Sometimes we’ve just gotta take the lead from Uncle Sam

I know some Aussies get very frustrated when they see so many American trends being adopted here.

Sure, there are some really cringeworthy examples, like teenagers putting their baseball caps on backwards, but ask yourself, where would the productivity of your practice be today if you’d turned your back on Word or Excel simply because they’re American?

Sometimes in business, you just have to take your lead from the US and other western countries that operate pretty much as we do.

Like it or not, accountancy is now in a global market.

I’d like to take a few minutes to outline for you where I see the accountancy market in Australia heading and look at where I believe we are now compared to the changes that have already swept through the United States.

Indiana-based Adam Hale, who is a Partner in the accounting firm Summit CPA, gave us a great insight into the changes that have already happened in the US market when he appeared in our recent webinar.

Adam told us that these rapid changes have occurred for a number of reasons, including:-

• ever improving and sophisticated software which is reducing the amount of time that American accountants are spending on the preparation of income tax returns

• firms being faced with losing key staff unless they can offer them greater intellectual challenges, such as a broader range of interests, like Virtual Chief Financial Officer (CFO) services to help their SME clients

• discovering that the SME marketplace is receptive, and in many cases expects, to be offered a broader range of value adding services by professional accountants

If you stand back and take a look, you can see that these changes are also happening in the Australian market.  Sure, we may be 12 to 18 months behind, but I see these changes coming here and we need to be ready for them.

Australia follows American trends in many ways.  For accountants, this doesn’t have to be a bad trend if you’re prepared to be open to new ideas.  Why wouldn’t you want to learn from international trends and position yourself to deliver additional value-added services with premium revenues to your SME clients?

That’s almost a ‘no-brainer’.  Oops…that’s one of those American sayings, isn’t it?

What’s become clear is that the impact on the US accounting industry resulted from software, technology and improvements to communications.  This evolution reduced the amount of time accountants were spending on tax return preparation work and it sliced into their revenues.

Same thing is happening here.

In the global economy, we share more with our US cousins than language, Black Friday sales and burgers with fries.

When the US sneezes, often we catch cold - we just have to be ready for it.

During our webinar presentation, Adam Hale made the comment that his firm succeeded with changing their focus through trial and error.

They identified those areas of interest that resonated with the SME market:

• “Financial Forecasting” which is mandatory for all of their clients. The process incorporates Business Planning, Key Drivers that support the calculations and Budgets.

• Cash Flow Forecast

• Projected Balance Sheets

• Monthly Work Programme that could be selected by the client for weekly, bi-monthly or monthly operations, and monthly Board of Review meetings that his accountancy firm facilitates

• Tax Advice and Taxation Returns – the client can always elect to have this work undertaken by another firm however they’ve found that about 90% of clients contract with Summit CPA to provide this service

• Back Office Accounting and Administration – the client elects whether they will undertake this work themselves, contract Summit CPA or use a third party.

The real lesson is that “financial forecasting” is the most important task being performed for their SME clients.

Their clients agree to a 12-month contract of services and pay the negotiated fee on a weekly basis. Wouldn’t that be great?  Virtually no debtors and very little work in progress!

The overall results, 150 clients paying an average $US80,000 a year - ranging from $US40,000 –  $US200,000.

Adam Hale says his firm has no trouble attracting talent or retaining high quality staff. They love the new way of working!

If you would like to listen to Adam Hale’s webinar recording, click here.

Andrew Geddes, an “Australian Accounting Industry Guru” and former public company director, watched Alan Hale’s webinar presentation with great interest. Later, Andrew joined me for an ESS BIZTOOLS podcast and he made the following prediction:

“It’s a new business model – I think it’s going to revolutionise the sector globally!”

Check out the podcast with Andrew Geddes for yourself by clicking here.

We know there are extremely challenging times ahead for our industry, so here at ESS BIZTOOLS, we’re presenting a series of Free Education Events just for accountants. I hope you can join us.

In these sessions, we’ll be looking at how you can supply value-adding virtual CFO services for SME clients by:

• creating interesting and challenging work to help attract and retain the best and brightest talent available; and

• having the confidence to outline the services that your firm can deliver for a reasonable fee

The first of our presentations “Introduction to Virtual CFO Delivery” was presented on 15 September and you can still access the recording by clicking here.

Please take the time to visit our website www.essbiztools.com.au and see if some of our product packages could help make your job a whole lot easier:

• Financial Planning Package
• Advanced Package
• Starter Package

Stay safe!

Peter Towers, Accountant, Company Secretary, Director, Consultant

Managing Director ESS BIZTOOLS

Grand Final Promotion

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 installments) to claim.  Click here to find out more.

Accounting News

e-Newsletters help you stay in touch

Most accountants don’t like having to stay in touch with their client base.  Often, that’s because they don’t know how.

If you see yourself in that category, then do yourself a favour and continue reading…

It’s no secret that things could get very tough in business during the next 18 months with high inflation, rising interest rates and a cost of living that’s going to see many people diving for cover.

