A Good Accountant Is More Than Just Having A Qualification

As any successful business owner will tell you, their accountant is just as much a part of their success as product quality, marketing plans, reliable supply chains, customer service standards, experienced staff and every other aspect of their business model.

Many people successfully complete accounting qualifications every year and start working in their profession. Most of them will perform the technical parts of their job quite professionally, but only some of them will have that extra something that makes them invaluable to their clients.

Apart from the relevant qualifications, what are those extra qualities that make an accountant an invaluable asset to their clients, and a source of wise and relevant counsel? Depending on whom you ask, there will be a range of attributes put forward, but many experts agree that empathy, perspective and dedication will be in the top five.

Some would disagree and ask what use empathy would be in a profession renowned for mathematical and financial precision. After all, the goal is to ensure that the accounting records of client businesses are accurate and reflect the true financial position of an entity at any point in time and to correctly report on taxation obligations.

The value of having an empathetic accountant lies in their ability to understand the challenges and responsibilities of running a business, in addition to their financial skills. An accountant who can mentally stand in the client’s shoes and see problems affecting the business with the same emotional attachment as the client, will likely offer different solutions from someone to whom the business is just another set of figures.

Perspective is another quality that elevates the role from just lodging tax and BAS returns to one of a trusted sounding board. As someone with a thorough knowledge of the inner workings of the business, the accountant with perspective will be called upon many times by the client to validate their business decisions or alternatively, to offer a different point of view.

Every vocation needs employees who undertake their work with dedication and the accounting vocation is no exception. All business owners expect that their accountant would practice the profession with diligence and dedication. The best way to demonstrate this to clients is through ongoing professional development. New technologies and constantly changing laws and taxation rulings are part of the finance industry. An accountant who keeps up to date adds additional value to a client’s business through this dedication.

These qualities are not just necessary for accountants with business clients. They also enhance the services provided by companies administering self-managed superannuation funds such as SMSF Assure. The superannuation industry is also undergoing rapid change, so these qualities will be important to clients relying on external assistance to manage their administration responsibilities.

The Tax Deductions Many Business Owners Miss

At this time of the year, every small business owner and sole trader should already be planning how to optimise their tax deductions to legally reduce their tax obligations. There is still three months to go before the end of the financial year, so now is the time to talk to their tax accountants and finalise any transactions that could save them money at tax time.

Businesses large enough to have an administration team to track and record expenses have a distinct advantage over the micro business or the sole trader in this regard. Sole traders are especially disadvantaged because they generally spend their day sourcing and performing work, then have the burden of using their nights and weekends to keep their tax records in order.

In this busy and pressurised environment, it is common for legitimate tax deductions to be missed and records mislaid, so when it comes time to complete their tax returns, often they are overpaying tax. Identifying and tracking these deductions is critical to saving them money, but some of them are often overlooked. Here are five of the most common examples.

Mixed-use Expenses

Most small business owners are familiar with tracking business expenses, but often, business and private expenses are part of the same transaction. These should also be tracked as the business component of the expense can be claimed as a tax deduction. Personal phones and the home internet, for example, can have both business and personal usage. Keep a diary that records times and how a call or internet search relates to the business so that it can be considered at tax time.

Deferring Income and Prepayments

These are two strategies that may suit some small business owners. If it is practical, delay issuing invoices until 1 July so that the income falls into the next financial year and not the current one. Conversely, pay some expenses early so they count in the current financial year, reducing this year’s taxable income. Other annual expenses, such as insurance, can be prepaid for the same result.

Claim All Advertising Expenses

Most business owners claim advertising expenses such as newspaper classifieds, adverts in community newspapers, production of flyers for letterbox distribution, etc. What they often forget about are the adverts they place on Facebook or Google to get traffic to their website. They may be small at the time, but over twelve months they add up and can be used to reduce taxable income.

Update a Vehicle

The Instant Asset Write-off is a great reason to update an ageing commercial vehicle, or to buy new tools, replace computer equipment or any other asset under $30 000, regardless of whether it is new or used.

