There are no secrets to success. It is the result of preparation, hard work, learning from failure. (Colin Powell)
Everyone wants to save fees. Professional accountants take responsibility for the accounts we produce. When we get accounts that have been prepared in a package (such as MYOB, Reckon, Xero and the like) we cannot just take that and file your taxes. We have to ensure the results are reasonably accurate (and tax compliant) before we add adjustments such as depreciation, FBT, owner salaries, taxes, etc.
All too often (almost all the time) clients' systems require fixing before we can proceed. It may be that several items bought were actually used in completion of an asset - so we have to move it from expenses to assets. Or an asset may have been capitalised when it cost less than $500 and so can be expensed. Or it may be that it is a mixed use asset - partly private and partly business - which may involve adjustments (including GST). And that's just assets.
There are common errors in every area. We make no pretence that we can pick up every error - even auditors can't do that. We primarily check for items that "look" strange (e.g. gross profit rate drops by half), or items that don't agree with other parts of IRD (e.g. GST) or third parties (e.g. banks). That way we ensure the accounts are at least consistent. Still, as they say, if something can go wrong it will, and if it can't go wrong, it still will 😄.
When we set up this business, we resolved never again would we deal with the same problems recurring in the same accounts year after year. Neither the client nor we enjoy that. So how do we avoid it? We only take on clients who agree to do their accounts correctly during the year, so the end of year is relatively simple. That sounds easy - almost every business person thinks they are doing things correctly, yet so many aren't. So how do we change this.
For clients who don't want a package, we offer an on-line package with a bank feed. You still take responsibility for identifying transactions we can't reliably identify, and we do the rest. These days most people run their own package - which we think can be great. With different packages and different exposure to bookkeeping principles, the room for error is enormous. We expect this early on - but if it continues for more than a couple of years, we'll suggest a move to a simple bank feed - or to another accountant. Otherwise there are two main tools we use.
The first is our fixed monthly fee. It includes training and support just for you - rather than a one size fits all. When you strike something for the first time, rather than guessing you ask us for help. It may be as simple as emailing for advice - or we may connect via TeamViewer and work through the issue with you on your package. The beauty of this is that you don't then risk repeating the same mistake for the rest of the year (or subsequent years). That's better for you - and better for us.
The second is our annual review. When you're ready for the accounts to be done, we arrange a time to review your data with you - usually using TeamViewer. That way we both see what's happening, and you can explain things we don't fully understand as we go. When we find things that need amending, we work with you so you understand why and learn from this so it doesn't happen again. With cloud systems we can edit them ourselves, and if it's a simple one-off error, we might. But most errors we ask you to fix - so you'll learn the correct way for the future.
With both procedures you learn, your system becomes more reliable than would otherwise be the case, and we're not forced to charge more than should be normal. We regard the effective low hourly rate in the first year or two as our investment in your busness. As things settle down, our annual reviews are fairly straightforward, and there are few situations that recur needing our attention during the year. An example of this might be the purchase of a new asset (often a vehicle) with a hire purchase agreement. It's often better for us to work with you on ensuring this is entered correctly at the time, rather than leaving it till year end - especially so the GST is handled correctly in the GST return - more important than ever when changes proposed by IRD come into effect.
When we help you keep your system correct as you go, we both win. We think that's an excellent reason to choose us as your accountant.
It's not surprising so many people visit this page, given the headline. To clarify the answer isn't to bring your accounting to us. We work differently from, and are less expensive than, many of our professional colleagues - but if you come to us it will not be on the basis of fees. This article applies to anyone using a professional accountant.
If absolute cost is more important to you than value for money, then you'll find cheap tax services around. Of course there are two sides to every transaction. The price is relatively easy to quantify. Much more difficult to measure is the what you get for that money - how can you measure that? Our professional standards mean we can never compete on price with those who don't have comparable standards. But apart from basics like fixing our errors (very rare but it can happen) without costing you extra time and money, our service goes well beyond basic accounts and tax returns, to the well-being of both you and your business.
As always it is a case of caveat emptor. As in any area of expertise, be it drain-layer, doctor, builder or whatever, most of us only recognise a poor-quality job when it comes back to haunt us. In the case of accounting and tax, this is usually when IRD discovers an issue. This can sometimes be several years after the event, when penalties and interest increase the original error. In one case a new client had saved perhaps $1,000 in fees by using a non-professional tax service. However, they missed out on a $50,000 GST refund - and this error could never be adjusted - it was permanent.
