Accountants Can Advise You

You’ve probably heard from some accountants, who are promoting themselves as offering business advisory services.  This edition will discuss the type of work accountants, who are offering more than taxation and annual account preparation, provide as part of their services.

What do they do?

Analysis Of Your Current Business Performance

The first step is they will sit down and talk to you about how your business has performed during the last 6-12 months.

• How are you going?
• How are the results?
• Do you need assistance in the key areas of the business?
• Are you happy with the margins that you’re generating in your business?
• Stock levels – are they too high?  What could you do about reducing them?
• Debtors’ days outstanding – how does your figure compare with the traditional 30-day trading period?  Is it as high as the average debtors’ days outstanding in Australia which, according to Dun & Bradstreet, is currently 54 days?
• Are you preparing budgets and cashflow forecasts?  Are you utilising those forecasts to better manage your business?
• Are you aware of the requirements of the Fair Work Act and the Modern Awards, as far as your relationship with your team members go?
• Would you like some assistance in better understanding your customers?
• Would you like your accountant to facilitate quarterly meetings of a customers’ advisory committee, so you can obtain feedback on what your customers think about your business operations?
• Are you monitoring your competitors?  Would you like some assistance in understanding the strengths and weaknesses of your competitors?
  • Do you hear about government grants and wonder whether any of them are applicable to your business?
  • Would you like your accountant to be proactive in identifying government grants for which your business might be suitable?
  • As the owner of the business, how are you going?  Are you achieving your aims?
  • Have you got other objectives that you would like to achieve over the next three to five years?

An accountant, offering business advisory services, can probably assist you in achieving those objectives.

Future Planning For Your Business

In the ‘hurly-burly’ of day-to-day business, it’s very difficult to sit down and do some objective planning and thinking about where you would like your business to go.

An accountant, who is offering business advisory services as an important aspect of their overall accountancy business, can assist you in that planning.

You might want to know what the accountant could do for you, acting as a Chief Financial Officer (CFO), thinking about the future and helping you to plan the future operations of your business.

This will include consideration of matters such as:

Business Plan

Do you have a business plan?

Business plans are like maps for tourists.  Every business should have a business plan and should regularly compare their actual performance against the milestones that have been established within the business plan, so you can monitor your progress.

Budgets and Cashflow Forecasts

Do you prepare budgets and cashflow forecasts?  Are these prepared on an annual basis?

If not, your accountant can assist you in the preparation of the budgets and cashflow forecasts and then in the monitoring of your actual performance, month by month, together with the updates of the budgets and cashflow forecasts, so they are still very much a useable document throughout the year.

Business Valuation

How much do you think your business is worth?  Have you ever asked your accountant what they think your business is worth?

In many cases, there’s a significant difference between what the small business operator thinks their business is worth and what their accountant thinks their business is worth.

It’s a modern business practice to value a business on an annual basis, to see how the overall business is performing.

Do you have your business valued annually?

Why don’t you talk to your accountant about preparing a business valuation on an annual basis, then sitting down with you and establishing targets on what is to be achieved over the next few years, to breach the ‘valuation gap’.

The ‘valuation gap’ is the difference between what you believe the business is worth and what your accountant believes its worth.

An accountant preparing a business valuation will utilise generally accepted methodologies for the valuation of businesses.  That is what most of the buyers will also be using, especially if they’ve sought advice from accountants, offering business advisory services.

Selling a Business

There are a lot of businesses for sale in Australia and, unfortunately, some people, who have been operating businesses for many years – in some cases, over 50 years – are being forced to just close up, without being able to sell their businesses.  Is this because they haven’t prepared a proper plan for selling their business?

Planning to sell a business is nearly as important as a business plan to operate a business.  Selling is not something that you can just wake up one morning and decide you want to sell your business on the weekend.  You need to implement a strategy and a plan to get the business in order, so you would be able to attract buyers in the current market.

Because of the change in generation and with baby boomers starting to think about retirement and leaving businesses, there are thousands of businesses for sale.

An accountant, offering business advisory services, can help you.

Business Expansion

Would you like to expand your business?  Are things going well?  Do you have a good team, a good product and good suppliers?

There’s nothing wrong with business expansion, as long as it’s appropriately planned.  In fact, the CCH survey of small businesses, which was released in April 2013, indicated that ‘assistance in expanding a business’ was one of the key items identified by the small businesses, who were surveyed as being an item on which they would like to receive advice.

Succession Planning

Another area that an accountant, offering business advisory services, can assist you with is in succession planning.

Succession planning is not something that just happens when someone reaches their 60s.  Succession planning is something that should be thought about throughout the business, in every position, for the entire life of the business.

Who would take over and perform a particular task if the current person is unavailable?

Business Health Check

Accountants, who are offering more than taxation advice, can also assist you in the preparation of a business health check.  Just as you go to your medical practitioner or dentist, probably at least on an annual basis, it’s also important to assess the business’ health.

Accountants use key performance indicators (KPIs) and business ratios, to be able to calculate various indicators.  They can also identify:

• gross profit percentage;
• average sales
• percentage of new customers;
• wages to turnover;
• net profit to turnover; and
• sales per square metre of rented space.

These are just some of the indicators that can be used, to give a comparison against your performance in previous years, compared to your budget expectations and compared to other similar businesses operating at other parts of Australia and New Zealand, on a benchmarking basis.

Accountants can also assist you in some ‘what if’ calculations.

• What would be the effective gross profit percentage if the business could improve by 2%, if the number of customers has increased by 5% and if you’re able to attract your customers to come back to your business 10% more often during the year.
• What would the turnover be and what would be the gross profit from that extra turnover?

These are the type of calculations that can be performed.

Personal Property Securities Register (PPSR)

Another very important area is:

• Do you have adequate systems to safeguard yourself against the Personal Property Securities Act (PPSA)?
• Do you have a system to determine which transactions you need to register on the PPSR?

Accountants Can Assist

Accountants, who are offering business advisory services, utilise an SME Needs’ Analysis to have a conversation with you, to determine the type of additional services you might like.

If you’re interested in a wider range of services, to assist you to better manage your business, so you can perform the role of a CEO, having an accountant providing a CFO service (just like you would have on a larger business, but on a far smaller scale), my suggestion is to approach your accountant and ask whether he/she is prepared to assist you in offering these type of services for your business.

If your accountant is unable to assist you, because he/she is not offering these types of services, please send an email to peter@essbiztools.com.au with your location and postcode and we will send you the names of accountants within your area, who are offering these types of services.

ESS BIZTOOLS has developed hundreds of articles and other templates, to assist small business operators to improve their business operations.  A complimentary copy of our article, ‘Use of ESS BIZTOOLS’ SME Needs’ Analysis’ can be downloaded below: