Tuesday, June 25, 2024

Andrew Griffith – Andrew Griffith CPA – On Top 5 Mistakes When Starting A New Business

Leaders Perception Magazine is currently running an interview series called – What Are The Top 5 Mistakes People Make When Starting A New Business?

Today, we had the opportunity to interview Andrew Griffith who is a Proprietor at Andrew Griffith CPA.

Interviewee Name: Andrew Griffith

Company: Andrew Griffith CPA

Andrew Griffith’s favourite quote: That’s a difficult decision. I have several favorite quotes that are relevant to my core values. Two of them that are “A mind is a terrible thing to waste” (Arthur Fletcher) and “An investment in knowledge pays the best interest.” (Benjamin Franklin).

The Interview

Thank you so much for joining us today! Tell us a little bit about yourself. What is your backstory?

Andrew Griffith : Today, I hold the Enrolled Agent (EA), which is issued by the Internal Revenue Service, and the Certified Public Accountant (CPA- issued by New York State) licenses. I also hold the Certified Management Accountant (CMA), Certified Internal Auditor (CIA), Certified Fraud Examiner (CFE), and the Certification in Risk Management Assurance (CRMA) credentials in the accounting field. I have six higher education degrees (five in business). Two of these degrees are in accounting (BS from the University of Central Oklahoma and a research doctorate from Nova Southeastern University). In addition to being the proprietor of my virtual public accounting firm, I am an Associate Professor of Accounting at Iona University.

I entered into the income tax profession by accident. In 2004, I wanted to help a family that was socioeconomically disadvantaged and struggling financially. I had left the corporate world as an internal auditor and was completing a degree program when I learned of their intent to use a tax professional to prepare their simple personal income tax returns. I asked what they paid that person for the prior year. When I learned that they were charged $600 for a set of returns with just W-2 and some interest and 1098 transactions, I was appalled. I offered to prepare their returns for free. (I will return to the word “free” in a little bit.) I asked several questions while preparing their returns and raised topics that had never been brought to their attention before. When I had finished their returns, I made it a point to walk them through every aspect of their tax returns and reminded them that I did not want to be paid for my services. About two weeks after this, I traveled out of town and found myself receiving non-stop phone calls asking me questions about income tax matters. (I never gave my mobile phone number to those callers, but someone else did.)

Remember that word “free”? About two months after their returns were filed, that family stopped by my residence and gave me a couple of gift cards as a “thank you” for helping them. I was mortified because they had paid me despite my request not to be paid. I realized at that point that I needed to manage my tax return preparation business (meaning activities) or it was going to manage me. I had inadvertently entered the tax profession the moment that I had prepared those returns for that family. My plans to return to the corporate accounting environment were changed by this experience. Instead, I entered academia full-time in 2006 while serving my clients as a tax professional. Here we are in 2022 and I am still working in both academia and public accounting.

In your opinion, what makes your company stand out? Any examples?

Andrew Griffith : My business model is relationship centered. I believe in building relationships with my clients and allowing room for people to be human. I also believe in transparency and asking questions while preparing my clients’ income tax returns. When a set of income tax returns are done, my clients know that I will happily review and explain every line of their tax returns with them before they sign their e-file authorization documents.
Because I develop relationships with my clients, they know I am available all year long to answer their questions about anything related to income taxes. (I don’t normally charge for answering my clients’ questions throughout the year.) I also never surprise my clients with a bill for my services after I have done the work. My clients always know before I begin the work what the ceiling (maximum) price for my services will be. Incidentally, my prices are stated on my website.

What are the TOP 5 mistakes people make when starting a new business? Please share advice/examples for all of them.

Andrew Griffith : Many of the mistakes that I have seen business owners make that can devastate a new business involve:
1) Unrealistic expectations by the business owner. Many people start a business without realizing how much work it takes to launch it and get it to a self-sustaining mode (think 7 to 10 years of continuous hard work and financing of the business). New businesses are rarely profitable during their early years and much research should be done before launching a business to ensure that it can be successful. (Some industries have a very high failure rate and those should be avoided.)
2) Moving the business after getting it established. Many business owners will move their business to new locations because of regulatory issues (e.g. condemnation of their business’ building) or perceived advantages. Often, this is harmful for the business because every time it moves, more customers are lost and new ones have to be found. For most businesses, this is a case of the grass appearing to be greener on the other side of the fence when the business would have been better off not moving.
3) Commingling business funds and records with personal funds and records. This increases the odds of an adverse tax audit and erroneous conclusions reached in the business’ accounting records. People in this situation often attempt (by mistake or intent) to deduct personal expenses as if they were business expenses and that can lead to a lot of legitimate problems.
4) Poor internal controls over the accounting system. This increases the chances that a tax audit or any other financial audit will not go well for the business. It also increases the odds that the business will be victimized by fraud from within the organization. Since the ACFE has concluded that the typical business loses 5% of its annual revenues to fraud each year, it would not be much of a stretch to conclude that businesses with poor internal controls would lose more than that to fraud and can be forced to cease operations.
5) Incorporating instead of remaining a sole proprietor. Many business owners are erroneously advised to incorporate instead of remaining a sole proprietor. This advice is often not in their best interests for several reasons. Incorporating when the annual reliable profits are too low just increases the annual operating expenses of the business and adds more regulatory burden to the business owner. Also, it does not resolve the business owner, who is managing the business, of all liabilities. (You should talk to a good business lawyer for all of the details behind this.) Those that do incorporate often fail to add themselves as an employee of the business while they manage its operations. When they do accomplish this, they often fail to pay themselves a reasonable wage for the work being performed. Both of these situations create huge issues for the business owner and that often results in all of the corporate profits being subjected to self-employment taxes as well as being assessed penalties and interest on those taxes.

Leaders Perception magaizne would like to thank Andrew Griffith for the time dedicated to completing this interview and sharing their valuable insights with our readers!

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