Make a Superannuation Contribution

Business owners who have employees are required to make all superannuation payments on behalf of these employees to the relevant superannuation funds by 30 June, in order to qualify for a tax deduction in this financial year.

Many business owners also have their own SMSFs (self-managed superannuation funds) with their own responsibilities as trustees, including reporting annually to the ATO (Australian Taxation Office). This is an additional burden to running the daily operations of their businesses, so they often engage the services of a company such as SMSF Assure to handle the administration of their SMSF, allowing them to concentrate on their business.

Does Your SMSF Investment Strategy Include Insurance?

As we go through life in our modern world, many of us choose insurance to protect us from a range of common loss scenarios. Vehicle insurance protects us against claims for damage in the event of an accident, home and contents insurance assists us to replace stolen or damaged items, and income protection insurance assists if we are unable to work for extended periods of time.

These insurances provide us with the security that, if we have an unfortunate accident or occurrence, our insurer will hopefully recompense us for some or all of our losses. We also need to consider what will happen to us if we are sick or injured and incur both hospital and medical expenses.

In Australia we have access to both universal health insurance and private health insurance. Most of us have one or the other, and many of us have both. Since 1984, Medicare has been the foundation of our health care system and is available to Australian and New Zealand citizens, permanent residents, and people from countries with reciprocal agreements.

The three major parts to Medicare are medical services, hospitals and medicines. It covers the cost of public hospital services should you need them, and some or all the costs of other services such as visits to GPs and other medical specialists. It also covers prescription medicines, which are available to Medicare recipients at much reduced prices under the Pharmaceutical Benefits Scheme.

Medicare is partly funded by a 2% levy on taxpayers (with exceptions for low-income earners) and further funding by the federal government from general revenue. People can also choose to take out additional private health insurance, which gives them access to private hospital services and a range of ancillary services not covered by Medicare.

As a result, Australians enjoy some of the best medical services in the world. The introduction of this scheme gave many Australians access to services they previously could not afford, and as a result, we now recognise the importance of health insurance as part of a modern and fair society.

Insurance is also an important consideration for trustees of SMSFs (self-managed superannuation funds. Once the SMSF has been established with the ATO (Australian Taxation Office), the trustees must by law finalise an investment strategy with a financial advisor. This includes consideration of the insurance needs of the members. Finalising an investment strategy is not the same process as engaging a company such as SMSF Assure to undertake all the administration and reporting requirements of the SMSF.

The ATO advises that an SMSF can provide insurance for members for an event that is consistent with several conditions of release of the member’s superannuation. These are death, a terminal medical condition, permanent incapacity and temporary incapacity. SMSFs generally cannot provide trauma insurance for their members. These events are not the same as universal or private health insurance but may be equally as important to the SMSF fund members.

WANT TO BE A SUCCESSFUL BUSINESS OWNER? THINGS TO THINK ABOUT

The trend for some years for many business owners was to rely on the eventual sale of their business to fund their retirement. It seems that in the effort of establishing and running a successful business, owners set aside any thought of retirement planning in the hope that economic conditions will be favourable when they decide to sell.

This retirement strategy had served the taxi industry well until the arrival of Uber. Almost overnight, taxi licenses that cost hundreds of thousands of dollars to purchase plunged in value, leaving many taxi owners with huge debts and businesses that would be unlikely to attract buyers when they were ready to retire.

With all this history in mind, it is worth reviewing some essential practices that successful people know and use, not only to develop and maintain wealth at work, but also to actively plan for a well-funded and comfortable retirement.

The Importance of Cash Flow

Understanding the importance of cash flow is no secret to the accounting industry but seems to baffle first-time business owners. Cash flow is not to be confused with profit which, put simply, is revenue less expenses. Cash flow refers to the inflow and outflow of cash through the business. The business needs it to operate, so cash flow management is one of the most important secrets to a successful business.

