Aware of your business goals and providing regular guidance and feedback to help you reach those goals?

As a business owner, the difference between a proactive or reactive accountant could mean the difference between success and failure.  Are you working with a proactive accountant?  If you’re not sure, contact Emerald Financial Partners and we’ll get you and your business on the right path.