Like many small business owners, you engage a Chartered Accountant and probably view your accounting fee as “normal.” It’s important for you to consider what you’re getting for your money. Before shopping around to reduce your accounting fees, compare the value that you’re receiving from your accountant.
Consider the following two examples:
Example 1: Your accountant prepares monthly management accounts for you, as well as end of year tax returns, etc and charges you $3,500 throughout the year. During that time, they give you regular business advice and advice on how to legally reduce tax (via an on-line newsletter like we do). You gladly adopt a few of the tips and you see a dramatic improvement in your business. And now you work less and fish more!
Scenario 2: The only time you talk with your accountant is at tax time and your accounting fee is $1,750. You receive no monthly management accounts to identify any early warning signs and you receive no advice at all.
Would you choose accountant 1 or accountant 2? Which one will provide you with more value?
Business owners often seek my advice on how they can receive a value added service from their accountant. Here are a few of my tips:
* Ask them to show you a way to organise your accounting records and if they recommend suitable accounting software.
* The majority of accountants charge an hourly rate (rather than fixed fees) so if they need to call you to get a missing bank statement or payroll return, you’ll be charged more. Keep your bank records, deposit books, cheque stubs and invoices tidy and in some kind of order.
* Don’t over complicate your needs. Often, you’ll only need a set of basic financial statements. Clients regularly instruct us to code hundreds of transactions to dozens of separate account transaction codes. This additional work adds to accounting fees and is often unnecessary for most small businesses.
* Separate your personal and business spending. Open a new account with your bank and pay all business expenses from that account as much as possible. Many people forget cash expenses for the business and then forget to claim for them. Try to remember to keep receipts and write on each one a brief description of what you spent your cash for. Think about adding yourself to your payroll, rather than taking irregular cash drawings.
* It’s OK if you hate accounting – hire someone to do your book-keeping. Recruit a part-timer or see if your accountant has book-keeping staff. Your accountant probably has junior accounting staff who can help you and their fees will be less than senior accounting staff. You should find that they’ll be able to do the job quicker and better than you which will ultimately save you time and money.
* Before making big business decisions or investments, consult with your accountant first. Poorly considered business decisions that affect your business’ financial performance may be very costly to rectify after you have made them.
File your GST & PAYE returns ahead of time or if you are falling behind your accountant should be able to negotiate a repayment plan for you.
* Speak with your accountant every few months or so to establish feedback on your business’ performance. You don’t need me to tell you that your business is far too important to ignore early warning signs and proven business methods.
You may view a “cheaper” accountant as a short term solution but longer terms consequences can often be overlooked. If it’s just number crunching you want, there are plenty of accountants out there to help you. But you should view your accounting fees as an important investment.
If it’s value for money you’re after, I hope you’ll use these tips to ensure your Chartered Accountant gives you more than bean counting.