5 Reasons you need accounting services for small business

I generally find that small business owners have a misconception that an accountant solely looks after tax returns, business activity statements and a very limited business advisory service offering. A relationship with an accountant should be far deeper than this. An accountant should be offering services such as monthly or quarterly performance monitoring, business planning days, budgets and cash flow formulation and at the very least tax planning services.

Roberts & Cowling believe that the old model of accounting relationships, being that of a mere tax accountant, is fading and not sustainable in the future. The people to blame for this misconception is not small business owners, it is accounting firms. More communication with the client about the services they offer, and how they can add value to their business is required.

I know a fair few Business accountants and majority of them offer advisory services. But they are too busy just being a tax accountant or don’t know how to educate clients on the advisory services. The best accountants don’t sell these services, as no one wants to be sold to. Instead they find out what the clients need by asking questions and listening, instead of just telling the client what they think the client needs.

Top 5 accounting services

The business world is changing, and I think these services are more valuable than ever. I have listed my top 5 reasons why small businesses need the services of an accounting firm.

1. Understanding the figures is more important than ever
2. Setting goals and planning
3. Cash flow monitoring
4. Accountability
5. Understanding future obligations

Understanding the figures is more important than ever.

Historically, it has been the role of an accountant to discuss the history of a business. Typically this happened in a meeting to discuss the results from the previous year and the resulting tax liability. This is not enough anymore and a good accountant should be able to interpret the numbers and explain the way numbers influence each other. Educating a client about the results from small changes in pricing, gross margin or overheads should be a major focus of an accountant. However, looking at indicators that are a predictor of future performance is more important now than ‘lag’ indicators. Exploring these with your accountant can make a significant difference to a business.

Setting goals and planning.

The old saying of “If you don’t have a plan then you plan to fail” is even more relevant in the current small business environment. Having a strategic business planning day with your accountant can add significant value to your business. Understanding the ramifications of achieving the desired goals is crucial and the accountant should have a thorough understanding of the business to be able to advise on these.

Cash flow monitoring.

The number one killer of a small business is cash flow. However, cash flow is a result of other factors at play. If cash flow is tight then there could be several reasons for it such as low profitability or growth that is occurring at a pace that the physical cash flow cannot keep up with. The number of small businesses that end up bankrupt that are actually profitable is quite astonishing. The real reason is that the business grew too quickly. An accountant should be able to produce cash flow forecasts and be able to predict where cash flow will become an issue well in advance. This then enables a business to take proactive measures to ease this issue with the guidance of the accountant. Alternatively, cash flow solutions such as external funding can be sought which are more likely to be successful when a business can show it has projections in place.

Accountability.

It has been shown in numerous surveys that the accountant is the most trusted advisor. Therefore, it is a logical step for the accountant to meet with client’s monthly or quarterly to hold them accountable to the plan that has been set. The accountant understands the business and can review the numbers in these meetings to ensure that the projects being carried out by the business are resulting in the desired impact on the KPI’s.

Understanding future obligations.

This is similar to cash flow issues as it is also quite often as the result of not understanding future tax obligations. However, it can be far wider reaching than this such as crossing a threshold for payroll tax in a state or territory. Or it can be as straightforward as understanding the working capital required to sustain the desired growth. Understanding what growth will mean in the future is, in my view, the accountant’s role to explain this to small business owners.

Fundamentally the role of a business accountant is changing from someone you see once a year, to someone that understands the business and is almost internal to the business.