The Big Four may make the headlines, but the truth is: many accounting firms are small operations. In fact, 22.5 percent of firms have fewer than nine employees. Businesses just like yours make up nearly one-quarter of accounting companies.
As a small-business owner, if you have to defend your firm from lawsuits and claims, you won't have the same resources as one of the big firms. So it's important to address your risk exposure with small business insurance and adopt best practices to reduce the likelihood that a client will sue you. Below are three of your biggest risk exposures and strategic tips to help you manage them.
Communication Prevents Lawsuits
According to the Journal of Accountancy , 55 percent of accountant lawsuits stem from misunderstandings about what's included in tax services, and as many as 11 percent of lawsuits come from simple bookkeeping mistakes or miscommunications, according to Accounting Web . And when it comes to claims involving financial statement services (including preparing a financial statement for a company in bankruptcy), fully 60 percent of lawsuits allege a misstatement or failure to disclose information. Luckily, there's an easy solution to lawsuits that stem from miscommunication: be clear about what your services include from the start. Use engagement letters, contracts, and emails to ensure that everything you agree to is in writing.
The Future Is Bright
The US Census shows that, while the smallest accounting firms account for less than 15 percent of the nation's total, there are lots of opportunities for accountants to grow. By 2022, the accounting sector is expected to experience growth of 13 percent in the coming years, meaning accountants in firms of all sizes will have opportunities to expand and increase revenue.