November 17, 2023

Accountants: Are we a cost or an investment?

Kyle Bonerath
Accountant & Registered Tax Agent

Accountants: Are we a cost or an investment?

As accountants, we're always helping our clients find ways to reduce their overhead costs — one of the seven ways to grow your business. Did you know that your accounting fees are an overhead cost? Should you be cutting this cost? Or do you view us as an investment?

Expenses are a necessary evil; you’ve likely heard the saying, “you need to spend money to make money”. But are your expenses providing enough of a value-add? 

An investment, on the other hand, is about the return on your spend — what you get back as benefits; more cash, more discretionary time, or simply peace of mind that everything is done as it should be.

The true purpose of an accountant is to provide enduring value to you and your business. It’s no longer just about annual accounts and tax. We believe that all our clients should have, at a minimum:

  • An annual Business Plan.
  • An annual Cash Flow Forecast.
  • Ongoing accountability coaching.

Clients who are investing in these services are reaping the rewards. They know where they want their business to go and have identified the goals they need to achieve to get there.

If you consider what you spend with your accountant to be a cost, then cut that cost; if you consider it an investment, you need to invest now more than ever.

''The biggest expense is an opportunity cost.'' - Anon

Ways accountants add value to your business

Provide strategic guidance for business success

A good accountant is there with you through thick and thin, helping you navigate the strategic horizon. 

Accountants analyse the financial and performance history of your business, identifying signs of growth, areas of potential development, and any roadblocks that may hinder progress. Armed with this knowledge, accountants create a strategy for the future, devising ways to grow profit and helping you make smart business decisions that are grounded in a wealth of information. Accountants guide decisions on diversifying services, introducing new products, evaluating growth potential, determining the feasibility of expanding your team, plus much more. Employing analytical accounting practices, advanced sales analysis, and comprehensive financial reports, accountants create a roadmap to business success.

Take the guess-work out of business decision making, and let your accountant identify areas of opportunity based on financial data. 

Managing (and minimising) your tax liability

Navigating the intricacies of tax season can be a source of considerable stress for business owners. The challenge of timely submission with accurate documentation for tax compliance is no small task — and the penalties from the ATO for noncompliance are definitely something you want to avoid. 

Recognising this, many business owners enlist the expertise of accountants. Accountants remove the administration burden by recording your business transaction data, preparing taxation documents such as Business Acitivity Statements and Tax Returns, and submitting information and documents to regulatory bodies like the Australian Taxation Office. 

Going beyond routine bookkeeping and reporting, accountants can provide advice around tax planning and structuring to ensure your tax liability is legally minimised. Given the dynamic nature of taxation laws, it’s essential to seek guidance from a professional who has their finger firmly on the pulse regarding compliance and strategy. 

Increase administrative efficiency and data integrity

For business owners juggling multiple roles within their organisation, even the addition of basic bookkeeping can become overwhelming — potentially leading to errors. With the importance of tax compliance and data integrity for decision making purposes, errors can cause significant issues for business owners. Accountants, with their keen eye for detail, bring significant value through precision. 

Bookkeeping mistakes can have far-reaching consequences, including financial losses, client issues, payroll errors, and complications with regulatory bodies like the ATO.

A business’s financial strategy is built upon a foundation of precise reporting and trend analysis. Without a dedicated focus and attention to detail, this critical information may be overlooked or even misinterpreted. 

Accountants play a pivotal role in adding tangible value to businesses of all sizes. The impact of a proactive, business-savvy, and strategically engaged accountant is evident across various business facets. These professionals contribute to tax savings, formulate effective financial and business strategies, enhance profitability, manage cash flow, and help businesses realise their long-term financial objectives. 

Different types of advisory and support in accounting

‍When most people think of accounting, tax accountants spring to mind. Someone who helps them tally up their invoices and receipts, and puts together a tax return to try to minimise their tax liability. While many accountants excel in and solely focus on this area, accounting is much broder and more comprehensive than just taxation. Below are the main types of accounting used for strategic business purposes.

