Diversification: for accountants, it’s like being thrown a lifeline

Accounting News

The ATO to laser in on small business tax agents

Your small business clients are about to be targeted by the ATO to try to collect a large slab of the $33Billion tax gap generated during the COVID lockdown.

Second Commissioner of the ATO Josh Hirschhorn says many SMEs haven’t been acting in good faith in the way they do business.

Commissioner Hirschhorn has singled out small businesses, their owners and tax agents that he claims are not always playing by the rules.

Mr Hirschhorn says the ATO estimates that at least $12Billion of the outstanding tax gap is the result of taxes not paid by small business operators.

He says the ATO will be focussing on both the sector and their tax agents as they struggle to recoup their shortfall in revenue generated over the past two years.

Although he agrees that most small business operators are trying to do the right thing, he claims there is a sector that wants to exist in or participate in the shadow economy.

Mr Hirschhorn says that, while the ATO will focus strongly on recouping outstanding tax revenue from the sector, he is pessimistic in their ability to turn the cash economy around in the short term.

Inflation: There’s no stopping it yet!

The CPI increase caught markets by surprise this week lifting inflation to a high of 7.3%.

This is bad news for the economy as the Reserve Bank is likely to have to take more drastic action than the 25-basis points increase in early October.

Following this week’s concerning inflation hike, analysts are now looking to 50 point rise in the cash rate for November.

The lift in CPI of 1.8% in the September quarter was significantly higher than expected.

Financial markets had been factoring in a 1.6% rise, which would have taken the inflation rate to over 7% for the first time in four decades.

But the news was even more disappointing and local markets reacted.

The increase in the CPI has been blamed on new housing costs, petrol and food.

In its release, the ABS noted new house construction costs jumped by 3.7%, but recent rate increases saw housing commencements drop by 28.9% from the previous year’s June quarter.  Annually, new home construction costs are up 20.7%.

Petrol is also hitting daily commuters hard with a 10.9% increase in the quarter.

This is before the Federal Government withdrew the fuel subsidy that its predecessor put in place to ease cost-of-living pressures.

The ABS figures showed the price of goods rose annually by 9.6%, the highest since 1983.

Super Crisis Looming: Self-employed hold back on contributions.

More than 25% of sole traders have stopped contributing to superannuation in recent months.

With inflation exploding, small businesspeople are finding it increasingly difficult to make ends meet.

It’s no secret that inflation has been surging over the past six months and now the fallout is starting to impact on small businesses.

Sole traders, from electricians and plumbers to consultants, are feeling the cost-of-living pinch, particularly as interest rates climb rapidly.

To get by, thousands of sole traders are now holding back on making their super contributions.  Many are only making part payments and others have stopped altogether.

In a recent survey, most sole traders say they’re worse off now than they were 12 months ago.

Many claim their work-life balance has been thrown into turmoil and that they’re now spending upward of 7 hours a week on paperwork and tax affairs.

Hnry Australia’s Karan Anand says the survey shows that, with the filing deadline rapidly approaching, fewer than 50% of sole traders have completed their tax returns.

There are more than 1.5 million sole traders in Australia, representing around 10-percent of the workforce.

Ms Anand says that the self-employed are pushing through during the current financial hardships, but they really need support.

Using Common Sense: ATO helps out flood victims

While the ATO is currently getting tough on its collections policy post-COVID, it’s still prepared to show some leniency for those taxpayers and small businesses caught up in flood-affected areas.

Clearly, the ATO understands that using common sense for victims of natural disasters makes good public relations.

The tax compliance industry is in no doubt of the ATO’s intention to get serious about collecting tens of millions of dollars of outstanding tax deferred from the COVID era.

But, it seems that something always comes along to spoil well-laid plans, even for government bureaucracies.

This time it’s the ongoing flooding.

Regional areas of southern Queensland, New South Wales and Victoria have been inundated again just months after yet another 100-year flood.

The ATO has stepped up to help the recovery process by agreeing to extend filing deadlines for accountants and tax agents.

As many regional accountancy practices and their storage facilities have been impacted by heavy flooding, it’s expected when the muddy waters subside that many client tax records may have been destroyed and need to be reconstructed.

The ATO says it’s available to provide information that may help taxpayers to claim disaster entitlements or government assistance.

Accountants and tax agents who have been severely impacted in flooded areas can work with the ATO to organise a practical lodgement plan that will take into account all their circumstances.

Labor funds the ATO to help its financial position

More than $240Million has been earmarked in the week’s budget for the ATO to wage war on the shadow economy.

The massive increase in funding is aimed at getting the cash economy under control.

For years, the ATO has targeted the shadow economy with varying degrees of success.

But this time, for the country’s sake, it needs to work.

The COVID pandemic threw a spanner in the works, as field investigative work ground to a halt during the lockdowns, allowing the cash economy to thrive.

This week, in his Budget speech, Federal Treasurer Jim Chalmers gave the Tax Office the money it needs to gear up with proper resources to tackle the shadow economy head on.

Accountants are predicting that they’ll be busier than ever with their small business clients ensuring that they are fully compliant and able to withstand a tax audit.

Sole traders and very small businesses are the most likely to be working in the cash economy.

The ATO’s Tax Avoidance Taskforce didn’t come away from the Budget empty-handed either.

It’ll receive $1.1Billion in funding to help recover an anticipated $2.8Billion in tax revenue over the next four years.

CPA Australia’s Gavan Ord says the extra funding is not surprising given the ATO’s current revenue position post-COVID.

Mr Ord says with the government in financial difficulty, there’s going to be a greater focus on tax compliance.

Diversification: for accountants, it’s like being thrown a lifeline

By Peter Towers – ESS BIZTOOLS

Is your accountancy firm doing the same old work day after day?

Have you been thinking about diversifying your practice?

If you’ve read the May edition of CommBank’s Accounting Market Pulse, you may have some concerns about the direction that the industry and your firm is taking.  That report identified worrying trends within the Australian Accountancy Industry.  Good reasons to be concerned.

So, are there changes you would like to make in your firm?

It’s a bit of worry when even the Tax Commissioner is raising warning flags over future market opportunities for tax return preparation.

Chances are very real that tax compliance work alone may not be viable in the future.

If you take some time to look closely, you may find that some of your clients could benefit from your advice on:

• major grant applications;
• raising funds for their business from Crowd Sourced Funding Equity Raising or Early-Stage Innovation Company Equity Raising;
• claiming taxation benefits for Research and Development; or
• wanting to know what their businesses will look like in five years time and what the business will then be worth?

Some clients may have told you that they would like access to your knowledge throughout the year, not just at taxation time.

Looking inside your business, have some of your team members been complaining about having to work on a never-ending stream of compliance tasks?  That’s a common complaint these days.

Have they been asking for more interesting work?

It may well be time for your firm to diversify and start offering a broader range of services.

If you want to go down this path, where do you start?  That’s a perplexing issue for many accountants.

I think the best strategy is for your accountancy firm to begin supplying a service to your business clients, as close as possible to what that your client would have, if they were a larger business.

Most would employ a qualified accountant or even a CFO to monitor their business activities 52 weeks of the year.

That’s a very expensive route to follow, but there’s a more practical and cost-effective solution.

Your firm could start by offering a virtual CFO service.

Initially, this would start as a basic service, but could later build up to provide a range of valuable services for clients with up to $25million turnover and even higher.

So think about it.

What can you offer your SME clients that will benefit them and offer you and your team more challenging work?

From your business perspective, the key requirement is to provide an ongoing service throughout the year preferably on a weekly, but at least on a monthly basis.

Your role as a virtual CFO will change the way you and your people interact with your clients:

• You and your team will need to get to know your clients business operations in far more depth than for preparing annual accounts and income tax returns – this is about understanding the “business of the business”.

• It’s a good idea to use a publication like the ‘SME Needs Analysis’ to get discussions going with each SME client so you can understand what he/she is worried about and the services they’re going to need from you.

• All businesses need a Business Plan. This should be the next task that you convince your client and the leadership team that you should undertake, so you can clearly identify their “Vision” for the business.

• The Business Plan then needs to be converted into financial projections. The first of these needs to be budgets for each of the individual business units.

• The Cash Flow Forecast comes next, analysing subaccounts – debtors – inventory – creditors. As yourself, “Are they realistic?”

• The projected Balance Sheet is the document through which you’ll demonstrate to your client what the end result of their current plans will look like.

• Most businesses will benefit from the introduction of a weekly Performance Report and KPIs. This is important for the individual business unit managers and the CEO because it provides immediate feedback to them on the previous week’s results.