As Certified Public Accountants, we have to undertake regular training to keep up to date. We have to comply with professional standards, hold professional indemnity insurance, and are subject to professional review.
Our personal commitment to quality and value for money in everything we do further reduces your risks - although most probably claim similar. Our focus on the bigger picture means we don't see numbers as the end of our job. Rather we look at the numbers to see if they highlight issues that need to be dealt with. However we will never cut corners to meet a budget if those corners are illegal or dangerous to the health of your business or your family.
IRD has reduced the need for small businesses to prepare general purpose financial statements, and is planning further "simplification". There are two issues with this. The first is that most exempt companies already produce simplified accounts. They can further simplify them - but there won't be significant savings for most businesses - especially if they already use their accounting system for regular management reports. Of course if they have to give their accounts to banks and other interested parties, they'll want them done according to standards.
The second issue comes from the sting in the tail. IRD says you won't have to follow accounting standards in general (but still follow generally accepted accounting principles). However they do want specific information added in, including things like details of related party transactions. For some people this won't be an issue, but for others, it may require additional reporting.
So what basic things avoid needless costs?
The first and most obvious way to reduce your fees is to keep things simple. Key to this is the KISS principle - and minimising complications suits us. Simple accounting is easier to do and understand, and when errors do creep in, they cause less trouble when things have been kept simple. Of course what seems simple to untrained people is often a source of problems when it is not as simple as first seems to be the case.
There are good reasons for having multiple entities - sometimes that is the simplest way to do things. For example a trust is often a great vehicle for holding assets and investments - especially for business owners. A look-through company may be the best way to own investment real estate that is going to make losses for the foreseeable future - although there are pitfalls. Keeping GST activities in separate entities from exempt activities can also simplify GST returns.
Of course the majority of your personal transactions should also be kept separate from business transactions.
This may seem obvious but still some business owners expect their accountant to process the proverbial shoebox of documents at year end. This is errorprone, and too expensive! We will not work that way (at least after the first year). It is a waste of everybody's time - and to be honest, we aren't interested. We may be able to recommend a bookkeeper for you - although most prefer to work with accounting systems.
As a bare minimum ALL income must be banked into a business bank account, and all expenses paid from that account. Of course you can use other accounts to earn interest on surplus funds, put money aside for various taxes, pay by credit card, etc., but you must not mix business and private accounts.
ALL cheque butts and ALL deposit slips must be completed, showing the date, other party, value and what the transaction was for. It continues to surprise me how often such basic information is missing. The minute it saves at the time pales into insignificance with the time taken to track down the details later.
All loan, H/P and other financial transactions and information must be kept - and forwarded to us at year-end if not already in your system.
With the move to on-line services, remember banks are still only your friend until you need them. You need to keep business records for several years - often banking information is available for months rather than years. If you don't get monthly physical statements any more, you should save copies of electronic statements - probably monthly.
Technology means anyone can do their own accounts in a modern computer-based accounting system. As Tui says, Yeah right!!! Our years of training at university and via ongoing education courses are not just to fill in time. You don't need to be a qualified accountant to operate an accounting system, but you do need someone to ensure your system is set up and operated to produce correct results. We have seen all sorts of practices which cause us to question figures produced by computerised accounting systems.
If the information in the system is unreliable, then it's no better than the shoebox. In fact it may be worse, in that the system may tell you that you are making a profit when you are making a loss - or vice versa. There are really only two solutions to this: outsource - or build up your in-house skills.
For outsourcing (unless you want to use a good bookkeeper - and just as with accountants, you can't judge who's actually good from their publicity) there is really only one cost-effective solution we recommend and use - a system using a bank feed. This system lets us download your bank transactions monthly, process your GST and provide basic reports as required. It also means that producing your financial accounts and tax returns is much simplified. The bank feed we prefer to use (for reliability) is MYOB's (formerly BankLink), but we will work with others.
If you run a computer-based accounting system, we will use that as your main accounting system - if it works in NZ conditions (especially GST). We will review your data with you to identify errors. Initially we may do this for every GST return - but as you gain skills, we will need to do less reviewing - mainly at your call.
We will also do most of the actual accounting in your system. At year-end, we will take your nearly-final data into our system, make final adjustments, produce your financial statements and tax returns, and update your system so that it matches the final published statements. This last step also makes it easier for you to produce meaningful interim reports during the year, and for us to process the following year's accounts. If your package is cloud-based then the process is slightly different, but the principle's the same.
And best of all, we offer these services and our support for your package remotely - as your virtual accountant.