Your year end accounting review
The owner of a small business usually wears many hats, but it’s important to know when to call in the experts.
Accounting is one area where you can benefit from outside expertise to save time, save money and improve revenue. Financial year end is a good time to review this aspect of your business. Here are some things for you to consider.
DIY or outsourced?
We find that many franchise owners do much of their own accounting work. And, whilst it’s true that modern accounting software can make it possible for you to do the basic bookkeeping, it’s important to know when to call on a specialist for help and advice.
A quick look at how a larger business typically approaches accounting can highlight the benefits of calling on a specialist rather than a DIY approach to bookwork and accounting. Larger businesses employ accounting staff because it’s efficient, reduces the risk of errors, and leaves other staff to get on with what they are best skilled at.
In these businesses, the company accountant is responsible for record keeping and financial reporting. Meanwhile, the various managers take care of operations, marketing, sales and so on. You’ll usually find the senior management or board meet monthly to review the results and make decisions. Managers refer to financial reports but they don’t prepare them!
However, in smaller business we often see the owner involved in the nuts and bolts of accounting, just as they are involved in other aspects of the business. But it’s not always a good use of time for the owner to be highly involved in the bookkeeping. It’s often better to have an external accountant who can act like the CFO would in a larger business. If you’re a franchise owner, you’ll almost certainly find that delegating some responsibility for the financial aspects of business means you can focus on vital areas such as on building sales, training and mentoring staff and managing the detail of business operations.
The question then becomes how much of the accounting work to handover to your external accountant?
No frills or top of the range?
In many areas of our life we make choices about whether to buy a ‘no frills’ product or service or to go with a higher level of quality or service. Sometimes ‘no frills’ is best - but not always. Depending on your situation, ‘no frills’, middle of the road or top of the range may be best.It’s the same with your franchise accountant. As the business owner, it’s helpful to think through whether a basic accounting service is best for you, or if you need or want something more.
A ‘no frills’ approach might be all you need if you’re good with the money side of things and your business and tax affairs are straightforward.
You may simply want your accountant to calculate the amount of tax due on your business profit and personal income, complete the necessary reconciliations and compliance requirements, lodge your tax return and let you know how to pay the tax you owe. In this case, your focus may be to keep the cost as low as is practical, while being confident the job is being done in a professional way.
However, a minimum level of service isn’t best for everyone and all situations.
If you have a more complicated or larger business it might be beneficial to seek out a higher level of expertise and service from your accountant. You will pay more for this expertise than for a basic tax return but the idea is that your business receives a greater benefit.
For instance, your accountant may have specialist skills in franchising, financial analysis, tax planning and advice that will help you save your costs or time, and even make more money.
If it’s been some time since you thought about this aspect of your business, you might like to have a chat with your accountant about what services they can provide to help your business in the year ahead.
WHAT TO TALK ABOUT
Here are five financial aspects of business you might like to chat about with your accountant.
Tax planning is the most basic area your external accountant will help with. This starts with working out how much tax is due on your business profit and personal income. Beyond this, they should be able to identify ways to legally minimise the amount of tax you pay, and make the most of tax concessions. It helps if you’re able to meet your accountant for a tax planning session before the end of the financial year so you have time to take advantage of any opportunities.
Not only can it be time consuming to administer your payroll, but there’s the risk of penalties if you get wage rates or payroll calculations wrong. However, technology is making things easier for small business, with several cost effective payroll solutions and Apps now on the market.
The start of the new financial year is a great time to implement software that simplifies rostering and wages calculations and includes inbuilt Award rate compliance. Ask your accountant if they can help you with software recommendations and set up.
Insurance is an expense that you should review each year to make sure it’s appropriate for your current situation. It’s definitely an area to ask your accountant about. Many have a connection with a local insurance broker, some even have an adviser who is part of their practice.
You’re no doubt used to your accountant preparing your tax return and perhaps your Business Activity Statement, but have you discussed other reports they could provide?
One of the most useful reports is a summary of revenue, costs and profit over the last two years. You can ask your accountant to prepare this from the information they have on file, then take a look and see what insights it helps you gain about your business.
From time to time you will have big expenses to meet; items such as tax payments, refurbishment costs, new equipment or a vehicle. An annual review of upcoming expenses will help you anticipate and plan for these by including them in your budget. But if budgets and spreadsheets are not your thing, why not ask your accountant to start work on this for you now?
Kate Groom is co-founder of Smart Franchise and the Franchise Accountants Network, together with her business partner, Peter Knight. You can find them online at: