Finance is the life blood of a business and good financial structures are essential to succeed and grow, says Garry Muriwai, chief executive of the NZ Institute of
“As a business owner you need to understand how the figures you’re seeing contribute to growth and prosperity.”
But, when you’re new to the business of being in business – or have reached the point where you’re ready for something more than just book-keeping and dealing with compliance issues – choosing accounting professionals to work with can be a challenge.
Do you go with a bean counter, or a strategist, mentor and trouble-shooter? Do you opt for a one-man band that will competently handle the basics or a larger firm with a real understanding of your business and the industry you’re in – an accounting partner who’s going to stretch your boundaries and make your business grow?
There are three main reasons any business, regardless of its size, needs an accountant. The most basic of these is to ensure the company’s financial transactions are being accurately recorded and that reliable, financial reports can be produced.
Then there are compliance issues; ensuring that the business is complying with its legal requirements in respect of income tax, GST, PAYE and FBT.
“These are all areas where significant penalties can be incurred if they are not handled properly,” says Tony Thomas of Auckland-based accountancy firm Neesham Pike Thomas Ltd.
The third role of an accountant – and one Thomas says is probably the most useful in terms of value for money – is business advice.
“Accountants deal with a vast range of businesses and can usually provide reliable advice in respect of improving the profitability or efficiency of your business.”
But, this type of service tends to take place when a company has been operating for a few years rather than at the start-up stage,
Finding an accountant is probably best done by asking around. Word of mouth works well, say the professionals, but it’s important to have a face-to-face meeting to see what the accountant can offer and make sure you’re compatible.
“The assumption is that all accountants are technically competent,” says Rowan Chapman, managing principal, WHK Gosling Chapman. “But we have found clients need to feel their accountant is able to empathise with them, that they’re part of, and understand their business.”
Chapman says referrals from other professionals, such as the company lawyer or banker, are ‘gold’. It boils down to compatibility, says Chapman.
“If you can’t freely communicate then you haven’t got a good accountant.”
Do the groundwork then talk with the two or three most likely contenders, says Tony Thomas. “Most accountants will happily spend an hour with a prospective client to see if they can help.”
He also advises asking about charge out rates, how they would suggest you account for the transactions of your business and how the accountant will deal with the information once he or she has received it. And while not essential, Thomas says it helps if they have other clients from your industry – or at least a passing knowledge of the industry.
So is it necessary to start out with a Chartered Accountant (CA)? What’s wrong with ‘mum’ doing the books?
Not a lot, says Chapman, if mum is suitably trained to carry out the compliance related work. “We encourage clients to become actively involved in doing the books as they gain an understanding of what this means, as well as a valuable insight into what drives profit and cashflow.”
However it is important to have an accountant cast his or her eye over the data and prepare the financial statements and income tax returns.
“This is a specialised area and the cost of getting it wrong can be significant, says Tony Thomas.
A Chartered Accountant can be your most useful and important business partner – whether as a consultant or as an employee, says Garry Muriwai.
“Their professional business management knowledge and skills take them into a far broader contribution to business growth and prosperity. They also have a commitment to ethics, high standards and on-going professional development.”
But does that give a client added protection should things go belly-up? Their intensive training should ensure this doesn’t happen, says Muriwai. They are also required, as a condition of membership, to abide by the Institute’s Rules and Code of Ethics. “That’s perhaps the primary reason you should look for the word ‘chartered’ because the Institute requires a high standard from its members and you benefit from that standard.”
But not all small businesses want a CA – at least not initially.
Small Business Accounting (S.B.A) operates around 30 franchises throughout New Zealand offering a range of general accounting services to small business enterprises – in a language they understand. Lisa Holten has been the Pukekohe franchisee for more than three years. Many of her clients are people who worked for others then decided to take the big step and set up on their own.
“We pride ourselves on being part of the team and giving the client the security of having their own financial department rather than feeling out there on their own. We take away as much as possible of the IRD compliance and other financial issues an SME has to deal with.”
And she says, when a business has grown outside their area of expertise – or become ‘too tax aggressive for them to handle’, they have good relationships with local Chartered Accountants.
“Some clients choose to have a meeting to get advice then we administer the nuts and bolts of the plan.”
Trust and communication
The accountant client relationship will succeed only when there’s trust on both sides; and where communication has been open and honest.
“An accountant will not be able to give reliable advice if he is only given part of the information,” says Tony Thomas. “There is nothing worse than finding out that a client has done something wrong which could easily have been sorted out with a quick phone call or email. It’s particularly important that you contact your accountant and let them know if you are changing the structure or financing of your business – or even your personal assets – as there may be a better way of doing it.”
Accountants who have only one piece of your financial picture may fail to see the forest for the trees, says Rowan Chapman. “If this happens the result could be very damaging.”
Open communication is also important, if you’re unhappy with the way your accountant is handling your business.
“Let them know,” says Tony Thomas. “Set out your concerns clearly and ask for an explanation. If you don’t get a satisfactory response, it’s time to make a change.” And, if your accountant is a CA, you have the option of making a complaint to the Institute, says Garry Muriwai. “We have a dedicated professional conduct team who specialise in investigating problems and deciding whether a member has breached the Rules or the Code of Ethics.”
While a good accountant may not be able to make a bad business good, they can make a good business better, says Muriwai. But as a business owner, you need to understand your business needs and ensure the accountant you partner with has the relevant experience to meet those needs.
And, says Rowan Chapman, although the strength of an accountant is usually measured by what they know, the mark of a successful accountant is also who they know.
“Your accountant should be a good source of referrals as they should know precisely each of their clients’ strengths and needs. Need to get a loan for your small business? Your accountant should be able to introduce you to the right banker.” NZB
Patricia Moore is an Auckland-based freelance writer. Email [email protected]