• Monthly financial accounts should be prepared for each individual business unit and completed no later than fourteen days after the end of the month

• KPIs and the Budget Variation Report should then be prepared for each business unit

Each month, there needs to be a “Business Review Meeting” attended by the CEO, leadership team members and your firm’s team leader, who is the virtual CFO.  This meeting lets them review each individual business unit’s performance, analysis of debtors, creditors and bank position and to authorise any updates to the financial projections going to the Board of Directors or to the Board of Advice.

This is the basic business approach that every company requires.

It’s built around the “corporate vision” and documenting that vision into a Business Plan.  The Business Plan then leads to financial forecasts, and ultimately, the week-by-week and month-by-month analysis of performance.

If you’re wondering where you’re going to start on putting all this together, the answer is simple.

ESS BIZTOOLS has a Business Advisory Services Starter Package which supplies all of the training material, documents and checklists required to roll out these services to each of your clients.

If you’re interested in getting more information on how this service package can help your firm on its diversification path, you can visit our website www.essbiztools.com.au.  We also welcome you to attend our complimentary webinar on Wednesday 2 November; “Business Advisory Services – Starter Package”.

You can register for our webinar here.

For accountants in 2022, thinking diversification is a smart way to go.

Holiday Accommodation Package Competition

There’s still time to enter our holiday accommodation package giveaway.  For a chance to win the competition, CLICK HERE to enter.

The winner will be drawn on Wednesday 2^nd November 2022 at 9.30am AEST/10.30am AEDT.  Good luck!

Accounting News – Accountants Daily Articles

ATO “hit by 3m cyber attacks a month”

Second Commissioner says criminals are getting smarter about identify theft and the tax infrastructure is vulnerable.

The ATO is hit by up to 3 million attempted cyber attacks per month, according to Second Commissioner Jeremy Hirschhorn, who said criminals were getting smarter about the way they gathered information for identity theft.  CLICK HERE to read more.

For real, accountable feel-good, the buck stops with finance

Accountants are the obvious choice to oversee environmental, social and governance factors.

Are you surprised by how often the ESG acronym crops up these days? You shouldn’t be. Social consciousness is becoming a more important issue in the commercial world for stakeholders of all stripes: investors, lenders, shareholders, customers, and even employees.  CLICK HERE to read more.

Politicians damned for “dumb” attempts at tax reform

Australia is saddened with an overcomplex system that punishes families, former ATO lieutenant says.

A former ATO second commissioner has fired a broadside at politicians for their “dumb” attempts at tax reform characterised by “thought bubbles” that favour one group over another and fail to learn lessons from the past.  CLICK HERE to read more.

Budget: what it means for the tax profession

Accounting firms and organisations offer their verdicts on the first test of Labor’s economic credentials.

Accountants will be busier than ever over the next few years with a huge increase in funding for the ATO’s crackdown on the shadow economy and compliance, as well as additional funding for the Tax Avoidance Taskforce.  CLICK HERE to read more.

Accounting gets tiny share of 20,000 extra fee-free courses

Education and health get the lion’s share of additional places in scheme to tackle skills shortage.

Accounting will get only a tiny share of 20,000 additional fee-free university places announced by the government.

The initiative, which was designed to counter the widespread skills shortage, has relegated accounting to a minor role.  CLICK HERE to read more.

It pays to find the right model for financial advice

Avoid missteps and adding another discipline to your practice can boost revenue, says consulting specialist.

Adding financial advice to the mix can diversify an accountant’s income stream but could backfire if done poorly, says Elixir Consulting senior consultant and business coach Graham Burnard.  CLICK HERE to read more.

Accounting News – Innovation Australia Articles

Medical imaging platform wins AIIA’s Startup of the Year iAward

A cloud-based medical imaging startup from Canberra has been named Startup of the Year at the Australian Information Industry Association’s annual iAwards program.

Aurabox was founded by chief executive Chaturica Athukorala and chief technology officer Christopher Skene in 2021 as a patient-centric diagnostic platform that gives doctors a single point of access to important patient information, including a complete medical imaging history.  CLICK HERE to read more.

Cloud spectrometer reduces soil test costs for farmers

Founded in Newcastle in regional NSW, Hone Carbon has commercialised innovative new ways to measure carbon in soil, unlocking the potential for carbon storage in Australia’s agricultural environments.

According to co-founder and chief executive Dr Philip Ireland, Hone Carbon was set up initially in 2014 by a group of PhD students – Dr Antony Martin, Dr William Palmer and Dr Jamie Flynn – while at the University of Newcastle.  CLICK HERE to read more.

Cyber breaches keeping company directors up at night

The recent cyber breaches at Medibank and Optus again show just how critical strong cyber security is for all organisations, for the economy as a whole and for each of us as individuals.

The Optus incident represents one of the biggest data thefts in Australia’s history with up to 10-million customers potentially having had their data stolen or compromised.  CLICK HERE to read more.

Sustainable food through modern, vertical farming

Helping to support efficient and sustainable modern farmers and feeding the world in a ‘smarter way’ are complimentary business and social impact for the team at InvertiGro.

The Sydney-based company – named as a finalist in the 2022 InnovationAus Awards for Excellence in the Food and Agritech category – designs and builds Indoor Vertical Farming solutions as leading Australian AgTech innovator, thereby enabling sustainable and profitable urban agriculture.  CLICK HERE to read more.

Start-up Amber banks $13.5m to roll out grid automation

Amber has banked $13.5 million in extra funding and added NRMA to its line-up of investors, as the Melbourne-based renewable electricity retailer cashes in on the wave of frustrated households facing soaring energy costs and the growing demand for electric vehicle charging infrastructure.

CLICK HERE to read more from Australian Financial Review.

e-Newsletter Proposal

e-Newsletters are a cost-effective way to maintain regular contact and develop closer ties with your clients.

Brad Smart, author of “Selling the Message”, has prepared an overview on business newsletters, which presents a great opportunity for accounting firms to recruit the services of a professional writer to add a vital service which will benefit their clients and the accounting firm.  Click here to access the article.

Grants Update

There are number of grants for which your SME clients might be eligible.

Want to know what they are?  Click here for a list of current grants, prepared by ESS BIZTOOLS.

ESS BIZTOOLS – New Subscriber Benefit

For a limited time, ESS BIZTOOLS is offering you a complimentary holiday accommodation package. 

You can enjoy a 4-day/3-night stay in a wide range of idyllic destinations throughout Australia.  Simply subscribe to one of our packages (paid 12 months upfront or in 4 equal monthly instalments) to claim.

Click here to find out more.

ESS BIZTOOLS – Feature Product Package

This week’s feature product package is the Business Advisory Services Starter Package.

The ESS BIZTOOLS’ Starter Package is suitable for accounting firms looking at establishing business advisory services for their SME clients.

Click here to find out more about this package.

Latest Social Media Posts

ESS BIZTOOLS has presented a series of posts over the last week.  Click on your preferred topic to access:

Virtual CFO services becoming a mainstream service?

Virtual CFO is an investment, not a cost!

Opportunities as compliance fades

Business Advisory Services is Different

Delivering real accounting advice

Free Webinars

You are invited to participate in the following webinars, free of charge.  Click on your preferred event to register your attendance.

ESS BIZTOOLS Starter Package – Wednesday 2^nd November 2022 at 11.30am AEST (12.30pm AEDT)

ESS BIZTOOLS Financial Forecasting Package – Wednesday 9^th November 2022 at 11.30am AEST (12.30pm AEDT)

ESS BIZTOOLS Advanced Package – Thursday 17^th November 2022 at 11.30am AEST (12.30pm AEDT)

Previous Webinars

Federal Budget as it Affects SMEs – CLICK HERE to watch

Biggest Risk – Talent Attraction and Retention Do You Have Strategies? – CLICK HERE to watch

Want to know more?

Visit www.essbiztools.com.au.  You are also welcome to visit www.essbizgrants.com.au, a website that can assist in the identification of government grant(s) suitable for your clients.

If you would like to have a discussion about how this concept of virtual CFO services can be supplied by Australian accounting firms please ring our Managing Director, Peter Towers, on 1800 232 088 and we will arrange a complimentary 45 minute Zoom meeting to discuss your firm’s position and to give you our advice.

We believe that this is the blueprint for the delivery of an enhanced range of services by Australian accounting firms to assist SME businesses to add value to their businesses and to assist accountants not only to attract but to retain outstanding talent who want to be involved in the delivery of “real accounting services”.

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