If you’re one of those accountants that doesn’t feel comfortable staying in regular contact with your clients, then you may just have to suck it up to make sure your practice survives these stormy times.

Every accountancy firm needs a communication plan, whether you like the idea or not.  You can think of it like a COVID injection.  Just imagine how sick you may get, if you don’t have one.

Like any other business plan you write, your communication plan should touch on all the likely scenarios – social media, LinkedIn blogs, YouTube videos, media releases and advertising. When you start putting all your ideas down on paper, it can get rather daunting.

You can find yourself asking, “where do I start?”

Well, the simplest answer is an e-newsletter.

There’s not a lot of production time required, and if you’ve got an active client email list, you’re halfway there!

e-Newsletters can be produced by people within your company for virtually no cost, or you can find someone external to produce it for you.

To help you get started, we’ve produced a brochure that lets you know the sort of content you’ll need to include and the style in which it should be written.

As an accountant, you’re going to be interested in the statistics of how effective e-newsletters can be in generating client responses.

Click here to download your copy of the brochure.

You’ll find it an interesting read.

Tax Commissioner warning to accountants

Last week at Xerocon, it has been reported that Chris Jordan, Tax Commissioner said:

“You must understand that if your business model is high-volume, low margin, simple tax returns, your business will not be viable in 3 – 5 years.”

 “You should be looking to diversify to remain viable longer term”

 “Focus on becoming a brilliant and trusted advisor.”

Research and Development Expenditure for SMEs

Last week’s edition of Accountants Minute alerted accountants to the article “Ditch R&D Tax Concessions For Direct Funding” (Financial Review 30 August), where the Deputy Vice Chancellor of the University of Sydney, Professor Emma Johnston, said “tax concessions currently paid to SMEs should be scrapped in favour of direct federal funding.”

According to the Australian Bureau of Statistics data for 2019/20 financial year (the last reported summary) Research and Development, Business Expenditure for Businesses was 18,171 million.

(Unfortunately there is no dissection between the level of expenditure from the various business categories)

Business Human Resources devoted to R&D totalled 77,724 person years of effort.

According to the report, the 3 industries with the greatest contribution to business expenditure on research and development are:

• Professional, scientific and technical services $6101 million or 34%

• Manufacturing $4763 million or 26%

• Financial and insurance services $2714 million or 15%

The Australian Small Business and Family Enterprise Ombudsman has prepared a report on research and development expenditure for 2017/18.  This report indicates that small businesses (1 – 19 employees) comprised 23% of Total Business Research and Development Expenditure in 2017/18.

According to the Australian Small Business and Family Enterprise Ombudsman Report, small business share of the total business research and development expenditure in 2017/18 was:

• Rental, hiring and real estate services 42%

• Other services 42%

• Professional, scientific and technical services 41%

• Healthcare and social assistance 41%

• Retail trade 36%

• Education and training 30%

• Mining 29%

• Electricity, gas, water and waste services 28%

• Information media and telecommunications 27%

• Construction 25%

• Wholesale trade 23%

• Agricultural, forestry and fishing 21%

• Accommodation and food services 17%

• Public administration and safety 14%

• Transport, Postal and warehousing 13%

• Manufacturing 11%

• Arts and recreation services 10%

• Financial and insurance services 5%

• Total small business share 23%

• Total expenditure by small business on R&D in 2017/18 was $4,060, 675,000

• Total expenditure medium size businesses (20 – 199 employees) in 2017/18 was $4, 537, 147, 000

• Equivalent to 26% of the total business research and development expenditure

This means that, in 2017/18, the total percentage of expenditure for small businesses and medium-sized businesses was 49% of the total business expenditure on R&D.

These are significant figures and show the extent of R&D expenditure being undertaken by SME businesses in Australia.

Whilst the current system is not perfect, it does give some assistance to SMEs with their R&D projects.

 Accountants and your SMEs clients should be concerned by any attempt to change the current system to benefit self-interested third parties at the expense of small business operators.

ESS BIZTOOLS – Podcast

Peter Towers, Managing Director of ESS BIZTOOLS, presented a podcast on the “Introduction to Virtual CFO Delivery”.  This podcast will be available soon..

Latest Social Media Posts

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

Research and Development - are SMEs under attack?

How well do you know your clients?

Are you preparing forecasts based on current data?

Budgeting facilitates improved management

Sometimes, we have to learn from Uncle Sam!

Free Education Events

We are presenting a series of Free Education Events relating to the challenge confronting accountants:

• Supplying value adding virtual CFO services for SME clients

• Supplying interesting and challenging work to assist in talent attraction and retention

• Having the confidence to outline the services that your firm can deliver for a reasonable fee

Introduction to Virtual CFO Delivery was presented on 15^th September 2022.  You can access the webinar recording by clicking here.

Our next education event will be held on Wednesday 28th September at 11.30am AEST.  This free education event will look at Financial Forecasting – Package of Services.  Click here to register your attendance.

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”.