Know the Competition

The second practice is to thoroughly research the competition. Only through knowing your competitors and how your product differs from theirs, can a business owner set competitive prices and respond to rival marketing strategies. Keeping an eye on the competition should be an ongoing activity so that your business offering can stand out against theirs.

Know Your Customer

It may seem obvious, but the third practice is to absolutely know your customer. Don’t assume that because you think your new product is sensational that your customers will too. Find out what they need and give them that. Talk to them face-to-face, survey them and use your social media presence to get their feedback; do whatever it takes to get the right product and price point to place your business where you want it to be.

Be Passionate

Number four practice or secret, if you like, is all about you. Be passionate about what your business does and how it reflects your values. You can always employ professionals to help you with your accounts, IT and similar tasks, but exhibiting values such as honesty and integrity through your actions and rhetoric will flow through you to your staff and hence to your customers. Create a business culture that transcends a business plan and draws exceptional people to you.

Take a Long-Term View

Once your business is established, you should now be ready to look to the future to see where your industry is going. Try to envision a sustainable future where your business, in its present and future forms, can develop and thrive. You will have to ask hard questions but as we now know, if the taxi industry had done this when Uber was just appearing, perhaps their outcome may have been different.

You should now be considering a retirement plan, and there is no better place to start than with your own self-managed superannuation fund. SMSFs have become so successful that they currently hold 30% of all superannuation assets in Australia. Be warned, however, that setting up and running an SMSF is completely different from a business. The good news is that there are now reputable companies such as SMSF Assure that exist solely to assist with the management of SMSFs, so you can have the best of both worlds – control over your own superannuation investments and assistance with the fund administration.

GET PROFESSIONAL ADVICE BEFORE DECIDING ON A BUSINESS STRUCTURE

When someone decides to go into business for themselves, their first decision is whether to buy an existing business, or to start from scratch. Both approaches have different priorities. An existing business should have some type of structure because it is already trading, but the start-up usually is a one or two-person operation without structure but with competing demands. The most critical demand gets the attention first, and in these early stages, the business structure is often left to be sorted out later.

This is a common mistake that would-be entrepreneurs should be addressing early in the life of their fledgling business. They can choose from four different structures here in Australia, and each one has implications for taxation, personal liability, degree of control and the ongoing costs and amount of administration required.

Sole Trader Structure

The sole trader option is simple to set up and operate and gives the owner full control over all operations of the business. It also makes the owner fully responsible for everything related to the business including any debts and losses. It is a low-cost structure with minimal reporting requirements but puts all personal assets at risk if anything goes wrong.

Partnership

A partnership has two or more people involved who distribute income and losses between themselves. There are three different types of partnerships with key differences, but again, they are relatively easy and inexpensive to set up. The partners require separate tax file numbers (TFNs) and each partner pays tax on their share of the net partnership income each one receives.

Company Structure

A company business structure is more difficult to set up than the others and business operations are controlled by directors and owned by shareholders. A company is a separate legal entity with obligations under the Corporations Act 2001. Company members have limited liability and directors must understand and comply with all legal obligations.

Trust

A business can be operated as a trust, but this structure can be expensive to set up and operate. A trust must operate under a trust deed that formally sets out how it is to be run, and the trustee is required to undertake formal yearly administrative tasks.

This is just a brief summary of the four most common types of business structures. There are many more issues to be understood and addressed before deciding on the best structure for the business. The best way to make the right decision is to discuss the options with an accountant.

Once the business is up and running the time may come when the owner decides to plan for retirement and set up a SMSF (self-managed superannuation fund). After running a successful business, the owner would be familiar with the business structure, the accounting methods, the formal reporting process and the tax requirements. This may lead them to think that, because they have business experience, getting a SMSF started will be easy.

However, the structure and operating processes surrounding a SMSF are completely different to a business. The administration is complex, and the reporting required by the ATO (Australian Taxation Office) is specific and time critical, with penalties for non-compliance. Business owners wanting to take control of building their own wealth for retirement engage companies like SMSF Assure to handle the administration and reporting of their SMSF while they get on with managing their business.