Reducing the cost of preparing your Annual Accounts
Are you conscious of your business costs and do you want to reduce the cost of getting your annual accounts and tax done? It’s a common issue and one I will address in this article.
As you may know, I am a qualified accountant with many years of experience. When I worked in management positions in the industry, we always used external accountants for audit and tax work. In that role, I was very focused on keeping costs down.
Now, in practice, I work with a wide range of clients. In a surprising number of cases, these clients were paying more for accounts than they need have. This not because they were being overcharged. It’s because of what they were asking the accountant to do.
Are you asking your accountant to do work you could do cheaper?
When you send you accounting records to your accountant, are they well organised? Are you asking your accountant to organise the information he/she is receiving?
Like you, your accountant is running a business and will have to charge you for that work. Why not either do it yourself or have one of your staff do it. If you have no staff, investigate if can you outsource it to someone who will charge less than your accountant. Click here to understand why accountants are expensive.
Do you send in information that is amiss?
Your accountant starts working, then realises he/she doesn’t have all they need. They request that from you and then wait to receive it. This is just inefficient.
You know that when you stop and start a job, you lose time because you have to have to get back up to speed every time you get back to the job.
It’s the same for accountants. If a job is broken up and I don’t look at it for a couple of weeks, I have to invest an extra bit of time refreshing myself on where I was.
Do you send in information in a uniform fashion?
Maybe you think that I have some of the information so I’ll send that in and I will send in the rest when its ready.
This is the same as sending in incomplete records and is inefficient.
Do you send in information that contains errors?
If you send in errors the accountant must find and fix them. If you find and fix them before you send the information in, the job will take the accountant less time. It is better you do it yourself for costs to go down.
Do you check your accounting records?
When I get information from a client, I have to check it first, before I start working on the accounts, to make sure that it is right ie complete, and accurate.
Accounts call this type of work reconciling, but basically its just proving that the numbers are reliable.
With accounting software now, it’s easy for the client to do some, if not all, of these checks. You can do bank reconciliations and you can do checks on the customer and the supplier balances.
Do you use accounting software?
For an accountant, getting information that is already entered into a reasonable system is much better than getting the raw data. The accountant will just have to review and analyse it, making some corrections.
It doesn’t take as much time and I know that I prefer that sort of work. To learn more click here.
Do you use cloud accounting?
Cloud accounting can be a big help. The accountant can review the records during the year and maybe give your feedback on the quality of the records earlier in the year.
The software will make you organise the information and you can do many of the reconciliations yourself and costs will be low.
Cloud Accounting Software lets the accountant work remotely. I have clients using Xero and Kashflow and we can have Skype calls to review accounts and discuss issues. This saves me from having to travel to the clients’ premises which reduces the cost.
Are you making your accountant do data entry work?
Data Entry can be done cheaper in most cases by an entry level admin person. Even if your accountant puts a junior staff member on the job, they will still want to recover the wage cost and overhead cost of that staff member and they will want to make a margin on it.
You must have access to someone who can do data entry cheaper and your costs will go down.
Do you leave it to the last minute to send in your information?
If this is the case, the accountant may have to work overtime – evenings or weekends. That’s going to cost more money. Staff have to be paid overtime. It’s also more difficult to do a good job as there may not be time to find full answers to any questions the accountant raises.
Does your accountant do an audit even though you are below the audit exemption threshold?
Some clients like getting an audit done because it gives them more comfort about the numbers. However, auditing is very regulated and the auditor will have to compile lots forms to satisfy the auditing regulations. You could ask your accountant to review the accounts without going through a full audit.
Are you using an expensive firm for all your accounting work?
Larger firms tend to have high overheads and therefore have to charge more. I know some clients who split up the work into different areas and use different firms for different elements.
For example, if your accounting records are good and you are just getting the accounts done for compliance purposes, you could get a smaller, possibly cheaper firm to do the accounts and reduce the cost. If you need more sophisticated tax or maybe corporate finance advice, you could have a different firm advising you on that.
For many client’s there are a number of things that they could for costs to be low. However, depending on your circumstances, you may not want to take on some of this extra work. However, you need to think it through. There may be other cheaper ways of getting it done through using part-time admin or book-keeping staff.
Don’t think your accountant will resent this.
I prefer working with clients to help them use their accounts to improve and grow the business. In addition to that, I feel that I can be much more effective if I am working on analysis and advice than if I am doing data entry or filing/organising. I also find it much more enjoyable working on providing analysis and advice.
Next time, you notice yourself resisting or resenting the accountants fee, use my checklist to see if you could do anything to reduce the fee.
This article is based on my own experience working with clients. If you have any comments or feedback, I would love to hear it. Feel free to leave a comment or send me an email.
Cost of a Part-time or Virtual Financial Controller
Are you running your own business and struggling with the finances? You would love to have your own financial controller but you can’t afford a full time one.