Taxation accounting 

Tax accounting involves the systematic recording and reporting of financial transactions within the framework of tax regulations. It is a specialised branch of accounting that focuses on ensuring compliance with taxation laws while legally minimising a company's tax liabilities. 

Tax accountants navigate the complex landscape of ever-evolving tax regulations, applying their expertise to accurately calculate and report income, deductions, and other relevant financial elements. Their role extends beyond mere documentation; tax accountants strive to minimise tax liabilities through strategic planning, keeping up to date with tax law changes, and offering advice on lawful deductions and offsets. 

The goal is to ensure that businesses fulfill their tax obligations while optimising their financial positions within the confines of tax regulations.

Financial accounting

Financial accounting is a crucial facet of the broader field of accounting, involving the preparation of financial statements, such as balance sheets, income statements, and cash flow statements, which provide a comprehensive snapshot of a business's economic performance and position. 

Responsibility of a financial accountant includes recording all financial transactions, tracking revenue, expenses, assets, and liabilities, ensuring accuracy and compliance with regulatory requirements. This information is then presented to stakeholders for the purposes of making informed decisions about the financial health and prospects of the business. Stakeholders include business owners, investors, financiers and regulatory bodies.

Management accounting

Management accounting involves gathering financial data, conducting analyses, compiling reports, and subsequently presenting them to the company's leadership. In contrast to externally used financial statements, these reports are exclusively intended for internal use and are not subject to external regulations. 

The primary objective of these documents is to provide those in leadership roles with the information required to enhance decision-making in the realm of business operations. 

Additionally, financial analysis involved in management accounting is used to make predictions in various domains such as operations, logistics, and risk. The greater the scale and complexity of a business, the more advantageous it becomes to enlist the services of a good managerial accountant.

While financial accounting and management accounting may sound similar, management accounting is focused on internal reporting used for strategic business decision making, while financial accounting is focused on external reporting. 

Cost accounting

Cost accounting focusses on systematically tracking, analysing, and managing the costs associated with a company's operations. The primary objective is to provide detailed insights into the various expenses incurred during the production of goods or services, aiding businesses in efficient cost control and informed decision-making. 

Cost accountants categorise costs into direct and indirect, fixed and variable, helping businesses understand the cost structure of their products or services — which helps to identify the most profitable product or service offered. Through methodologies such as job costing, process costing, and activity-based costing, cost accountants allocate expenses to specific activities or products, offering a granular view of where resources are utilised. 

This detailed understanding of costs is instrumental in pricing strategies, budgeting, and overall financial planning for organisations. Ultimately, cost accounting plays a vital role in enhancing cost efficiency, profitability, and strategic resource allocation within a business.

Which type of accounting does my business need?

Tax accounting is a must-have for all businesses, however, it’s worth considering engaging a professional to help you manage other areas of accounting for the optimisation of your business’s financial performance.

Selecting an accountant who provides a comprehensive suite of services, as opposed to a tax accountant, is crucial for businesses seeking long-term financial success. A holistic accountant goes beyond tax preparation, offering a broader range of services that includes bookkeeping, financial statement preparation, financial analysis, budgeting, strategic planning, and compliance management. This multifaceted approach ensures you get a more thorough understanding of your business’s financial landscape, enabling proactive decision-making. Unlike a tax accountant who may focus solely on compliance, a comprehensive accountant considers the overall financial health of the business, identifying opportunities for growth, cost-saving measures, and operational improvements. 

This comprehensive perspective offers a collaborative and strategic partnership, positioning your business for sustained success and adaptability in a dynamic economic environment. Choosing an accountant who can help with strategic planning means you get your own dedicated financial ally, capable of navigating the intricacies of business finances beyond tax considerations.

If you need more advice on this issue, please contact our team.

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