Hiring a Bookkeeper: 8 Accounting Interview Questions to Ask
Hiring a bookkeeper can be an overwhelming process for many small business owners. Before you begin your search, it’s important to determine the type of experience and skills you need. Are you looking for someone to break down the numbers for you and create a budget, or do you really just need someone to enter bills and invoices?
If you have someone to help you understand the numbers, or if you have a strong background in accounting and financial management, it’s probably a good idea to get someone who is proficient in your accounting software and whose experience and personality suit your business. . On the other hand, if you don’t have someone to make sure the numbers are correct, the data entry counter is not a good idea. In this case, you’ll want to look for someone with a thorough accounting background. That is, the ability to reconcile the balance and perform a monthly closing. Bookkeepers typically don’t have the skill set to help you with financial management beyond accurate financial reporting.
Once you place an ad, you’ll be treated to a smorgasbord of candidates. You’ll need to narrow down the pool of candidates to those that meet the needs of your job description and then the fun of the interview begins. You’ll want to ask questions that ensure the bookkeeper really does have the right skills and fit into your business culture. Here are 8 questions to ask your potential accountant:
1) Do you think accrual or cash reporting is better for business management?
Find an advanced bookkeeper to explain that accrual accounting provides better financial reporting, but the cash basis is generally preferred for taxes. We can keep the books on an accrual basis for management reports and the tax accountant can make adjustments for cash taxes. A standard accountant will probably tell you what her experience has been and will have no preference for either.
2) What is the accounting equation (or the balance equation) or explain the balance.
A good bookkeeper will explain that the balance sheet has assets, liabilities, and equity. This is mandatory for anyone who is expected to provide accurate financial reports. Ideally, they will tell you that the equation is: Assets = Liabilities + Equity. If they can’t explain the balance sheet, ask them to describe an asset and liability account. You don’t want someone who doesn’t know the balance sheet responsible for month-end closing, but if someone else is ensuring accuracy, just knowing how assets and liabilities are used will be fine.
3) The bank account has a discount of $0.72. How much time will you spend searching for the problem and what steps will you take to find it?
This problem is tricky and it really depends on what you would like to see in the right bookkeeper. Some won’t stop looking until they find it. Sure, there could be a lot of things causing a discrepancy, so you want them to spend some time looking for the problem. But how long? Is spending 2 hours searching for $.72 the best use of time? If we look at the return on investment, that is absolutely a bad use of time. If you answer 2 hours, you’ll want to investigate your tolerance for non-perfect circumstances. If you are in the creative field, an extreme perfectionist can drive you crazy. However, if they aren’t looking for the bug at all, their attention to detail probably isn’t strong enough and you should keep looking.
When searching for the error, the ideal candidate will say that it is likely a transposition error and that he would start there first (transposition errors are divisible by 9). They might just say that they would check each line item against the declaration, which is perfectly fine.
4) Using cash accounting, how would you record an annual insurance premium of $600?
The correct answer for the cash basis is debit insurance expense $600, credit cash, or accounts payable. All bookkeepers should understand this well.
5) How would you record an annual insurance premium of $600 using accrual accounting?
The correct answer here is Debit Prepaid Insurance $600, Credit Cash, or Accounts Payable. Ask them to find out when the insurance expense is recognized. It should be $50/mo with a debit to insurance expense and a credit to prepaid insurance. If the candidate cannot answer this question, do not expect him to keep his books based on accrual accounting. You’ll want to rely on someone else for management reporting.
6) How many gas stations (or coffee shops, etc.) do you think there are in the US?
With this question, we are looking for good critical thinking skills. It’s not okay to just guess a number without explanation or say they’d “Google” it. You want the candidate to have a process for getting to their guess, no matter how far off it is. There are so many gas stations in my city, I guess so many cities in my state…
7) Rank the following in order of importance to business success: Sales, Teamwork, Quality, Integrity, Profitability, Service
There is no right or wrong answer to this question, but it will indicate whether the candidate is aligned with your company culture and will also demonstrate critical thinking skills. Find a justification for why they responded the way they did. Does it align with how you would answer the question? For example, if they say that Profitability is the most important thing. Why is that the case? If they say teamwork is the least important, you probably want to dig a little deeper if teamwork is high on your list of priorities.
A bookkeeper would prefer to list profitability further down the list because they want to know that they are looking at the entire business, not just their job. He too would like to see integrity high on the list. Do you really want a bookkeeper who doesn’t value integrity?
8) Tell me about a time when you disagreed with something your boss asked you to do.
The correct answer here will depend on the personality you are looking for. Do you want a follower who does what you say? Are you looking for an advisor to tell you what to do? Maybe a combination is the right answer for you, someone who is confident enough to speak his mind, but willing to take the lead.
There are tons of potential interview questions to ask when interviewing bookkeepers. The ones listed above can give you a good indication of whether or not the candidate is a good fit. For a better assessment of accounting skill, check out the AIPB Accounting Test. Don’t forget to check references and try to speak with a CPA who has had a chance to see your work.
Copyright (c) 2010 Kelly Totten