Accountants can Assist with Wealth Creation
Another article brought to you by Zimbo the Visual Directory that Sells.

Wealth creation is the main goal of business owners and thus accountants must be a vital resource to help businesses grow. As part of their usual role, accountants should review areas such as superannuation, taxation record keeping, tax returns, fringe benefits tax, loans including leases and mortgages and finances requirements generally. In this article, we will consider mainly how accountants help with wealth creation for owners.

Corporate Structure as a Component of Wealth Creation

Getting the structure right when the business starts is very important. Should it be run as a sole trader, partnership, company or trust? The choice of structure is driven by the type of business, cash resources, expected revenues and people involved. Accountants play a vital role in setting up businesses and the administrative costs and potential tax burdens of changing a structure are high. Best to get it right first.

However, do accountants consider wealth creation when acting as business advisors in the set-up phase? If they don't, they should! What are the exit strategies, what happens if one founder wants to sell and another wants to stay on in the business, will the kids take over or is there any succession planning?

Owners and accountants should have their eye on the main game from day 1. What is the main game? Successful exiting of the company with real tangible wealth which has been generated by setting up and growing a successful business.

Accountants as Business Advisors

The business' accountant should be focused on helping run the business. It doesn't matter if your accountant is in North Sydney or Melbourne, their primary role is not book keeping and this is discussed in our ZimboPages article Accountant as a business advisor This article discusses how accountants help businesses grow via a two pronged review of current, and more importantly, future business operations:

1. Increase revenues
2. Decrease expenses

For ideas on growing your business online see our article best online business ideas.

Business Review

Many businesses operate as a company. This means that there is a split between owners - i.e. the shareholders and the executive managers i.e. the directors. In many small companies often the owners are the directors. However, each role should be considered separately. Why? Well just consider the different objectives. Directors want a good salary, cars and holidays. They also want power. The shareholders of the company, as its owners, want different things. They want higher profits (which means of course lower expenses such as directors salaries and costs including keeping accountants fees or salaries as low as possible), more dividends and growing value of their shares. Owners want high business valuation as a vital step in their financial planning for retirement.

Wealth Creation

Where are the profits going? Profits can be used for several things:

1. to pay dividends
2. to pay higher directors salaries and expenses
3. expand the business including more staff
4. buy business assets
5. increased marketing and promotion
6. new business divisions - i.e. mergers and acquisitions

How profits are spent affect greatly the creation of wealth for the shareholders. Part of this job is to provide financial accounts for shareholders. However, most accountants deal mainly with the directors and it should be part of the director's stewardship role to help with the wealth creation of shareholders. Accountants can outline strategies and possibilities for consideration by the shareholders.

In fact some owners may employ accountants independently of the company to review their own position. The scope of how shareholders gain access to the wealth created by the company is a topic for another day.

So accountants help by getting the initial structure right, helping businesses to grow and reviewing strategies to meet the owners main objective of wealth creation.

Share Investment Diversification

Having created wealth and received the cash (because it doesn't really exist until you have cash in hand), the next step is portfolio diversification. This would include listed shares in a range of industries - some blue chip and others which are more growth oriented.

However, despite what your accountant may say, a small proportion such as 5% should be in high return/high risk shares including shares that are not yet listed. The downside risk is that you may lose your investment or the funds are illiquid for a while.

The upside is that this is where stellar returns could be made. As one option, as you are reading an article on the Zimbo website, we suggest you check out our share investment opportunity at our Zimbo share investment listing on ZimboPages at http://www.zimbo.com.au/find/investing or go straight to our government lodged offer document at http://www.zimbo.com.au/OIS.

Disclaimer

This article is of a general nature only and should not be relied upon as all readers should get expert advice - maybe from accountant business advisors found on ZimboPages.

Learn How Accountants Can Provide Many Different Business Advisors Roles and How to Choose Your Next Accountant.