You have heard someone mention part-time financial controllers and that sounds interesting. But you are still wondering how much a part-time or virtual financial controller service would cost.
As with many of these questions, there is no simple answer. It all depends on what you want from the service.
I have been working as a financial control for many years now. I was a full-time financial controller when I worked with the multinationals. Since I went freelance, I have worked as a part-time financial controller for a large number of clients in a variety of businesses.
Providing financial controller services is a professional service and these are usually priced based on the time input. However, there are a number of different factors that influence the amount of time input.
When I meet with a potential client I will be trying to understand and evaluate their circumstances so that I can give them a proposal that is tailored to their situation.
The factors that I will be looking at will include the following
Existing Accounting Capability
How is your accounting function staffed and what level of skills are available to you? Will we be recruiting new staff, developing existing staff, or supervising existing staff? How much can be delegated to in-house staff and how much will be left to the part-time controller?
What sort of systems do you have? Are these well implemented or do they need to be enhanced? Are there standard routines or do we have to develop and install those routines?
What sort of reporting or analysis is required? Is the infrastructure in place to provide this or does it have to be developed? Has the potential client got a good handle on their revenues and costs? Are they confident in their product or service costs? Do they understand the reported profits or do they express surprise that the profits are not as expected?
Type of Stakeholders
What sort of stakeholders are in the business? What requirements have they specified for reporting and analysis both in terms of frequency and detail?
Stage of the Business
At what point in the development cycle is the business. Is it a startup with external funding or plans to bring in external funding? Is it a mature business with fairly steady sales and costs?
Challenges facing the business
What are the challenges facing the business? Are profitability levels acceptable? Are they undertaking any significant projects – new markets, new products, new processes, new facilities?
Once I have a good understanding of the current situation for the company, I will then start to work on defining what the desired situation should be. As part of that, we will set some goals – a mix of development goals and some maintenance goals.
Agreed Workplan for Outsourced FC Services
From that analysis, I will create a work plan (read here on how to create a work plan) which will determine the cost of the service. This work plan will be presented to the potential client and discussed to come up with an agreed work plan.
The level of work needed varies from company to company. I have one company where I did a lot of work early on developing the staff and the systems and I now attend them about one half-day per quarter with additional time as they require specific, clearly identified issues.
I have other clients where I am with them for two days per month. These clients with a higher time requirement tend to be either dealing with some major issues or are still in the development stages of the business.
With good broadband, I can also work remotely. This can be very helpful if something crops up and it will only take a short time to resolve. So a skype-type call will avoid travel time and can give the client the answer much more quickly.
Service Cost per month
In terms of cost, it can range from € 400-500 per quarter to maybe € 1500 per month but if the client requires greater inputs the cost will be greater.
From the client’s point of view, what they want to get from the service is the elimination of surprises, a much-improved understanding of their profitability, greater confidence when pricing for their customers, and improved profitability.
To get a better understanding of how we work, feel free to browse through our blog articles. I suggest this article, “Understanding the nuts and bolts of accounting”, as a good starting place.
As always, if you have any comments or questions on this article, feel free to contact me by phone(086 2323525) or by email at jim(at)accountsplus (dot) ie.
Today’s blog update comes from Mindshop founder, Chris Mason. “In today’s ever increasingly competitive global market the question on how to compete on price always comes up. People believe that the only way to compete is to be the lowest price supplier of their goods or services. Unit price is only one factor in deciding who to deal with. The more compelling factor is what I call the Total Cost.
For example, I want to get my car repaired, do I go to the person with the lowest quotation if they are located in a city four hours away; of course not. Do I go to someone locally just because they have the lowest cost; probably not.
So what is causing my concern? I know from experience that I need to check the total cost, will the unknown supplier use quality parts, will they do it when I want, do they take my preferred credit card, and can I trust them to do the repair well? I cannot always put a financial price on each of these factors but they do impact on my perception of the total price. The bottom line is that not always is the lowest unit price the lowest total cost.
This concept works in any sales situation. A lot of manufactures were tempted to source their components from emerging nations such as China and India, only to find that there was a sting in the tail of the total cost. In this case factors such as communication, quality, on time delivery, minimum order quantities, and freight, added to the unit price. Many have subsequently brought their business back on-shore because of these extra costs.
Think about your own business, what are the unit costs and what extra costs can you manage for your customer.
You should be able to work on making the total cost of buying from you lower than the total cost of buying from your competitor even when your unit cost is higher. If you find you really cannot create a lower total cost perhaps you need to change the way you price and pull waste out of your processes.
The worst case scenario is that you withdraw from that market, but the need to do that is rare. Start with the price that you need to be competitive and work backwards to determine your target material, labour, and overhead costs. When talking to your customers, talk total cost rather than unit price and you are less likely to have to compete poor quality and unreliable competitors.”
Here is an article that might help you know what to change in your business.
As always, if you have any comments or questions on the above blog post, contact jim(at)accountsplus(dot)ie.