Cheap Online Accountants & Financial Nightmares

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image.pngSource: Twitter

Like in the Tweet above, the word good often precedes the word accountant. That’s because many business owners find out the hard way how good accounting help can make or break a company.

We caught up with seven real-life small business owners who hired the cheapest accountant available to them. Join us to hear how each story turns out.

“A bad bookkeeper held my financial data hostage”

Noah James, a Vancouver, B.C.-area landscaping business owner, says he felt like his bookkeeper held him at financial gunpoint. But the trouble didn’t start with the bookkeeper he hired. It started with his mindset as a business owner.

“I was wearing too many hats and I was running out of time fast,” James recalls. “I knew something was going to break. I had to start delegating.”

So, what did he do? Too busy to do due diligence, he hired the cheapest bookkeeper he could find. “I finally found a bookkeeper and just hired them on the spot because I was desperate,” he says. “Little did I know, hiring them only sped up the trouble!”

Oddly, this bookkeeper had James continue doing the data entry and transaction categorization work. Stuck, James felt he couldn’t ask for higher-quality work because he feared the bookkeeper might somehow take revenge using his forms and records.

“It was such a waste of time and money! I was ripped off, plain and simple,” says James. “They had all my financial data, so I had to be careful not to make them mad. The failure cost my business thousands because my time is money and I still ended up doing most of the work.”

Today, James does due diligence before engaging any online accounting experts and encourages other business owners to do the same. “Never hire the first one you meet,” he says.

“I paid double in penalties and fees because of bad online accounting.”

Founder of Elevate Delta 8 Jessica Lipton now knows the value of a good accountant. But the lesson came at a cost.

“As my businesses expanded, I failed to realize the need for an upgrade from basic compliance accounting,” she says. “Eventually, though, I did — and I paid the price.”

It all started when Lipton’s growing company increased in size and complexity. Lipton says that like most business owners, real-time cash flow dominated her early-stage mindset. Then, when the venture grew, that mindset held her back. She failed to scale her business’s accounting services along with her enterprise. Her subpar accountant bungled her books, recording receipts improperly and omitting important business transactions. The miscalculations led to a misrepresentation of financial statements — an error the tax authorities flagged.

The online accountant also failed to account for small expenses, which they deemed as too insignificant. The omitted expenses added up to over $4,000, which should have been deducted for income tax savings.

Today, Lipton takes a longer-term view of hiring financial help. “While an inexpensive bookkeeper will save you money in the short run, potential errors and omissions can cost you double what you would be paying for a well-trained accountant.”
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“My online accountant didn’t care to help me take important, basic deductions.”

Dan Morris, the owner of Fire and Saw, learned that a good accountant is proactive. Sadly though, he didn’t learn the easy way.

“I hired the cheapest online accountant I could find because my business was just a part-time side hustle,” says Morris, remembering his mindset at the time. “It wasn't making much money, and I didn't know if it ever would, so I didn't want to invest in a more expensive accountant.”

As you can see, Morris’s mindset stood between his current situation and his goal.

Unfortunately, the accountant didn’t collaborate to offer even the most common, helpful tax breaks for business owners. Morris’s company then lost out on basic, big-ticket deductions because, as a non-accountant, he had no idea these tax breaks were available. He assumed (as most people do) that accountants — even the cheapest online accountant — would do this basic work on his behalf.

“I ended up paying more in income tax because my earnings appeared higher and lost out on the deduction,” he says.

Today, Morris plans to recoup most or all of what he pays for a certified public accountant (CPA) because that expert will chase deductions for his business’s benefit.

“I should have educated myself before choosing a tax preparation accountant,” he says. “The extra money I would have spent on a good online accountant would have more than been made up for itself in the deductions I would have received.”

“I had to have all my accountant’s work redone, doubling the investment of time and energy.”

Luke Palder, founder and CEO of ProofreadingServices.com, found out a bad accounting job must be fixed, and that ends up costing more. In his case, it cost nearly double.

Palder’s story began ten years ago. His business was young, and he needed to keep costs low. Why not skimp on bookkeeping and other financial services? Seemed smart at the time.

“They were cheap,” he says, recalling his bookkeeping service. “Redoing their work was not.”

At first, Palder measured the success of his new helpers by how many legitimate-looking numbers they produced for the balance sheet, a common pitfall. Turns out, the bookkeepers had been doing things incorrectly or incompletely the whole time.

“I spent about $6,500 on bookkeeping with the firm-that-shall-not-be-named,” he says. “I ended up having another firm completely redo their work for slightly less (about $4,800). It was a costly lesson both in dollars and stress.”

Today, Palder only hires accountants who leverage accounting software like QuickBooks Online, as well as technology to automate and streamline their work. This way, they maximize the value they add to a business.

“I didn’t respect the work a good accountant performs for a business. In turn, they didn’t respect my business.”

David Levi, founder and owner of Cryptoner, used to dismiss accountants’ work as basic data entry, not a necessary or value-adding service. Had he addressed his perspective, he could have saved tens of thousands of dollars, plus time, energy, and stress.

In the beginning, Levi recalls hiring the least expensive bookkeeper because he didn't think bookkeeping was crucial in the business. His main goal was to avoid penalties and stay within compliance, not save money on taxes.

