Today I’m going to talk about three critical questions that your accountant should be answering. And why you should be raising these questions if your accountant isn’t.
Over the years I’ve had plenty of new clients come in the door who are, frankly, pissed off with their existing accountants because they haven’t been told these things until it was too late and also, to be honest there have been a few occasions when I should have been more forward in raising these things with some of my clients – nobody’s perfect.
Okay, let’s start with a big one that comes up regularly…
Question number one
“How come I’m making profits but I never seem to have any cash?”
I wish I had a dollar for every time I heard this question. I can buy a hell of a boat with that many dollars.
Now here’s the interesting thing to understand about this question. It’s a question that can always be answered. Answering it is sometimes obvious but usually it requires a little bit of analysis. And I don’t mean a massive amount of analysis, but it does take some. Answering it is not a super-complex task. It’s something that any competent accountant should be able to do.
It’s fundamentally a diagnostic exercise. There’s only a limited number of possibilities:
Maybe the issue has to do with the rate that you’re paying down your debt.
Or your investment in new equipment.
Or the amount that you’re drawing out of the business.
Or the way your working capital gets chewed up by new growth.
Or you’re not providing for tax properly.
Or for about ten other reasons – it doesn’t matter – the fact is that this is a knowable thing and you can’t do anything about the problem until it’s diagnosed. And make no mistake, there are virtually always things that can be done to cure this problem.
Question number two.
“Why do I have to wait until the last minute to know what my tax situation is going to be?”
Look, if you’re going to succeed in business you need a plan. And fair warning, you may hear me say that again. But in order to plan you need to be able to make meaningful predictions about things like tax. The predictions don’t need to be hyper-accurate but they do need to be reasonable and sensible. And you can’t make those predictions without information and it’s your accountant who should be giving you that information as and when you need it.
Again, this is a totally do-able thing. It just needs to be done.
Question number three.
“What are some simple things I can do to increase my profits?”
Your accountant should be able to talk to you sensibly about real, actionable things that you can do to boost your profits. And I don’t mean generalities. I mean exact steps. This is where a business-focussed accountant has an absolute advantage. A business-focussed accountant will have three tools in their toolkit.
First, they’ll have a good understanding of the key strategies that you’ll need to apply to your business to make it profitable. There’s actually nothing special about this. The truth is that you can get most of this information from a book.
What is special is the second tool in the toolkit – and that is the ability to help you formulate a practical plan to implement those strategies. That is, a plan that will work for you with your unique situation, your personality and your business.
And the third tool is the ability to help you execute the plan. A plan without execution is just a piece of paper or a file on a computer. A throw-together plan that’s brilliantly executed will always beat a brilliant plan that never makes it off the table. A lot of business owners are fundamentally lonely – the buck always stops with them. That’s why it’s invaluable to have a business-focussed accountant as a trusted advisor who’ll have your back.
So why don’t you get questions answered by your accountant?
Well, I’m not just here to hate on my fellow accountants. A lot of them are working their butts off. But the real answer is that getting questions like this answered isn’t part of the agenda. It’s not part of the accepted client / accountant relationship. In short, it’s not traditional.
What is traditional is getting things done that have to be done. Like preparing financial statements and year-end tax returns and preparing the BAS and answering nitty-gritty tax questions. You know, detailed technical stuff.
“Traditional” does not include conversations about high level things like your growth plans, profitability and cash flow and building up the value of your business. Most accountants can do this stuff but most choose not to and that’s because it’s outside their comfort zone.
And that’s a big problem. It’s actually a massive problem.
It’s a massive problem because having those conversations, getting those insights, solving those problems is what stands between you and success. You’ve got a business to run and you need to run it to a plan. If you don’t, your business runs you. And there’s obviously no person alive who’s better equipped to help you formulate that plan and keep you on the rails than your accountant. And as I said before, accountants are actually trained to do that stuff and because they have the advantage of being able to look at your business from the outside it’s a lot easier for them to distinguish the forest from the trees.
But if you’re not getting that help, what are your options?
Well, there are two main options. Firstly, if you’ve already got a good relationship with your accountant, you can sit down and have a heart-to-heart conversation and explain to them exactly what you need. Tell them that you need help to build a structured program to develop the business, build cash flow and profit so you can take things to the next level. Don’t expect them to come up with a comprehensive program straight off the bat. That’s unreasonable. Tell them that you’d like them to produce a proposal which you can accept or reject depending on whether you think it suits you. You never know, your accountant may have hidden depths that you never knew about.
Option two is to switch accountants. This is actually nowhere as complex as most people think it is. Accountants have protocols for handovers and unless you’re actually at war with your existing accountant, it almost never involves any drama. The upside of switching accountants is that you get to start the relationship with a clean slate. It’s a hell of a lot easier to pick someone who’s already mentally programmed to give you the support you actually need than to try to change someone who probably doesn’t want to or isn’t capable of changing.
Which leads me now to my call to action…
As you’re no doubt aware, Certus Group Accountants are ready and equipped to help you take your business on to the next level. We have dedicated programs for Sparkies which go well beyond the basics. We’ll help you create a coherent, well-thought-out plan and we’ll be with you while you execute it.
I’m David Thomson. If your ready to move up to the next level give me a call and don’t forget to audcheck out our website at HVACAccountants.com.au
Talk to you next time.