Accountant as a business advisor
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Most businesses have an accountant for preparing their tax return but are they your business advisors as well? All businesses need a tax return and BAS statements and often related advise such as fringe benefits tax advice, however this information is not a planning tool. Maybe the accountants could prepare management accounts but most financial accounts are historical only and don't provide much useful information for the future. Generally accountants are members of the Institute of Chartered Accountants or CPAs but how many offer useful information as a business advisor?

Business Advisory Services

Some accountants are financial planners and as such provide advice on wealth creation. However, this is mainly for the owners themselves and not for the benefit of the business. The business' accountant should be focused on helping you run your business. It doesn't matter if your accountant is in North Sydney or Perth, their primary role is not book keeping, tax returns or FBT summaries - it should be in providing proper, useful, timely and intelligent advisory services for the business.

Aims of Useful Business Advice

We all know of expensive consultants that provide glossy brochures and expensive reports that either tell you what you already know or set up complex systems that are unmanageable and useless. It is worth reviewing the basics.

1. The purpose of the business is to make a profit.
2. The aims of the business owner are to make sufficient profits to pay themselves a good salary and also to create an asset to be sold later to provide for future retirement benefits.

Accountants Helps Generate Profits

Not all profits are the same. Basic accounting will tell you that a profit is revenues less costs. However, accountants often use accrual accounting - i.e. making assumptions about non cash transactions.

Need an example? Consider long service leave. Every business has a legal obligation for long service leave and this "expense" is accrued in the accounts. It results in less reported profits but usually the cash is not set aside so the cost has to come from future cashflow, which of course, may not be there at the time of the liability to pay employees for long service leave.

So the first thing the accountant should focus on is cashflow. This ignores accruals and looks at the real cash position. The accountant as the business advisory will sit down with you and review revenues and expenses. Let's consider expenses first. Many accountants are good at looking at expenses, hey, that's what they spend a lot of time accounting for. This will include a review of debt and the finance requirements of the business. It is necessary but not the full picture. The real focus is on revenues.

Advisors Needed to Review Business Revenues

Revenues come from sales. An accountant can work with you to do a strategic review of sales income. Who are the key customers? Are you over-exposed to just one or a few key customers? What is the turnover of customers? Can you add extra margins? Are your prices properly bench marked? Who are your main competitors?

Have you done a SWOT analysis (Strength, Weaknesses, Opportunities and Threats)? The accountant should also review the assets of the business. This should involve more than just operating equipment,cars and so on. It should include investments including shares. We suggest you read our article on what to invest in during a share market downturn. If your business doesn't have investment assets then you definitely need to review your revenues and profits.

Promote your Business

Every business needs to promote itself. This is true of mega-corporations such as Coca-Cola to the local kebab shop. The difference now is that the internet has made it easier and more accessible for all businesses to do this cost-effectively. We are sure that accountants would agree that a ZimboPages listing is excellent value as part of your advertising and marketing budget.

Conclusion - The Right Accountant Provides Needed Business Advice

This is a brief summary of an interesting topic. The accountant as a business advisor can add real profits to your business by sitting down and reviewing your business with a view to wealth creation, retirement and financial freedom.

Disclaimer

Understand the Role of Accountant as a Business Advisors Can Create Business Wealth