Interview: QuickBooks ProAdvisor Renee Mengali on Planning Ahead to Solve Problems
 Payroll can be a tough course to navigate—tax agencies constantly update their rates and, as your business grows, the rules for compliance can change. QuickBooks® Payroll takes the guesswork out of payroll, but sometimes you might need a little help.
Certified QuickBooks® ProAdvisors are practicing accounting professionals who are certified in QuickBooks and can help you—not just with the occasional trouble spot, but also with setting up new benefits or QuickBooks features. They can show you how to get more out of the software you're already using, giving you more time to run your business.
QuickBooks Payroll Bulletin Editor Lise Quintana talked with Renee Mengali of Mengali Accountancy in the Northern California town of Healdsburg. Mengali Accountancy is a full-service accounting and bookkeeping firm that, among other things, provides a variety of payroll support services.
QBPB: How long have you been a QuickBooks ProAdvisor?
Mengali: For about 2 years now. I've been using QuickBooks for much longer than that, since 1995, so about 12 years.
QBPB: What portion of your clients comes to you specifically for payroll help?
Mengali: Approximately one out of five clients comes to us specifically for payroll help alone, and then another 75 percent needs our help with some aspect of payroll. So, for a high percentage of our clients, we interact with their payroll in some way, shape, or form, whether we're just helping them set it up, or we're actually setting it up for them and running their paychecks and paying their payroll taxes.
QBPB: At what point in their QuickBooks Payroll setup do most of your clients come to you?
Mengali: Clients can be divided into two groups: you have planners, and you have people who don't plan. I'd say about one out of three clients comes to me at the very beginning of the process. These are the planners. They're opening a business or they've been in business for a couple of years, they've established their business, and now they want to hire their first employee, so they come to us ahead of time. We can make sure they have all their ducks in a row legally and compliance-wise, and we can make sure they have their employer identification numbers at the federal and state levels. Because we are able to plan ahead, we can get everything set up for them to function seamlessly and they have a great experience.
The majority of our clients, I'd say at least two out of three if not more, will come to us for payroll help only when they have an odd situation or a very sophisticated problem that they can't resolve, or they've received a letter from the IRS, or something has gone horribly wrong and they need some expert advice because they simply can't fix it themselves.
QBPB: So, it would be best if you could get people in before their first employee comes through the door?
Mengali: Yes, yes! Then we don't have to clean up any messes. For example, the client isn't faced with the unfortunate discovery that their bookkeeper didn't fill in the state for an employee, so there's been no state withholding or state taxes calculated for that employee. We don't have any problems to clean up because we know from the very beginning that everything has been set up correctly and running correctly as a result of that setup.
Solving Problems
QBPB: When you do have problems—let's take the scenario you just outlined, where an employer has not put in the state for the employee and so the employee's state withholding has not been calculated—how long does it take you to fix?
Mengali: In some cases, depending on the volume of payroll transactions and the number of employees impacted, it can take literally months—not in terms of hours worked, but to work through the federal and state governments to get your [California State Employment Development Department quarterly] DE 6s corrected and to get your [federal] 941s corrected. If all this time you've been using QuickBooks Payroll to run your payroll reports, your payroll reports are incorrect as well. Depending on how long the problem has been festering, the fix can take six months to a year. If you filed your W-2s incorrectly, that's an entire process to get corrected. In other words, it just depends on the magnitude of the problem.
QBPB: And then, aside from your time, of course—how much they're paying you—they also would probably then incur state and/or federal penalties, right?
Mengali: Absolutely. They incur penalties at that point for failure to report and failure to file: that's a fine on a quarterly and by-employee basis. They also incur payroll tax deposit penalties: because they didn't withhold, they didn't pay those taxes timely. If the employer didn't notice the problem until after the employee is gone, it's then the responsibility of the employer to remit the state disability insurance on behalf of that employee, when in fact that's an employee-paid benefit. If the employer can't take it out of the employee's paycheck, then the employer foots that bill as well. So the costs can really mount anytime there's a payroll problem.
QBPB: Please describe a typical client interaction.
Mengali: No two clients have the same situation or the same problem to be solved. Going back to my two different types of clients: the client that is the planner will come to me and say, "OK, what do I need to do to get my payroll set up?" That's an entirely different conversation and that runs smoothly. I have the time to convey to them the importance of payroll taxes and reporting and filing requirements and the deposit requirements. I have all of the time I need to explain to them what their responsibilities are.
On the other end of the spectrum, I have the client who calls me in a panic because the IRS is literally in their office. Clients call me and say, "Two men in suits are here flashing badges at me and they want 10,000 dollars in federal withholding that's past due. Come help me!"
If you were to carve down the interaction into a fixed process, I would get a phone call from a client, and I'd get a general description of what the problem is. My operating procedure is to go out to the client's office and to sit down with their books. I look at the QuickBooks file, I look at all of the payroll tax reports that they either have or have not filed, and I assess the severity of the problem and outline a plan of how we should fix it. At that point I draft an engagement letter to address the problem and my time estimate and fee estimate for what I think it's going to cost. Then we go forward from there, and where we go from there is entirely dependent on what I find in my initial meeting. At that point it's not really describable in terms of a fixed process.
Avoiding the Top Mistakes
QBPB: What are the top three mistakes you run into when you're working with QuickBooks Payroll clients?
