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.

WHAT NOT TO DO WITH YOUR SMALL BUSINESS ACCOUNTING?

Running a small business has always been a challenge. Our current economic environment, even with interest rates at never-before seen lows, is stubbornly stuck in low growth mode and consumer confidence is flat. However, there are still many large and medium-sized businesses that are operating profitably in this environment.

To do this requires a robust and responsive accounting system, which allows them to respond quickly to the needs of the market. Owners running small businesses with good accounting systems can also do the same, provided they avoid the common mistakes often made by people lacking accounting experience.

If you are a small business owner, most likely you are wearing many different hats. Some of them will be familiar, and some will be new hats involving a steep learning curve. Unless you have prior experience in bookkeeping, small business accounting is usually one of those hats, and the most important thing you need to learn is what not to do.

Garbage in, Garbage Out

Keeping it simple to start with, the first mistake is inaccuracy. Small business owners who do their own data entry often don’t take enough care. They transpose numbers, put entries into the wrong accounts or hit the wrong keys, then they wonder why the reports they produce don’t make sense. If you put garbage into your software, you will get garbage out, so make sure you check your data entries.

Keep Records up to Date

Many owners neglect their record keeping, leaving it to the end of the month. According to the Institute of Public Accountants, not keeping records up to date is a major time waster for small businesses. Spending just 15 minutes each day entering the new transactions will mean a huge time saver when it comes time to checking your cash flow or running a profit and loss statement.

Separate Personal from Business

Always keep a separate account for the business where all business transactions go. All personal transactions should be kept separate in personal accounts. This is essential for not only getting accurate reports about the business, but also for doing tax returns at the end of the financial year.

What Else Can Your Software Do?

There is now accounting software available for every budget, but many small business owners just use it for the basics. Most software comes with a free training module so users can get the most out of the package. Time spent understanding what the software can do will save you hours further down the track.

Keep in Touch with Your Accountant

One of the worst mistakes new small business owners make is not communicating regularly with their accountant. They then expect to get their business tax return done using inaccurate data, shambolic filing systems and poorly prepared reports. They also make important business decisions without first checking the tax or other implications with their accountant.

Many small business owners are also trying to run their own SMSFs (self-managed superannuation funds), while working actively in their businesses. Record keeping for a business and record keeping for an SMSF are totally different and they require two different recording systems.

Fortunately, many accounting firms now offer additional services to help small business clients in this situation. Being the trustee of an SMSF is a big responsibility and another huge learning curve for the inexperienced. The process is heavily regulated and requires timely reporting and extensive administration.

Companies such as SMSF Assure are now available to help small business owners with this administration while their accounting associates work separately with the clients to keep their business accounting practices accurate and up to date.

WANT TO START YOUR OWN SMSF? EMBRACE THE CHALLENGE AND SEEK ASSISTANCE

Many Australians are hearing about the success of others who started their own SMSFs (self-managed superannuation funds) some time ago and are thinking about doing the same. They dwell on the benefits of taking control of their own retirement nest egg, but some of them gloss over the challenges involved, not only in getting the fund started but also the expertise required to grow the investments.

If you are one of those who are thinking that you could get a better return on your superannuation if you do it yourself, it would be wise to first consider seriously the considerable challenges ahead of you. You must first understand that the management of an SMSF is highly regulated by the ATO (Australian Taxation Office) and as the trustee, it is your responsibility to comply with complex superannuation and taxation laws.

Your first challenge is to set the fund up correctly so that it can receive contributions, be eligible for tax concessions and be correctly structured. Getting it wrong at this point will cost a lot of time and money to rectify, and in the interim, investment opportunities will be missed. Just as one example, there are many administrative tasks required, first in the set-up phase, then in day-to-day operations, as well as strict reporting requirements and deadlines to meet.

You will need to choose and appoint trustees, create the trust deed, register the fund correctly as an Australian super fund, set up a bank account, get an electronic service address and prepare an exit strategy; and this all before you have even thought about where you will be investing the funds.

To do this, you will need a documented investment strategy. There are still issues of how to pay benefits to members, choosing SMSF auditors who must meet specific requirements and be registered with ASIC (Australian Securities and Investments Commission), and the already mentioned administration and reporting.

While none of these challenges are insurmountable, if you still believe that having your own SMSF is the best option for your retirement planning, the good news is that you can have your cake and eat it too. At every step of the way, there are professionals in the relevant fields who can assist you to achieve your SMSF goals.

Accountants can help with establishing financial systems, a legal professional can prepare your trust deed and a financial advisor can help you with your investment strategy. Regarding the administration and reporting, companies such as SMSF Assure are assisting many SMSF trustees with the initial set up and the ongoing running of their funds.

Be prudent, be aware that there will be challenges, but if you take advantage of the professional help that is available, you can run your own SMSF successfully and take charge of your retirement planning.