FAQ

FAQ

Frequently Asked Questions

Why Prax?

Why use an accounting firm at all?

The short answer? Because we’ll save you time, money, and headaches!

The long answer? A good accounting firm (as opposed to a lousy one) is an invaluable partner in running your business. We care about your business as much as you do! Sure, that’s easy to say, but we are very aware of the reality: that your success dictates our success. We have a vested interest in your business performing well, which means we don’t take a passive approach – we try to predict problems before they happen. When problems happen, we take care of it as soon as possible. If we make a mistake, we own it and fix it. And we never push due dates unless there’s no other alternative, including tax deadlines.

Can’t business owners do the accounting themselves?

Absolutely! In fact, if you are a startup or your annual gross revenues are under $500k, we may recommend training you to maintain your own bookkeeping and meet quarterly with us to review your work. We have trained many clients to maintain their own books, and we find that quarterly checks are a great way to catch mistakes somewhat early while still keeping your costs as low as we can.

How can remote accounting be better than on-site?

We’re remote for several reasons, but it’s mostly about expertise. Instead of being limited by local talent, we’ve pulled a team together from across the globe with an incredibly rich history of experiences, skills, and education. Team Prax is a close-knit group with a strong set of shared values, subject matter expertise, and passion that you won’t find in most firms. Additionally, Prax’s philosophy includes offering opportunities to all individuals regardless of disability, which is easier to support in a remote setting. We also avoid contributing to pollution and waste by minimizing driving and printing.

Why is Prax different/better?

We are not passive accountants that are comfortable posting historical data and having a 20-minute check-in with you before continuing business as usual. We bring out-of-the box thinking and we’re highly motivated to help your financial health improve every single month. We want you to feel we have your back every step of the way and that we are a vital partner and contributor to your ongoing success. Our success is measured by your success, and we know it!

Why recurring accounting services?

Why do I need recurring accounting services?

If the routine data entry to your accounting system isn’t happening or the data in the system is wrong, those are big red flags that you need monthly bookkeeping. Monthly maintenance gives you real-time insight into your numbers and allows you to use that insight now instead of months or years after the fact. Monthly maintenance also gives you a safety net to catch mistakes that will impact your tax liabilities before those cost you penalties and interest.

What does Prax’s recurring accounting services entail?

Your bookkeeper posts all transactional data to your system 1-3 times per week (depending on the volume of activity). They notify you if we have questions and keep you updated on action items that are holding us up. Your C/C checks the bookkeeper’s work once a week, then hosts a virtual monthly meeting with you and your Prax Team to close your books, go over your financials, resolve any outstanding issues, discuss any new tax-related developments or opportunities, and track specific goals and action items.

Can’t I just catch up everything once a year?

The last thing you want is to get to the end of the year and discover you’ve done things wrong that can’t be corrected now. We’ve personally seen clients who’ve lost tens of thousands of dollars in tax savings alone because of this, plus penalties and interest. And that’s just one example – we’ve seen months of missed theft, double-charged subscriptions, and active cell phone lines months after employees left. Monthly maintenance would have caught all of these.

What does Prax need from me?

What do clients need to provide?

Generally, we’ll always request at least the following:

  1. access to your existing accounting and payroll systems
  2. user access to bank accounts and loan/credit card accounts
  3. the last few years’ tax returns and business formation records
  4. a system to ensure we have electronic copies of all documents
  5. authority to talk to tax agencies

We request the following commitments from all clients:

  1. Separate business and personal finances.
  2. Respond to inquiries and attend scheduled meetings.
  3. Not misrepresent the business nature of transactions.

Accountant, controller, CPA? What’s with all the titles?!

Accountant

Use of the title ‘Accountant’ depends on where you’re located since some of the rules are state-specific. However, in Maryland (where Prax is based), ‘accountant’ is a general and catch-all title for anyone who provides professional accounting-related services. This could include anything from data entry to tax work. It’s similar to the title ‘teacher’, which doesn’t differentiate between the subjects in which they have expertise but still tells you what they do. Same deal with accountants. We can specialize in specific areas but ultimately we’re still performing work related to accounting.

Bookkeeper

Bookkeeping is a specific area of work that includes most data entry tasks. The bookkeeper posts income, expenses, keeps track of your customer or vendor balances, reconciles your accounts, makes deposit runs, processes payroll, and more. Think of the bookkeeper as the elementary school teacher – they’re handling all the basics and you won’t get far without them. A good bookkeeper is generally the first and most critical accounting team member in a business. At Prax, all clients are assigned a Bookkeeper.