Mengali: Not being aware of the payroll tax reporting deadlines. QuickBooks Payroll 2007 has incredible built-in functionality to remind you of those payment due dates. However, if you don't initially tell QuickBooks Payroll what your company's payroll tax timelines are, QuickBooks will not remind you because you haven't set up that feature. A lot of clients don't even know that QuickBooks has this fantastic new built-in reminder system. I make sure to set them up on that right away—to begin using the built-in features, the scheduled payments functionality, and the payroll tax reporting. And then they have a visual reminder when things are late—they show up in red. It's very helpful.
Then as companies grow, as their payroll liabilities grow, the feds start wanting their money quicker and quicker. That's another thing that people overlook. As their payrolls grow and as their tax liabilities grow, they change from being a monthly depositor to being a weekly depositor.
I've had other clients in the past, as I mentioned, not assign a state to their employee. It's a little bit more difficult to overlook that step now. In previous versions of QuickBooks, you had to really know how to use the software to be able to assign a state to an employee.
And then another thing that I recommend my clients do is this: QuickBooks out of the box assigns all your payroll tax liabilities to one tax liability account. I think it's very difficult, given the different payment schedules that are enforced by our government. Certain taxes are due only quarterly and certain taxes are due more frequently, so I recommend to my clients that they always separately categorize their payroll tax liabilities by payroll tax type. You have your federal 941 taxes, you have your federal unemployment, you have your state taxes, and you have your state unemployment. On your chart of accounts, you can track tax by tax whether you've paid your taxes on time, whether you've paid them in the right amount, whether you've overpaid them or underpaid them. It really gives you a better picture of your existing tax liabilities, and it gives you greater ability to manage your tax liabilities. I can't say that it's a mistake to use the software functionality as it is out of the box, but I think that there's room for improvement—to separate your payroll tax liabilities by type because it helps with tracking and it helps ensure that everything's getting paid on time.
QBPB: Do you have any other tips or tidbits that can help cut down on errors or help people get a little bit more out of their QuickBooks Payroll?
Mengali: My recommendation is to utilize every built-in feature that QuickBooks gives you. If you're using an outsourced payroll service, consider moving to a QuickBooks-managed payroll service so that all of your entry is not duplicated and all of the payroll reporting and direct deposit functionality is completely seamless.
I recommend being registered with the state and local governments to pay your taxes electronically, so that you can utilize that fantastic feature in QuickBooks Payroll1 that lets you enter your PIN, enter your Internet password, and then, with a couple of clicks of a mouse, your payroll taxes are paid and you have an Intuit-backed receipt.
Even though it seems really simple to say, "use the software as it was intended to be used," it's not necessarily what's happening. People are using QuickBooks Payroll the way they're used to using it. When I tell people, "If you just enroll in EFTPS, you could pay these taxes through QuickBooks," they almost don't believe that I'm serious! Get to know what your software is capable of and utilize those functions, because they really are timesaving functions.
Preparing for a Meeting with a ProAdvisor
QBPB: How does a business owner prepare for meeting with a ProAdvisor? What do you want your clients to have with them?
Mengali: That's a good question. It's highly dependent on whether you ask them to come see you or whether you go to see them. A lot of ProAdvisors go out and visit their clients because that approach has a number of benefits. First of all, a client cannot lug with them all of their accounting records to have at my fingertips during our first meeting. So even if I gave them a list of what to bring, I'm always going to be missing something that would be handy to reference.
That's why I always feel that my initial consultation should be at the client's office. I get to see their environment, I get to assess the skill level of their staff, I get to see those intangible things that I couldn't see if I were just looking at a backup of their QuickBooks file in my office. I don't really ask them to prepare much for the meeting, unless there's a specific issue that they've called me to address. I just kind of take it as it is. And then from that point on we'll decide what we do, once I know how they're doing.
For the clients who call me with a specific problem, I just ask that they have anything related to that problem and how it developed readily accessible. I'll ask them some general questions related to their business type and entity type (partnership, LLC, S corporation). I have a questionnaire that I bring with me. It gives me a snapshot of their overall business, so I can be prepared for the meeting.
QBPB: When somebody comes to you with a problem, do they keep coming back to you and asking you to fix things for them? Or do people who come to you with a problem then say, "Great! You fixed that! I understand what to do now and I can do it all by myself"?
Mengali: In my practice, I find that I've built a relationship with that person at the end of that problem. They are so happy to find somebody who's competent in the software that they're using who has, by the end of the first meeting, already given them powerful recommendations on how they can do things more efficiently. During the process of me helping them with that initial problem, I'm building a relationship.
I have built a practice out of solving people's problems and then following up with them. Business owners enjoy that level of oversight that they themselves don't have time to give.
QBPB: So you're just looking over their shoulder, making sure that they continue to go on problem-free?
Mengali: Right. And the world is changing daily—business is not static. There are constantly new issues—an employee wants an advance, how to do I take that out of his pay? How do I make sure it stops at the right amount? I have an earned-income credit employee; I've never had that type of an employee before. There's always something to do with every client.
Renee Mengali is the head of Mengali Accountancy and a QuickBooks ProAdvisor in Healdsburg, California. You can find her firm at www.mengali.com.
To find a Certified QuickBooks® ProAdvisor in your area, go to www.findaproadvisor.com/getstarted. You'll be able to find a ProAdvisor who will understand your needs and your business.
1 E-File & Pay is available only with QuickBooks 2007 Enhanced Payroll.
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