Sadly the inexpensive bookkeeper reciprocated to Levi’s business the same level of (dis)respect. They did things incorrectly and didn’t seem to care what it was costing Cryptoner.

“We had to pay around $15,000 for the penalties and $20,000 more for the surcharges as we didn't notice it right away,” Levi says.

Today, Levi knows good accounting is not just an administrative task that can be done by the least expensive person available. In the future, he says he won’t skimp on accounting expertise.

“There are ways to cut costs, but if you put this business function at stake, then chances are you will be spending a lot more than saving.”

“Our unqualified bookkeeper had to re-learn QuickBooks daily.”

Lucas Travis, founder of Inboard Skate, thought his two options were to either hire the least expensive online accountant or not hire anyone at all. Now, he knows exactly what to expect when a business hires the least expensive online accountant.

Inboard Skate was young and small at the time, and Travis really wanted to cut costs, so he chose the cheapest online bookkeeper.

Regrettably, he now realizes the bookkeeper didn’t know how to do their job. But because of the lower cost, Travis felt unable to hold the person to a higher (or any) standard.

“It was troubling for us that the bookkeeper we had didn't really know much about the whole process, and she had to re-read books again every time there is a transaction,” he says. Accounting principles and standards weren't even on her radar. “The whole point of hiring a bookkeeper is to have someone knowledgeable do these tasks for you!”

By the time Travis had switched to a higher-quality service provider, the mistake had cost the company over $30,000 in work that had to be undone and redone.

These days, Travis doesn’t encourage anyone to “pay more.” To him, the answer isn’t that simple. He does say, however, you should know what to expect, and lower-cost accountants will always mean lower-quality work.

“You get what you pay for,” he says.

“I thought the smaller the rate, the more applicable to my very small business.”

Aviad Faruz, founder of ecommerce retail site Faruzo, has also learned the value of a good online accountant — and the pitfalls of a bad one.

In the beginning, Faruz recalls the business’s many duties, responsibilities, pressures, crises, and needs weighing heavily on him. He agreed to pay an accountant $10 per hour, thinking he was getting a screamin’ deal for help managing it all. Faruz wanted someone to help analyze finances so that he could make better business decisions. But he didn’t have time to manage the person or ensure they got their money’s worth for the spend. And he shouldn’t have to manage the person — an online accountant should manage themselves to deliver the most value possible.

“The hourly rate was a huge problem as he took more time than it normally took to complete the work,” Faruz says. In fact, he ended up paying double what he expected to pay for the first two months of work.

And that was only the beginning. “At the end of the third month, when it was time to pay the wages to my employees, I discovered that I was short of the money that I had kept aside for such matters,” he says. “After a little digging, I found out that he had deposited money from the business into his own account and had expensed it for office supplies, fuel, and more. I called the authorities and had him pay back the thousands he had stolen before he could run away. Obviously, I fired him after that.”

Today, Faruz will only work with a CPA who have a fixed salary. He still knows not to overpay. But as he assesses online accountant partnerships, he avoids hourly pricing structures. And finally, Faruz advises other business owners to find a bookkeeper or online accountant who will present a summary of the business’s cash inflows and outflows on a weekly basis. These financial reports will give you visibility. And with visibility comes peace of mind.

Prevent accounting problems instead of fixing them

Each of these stories started not with problematic accountants but with a wrong mindset on the business owner’s part. To avoid these tragedies, start with your perspective, not who you hire.

  • Like Noah James, know what a good accountant can and cannot do. They cannot hold your reports or data or statements or returns “hostage.” But they also cannot read your mind (you must collaborate to set expectations).
  • Like Jessica Lipton, plan to scale the help you need with the size and complexity of your growing business. Remember the first bookkeeping services you engage as a solopreneur won’t be robust enough to service your scaling company as it morphs and changes.
  • Like Dan Morris, ask your accountant questions. If you want your bookkeeper or online accountant to be proactive, you need to be proactive, as well. And remember that even if you’re still employed full-time, a side-hustle is worth good financial management.
  • Like Luke Palder, determine what you want from your accountant relationship. A business owner needs to decide how they’ll measure a service provider’s success. Make it something other than “we saved money up front.”
  • Like David Levi, know that young, fragile companies deserve the same quality accounting as those scaling or soaring. No, you won’t need all the same services, but you will need the same quality of work performed in each bookkeeping and accounting task.
  • Like Lucas Travis, prepare to hold your online accountant “accountable” if necessary. Travis learned the least expensive online accountant or bookkeeper is cheap for a reason. Now, he pays more (without over-paying) and holds his helpers to a higher standard.
  • Like Aviad Faruz, expect value-added, not hourly, tasks completed. Look for ways your online accountant checks tasks off a list. Instead, watch for ways they save you money on time and energy saved, as well as taxes and penalties.

Sadly, hiring the cheapest online accountant can be disastrous. But so can hiring an overpriced one. Find one who delivers the best quality work without an exorbitant up-front cost. The accountants at Ignite Spot will proactively go to bat to save you time, energy, stress, and tax dollars. A free 30-minute consultation is the first step, so call today.

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