Controller

A Controller takes the bookkeeper’s data and makes sense out of it. Imagine the Controller as the high-school English teacher who helps you decipher Shakespeare. Your Controller will explain your financial position in layman’s terms and help troubleshoot problems, such as payroll liability balances that seem off or a growing balance in undeposited funds. In new businesses, the controller and bookkeeper are often the same person, but as your business grows, you’ll want that second pair of specialized eyes looking at your financials. At Prax, all clients are assigned an account manager who functions as joint Controller and CFO (aka C/C).

CFO (Chief Financial Officer)

The CFO (Chief Financial Officer) plays the role of psychic guide. No pressure, right? It’s the CFO’s job to figure out what’s coming down the pipeline that will impact your business and how to turn that into smart and strategic business decisions. These are the guidance counselors in our ongoing and brilliant analogy. They keep up with industry developments, create cash forecasts, help identify opportunities and risks, develop a plan of action, identify benchmarks and KPIs, and much more. This is a specialized area of accounting that focuses heavily on the future of your business. At Prax, all clients are assigned an account manager who functions as joint Controller and CFO (aka C/C).

CPA (Certified Public Accountant)

The CPA (Certified Public Accountant) is an accountant that has pursued additional education and licensing related to tax preparation and public accounting rules for (generally) larger businesses. In 99% of small businesses, the only time you truly need a CPA is for tax prep or tax planning. Think of the CPA as the college professor teaching contract law – it’s overkill to have them work on bookkeeping tasks. At Prax, all clients are assigned either a CPA or EA to address tax implications during monthly reviews and handle all tax-related matters and filings.

EA (Enrolled Agent)

Another specialized tax preparer license is EA (Enrolled Agent), which is the highest credential awarded by the IRS. This license allows an EA to represent taxpayers before the IRS for collections, audits, and appeals, and have expertise in tax laws. An EA is similar to At Prax, all clients are assigned either a CPA or EA to address tax implications during monthly reviews and handle all tax-related matters and filings.

Random Qs...

How much does it cost to work with Prax?

It varies! We can give you a range after a phone consultation – it’s too difficult to quote without specifics. However, our pricing model takes three approaches: 1) hourly rates, 2) fixed fee, and 3) retainer packages. Most clients start with a retainer to cover cleanup needs, then move to hourly, then eventually negotiate a fixed fee based on the workload (clients can request this after 90 days of working with Prax).

How can I meet Team Prax?

Since we are all remote, that’s a tough one. We have office space for special events or rare on-site meetings, but otherwise 99% of our meetings happen via video conference calling. We will occasionally travel to the client’s location if circumstances prevent remote work, but at this time this is only offered to clients located on the east coast between Virginia and New York.

What accounting system does Prax use?

We use Quickbooks (both online and desktop) for 90% of our clients. The remaining 10% are other cloud-based programs like Xero and Freshbooks or industry-specific programs like Deltek and Yardi.

What is a Balance Sheet?

In layman’s terms, it’s a snapshot of all your account balances on a given day. This includes bank accounts, credit cards, loans, what’s due to tax agencies, your equity, and a few other nuggets. This is the first report we review to look for red flags – all the balances on your Balance Sheet should make sense to you and jive with what you know is true.

What is a Profit and Loss Report?

In layman’s terms, it’s a list of all your income and expenses for a specific period and calculates the net of those income and expenses. It also shows you trends and is a critical report used to determine if you’re profitable.

How can I make my business financially successful?

Bring in more money than you shell out. Sounds simple, but cash really is king. If you’re constantly running out of money or your balances are dwindling away, your business is on the road to insolvency. Prax can help you turn that around and we’ll celebrate your success alongside you – your success boosts our bragging rights! But you’ll need to be ready to make changes if we identify problems.

What do I do if I can't pay my taxes?

Tax agencies know everyone hits tough times, but no one likes getting their love letters (aka levy letters). They’re somewhat forgiving provided you keep up with your reporting requirements. That’s not to say they’ll waive your tax bill, but a little negotiating can buy you a payment plan that will ease the financial burden while also getting you off their frequent mailer list. However, it’s a good idea to discuss your specific situation with an EA or CPA who specializes in tax debt resolution – there’s potential additional options that the IRS won’t volunteer on their own.

How long do I need to keep financial records?

The IRS rules vary, but 7 years covers you in pretty much all scenarios. However, we highly recommend maintaining electronic copies for security and peace of mind. Prax is 99% paper-free these days, and we love to wean clients off reliance on paper records.