Implementing your client's vision
Peter Towers
Certified Public Accountant | Founder of ESS BIZTOOLS Pty Ltd | Business Advisor | Mentor and Coach
Accounting News
Implementing your client's vision
By Peter Towers – ESS BIZTOOLS Pty Ltd
“I need help attracting investors for a new product that I have developed.”
Sound familiar?
It’s a comment that the owners of SMEs often make to their accountants at this time of year.
They will proudly say “I have developed a prototype and I think it is ready to take to market.”
This is how the innovation journey of many SMEs ends.
But let’s go back to the beginning and follow the story through…
If you, as an accountant, are planning to offer a broader range of commercial services or Business Advisory Services to your clients, then you’ll likely have more of these conversations in the future.
Don’t be caught flat-footed and not able to confidently steer your client in the right direction.
It is crucial that you have at least a working knowledge of how the R&D process works.?Your clients are coming to you as an expert, therefore you need to know every aspect of the “Innovation Journey” to be able to advise them properly.
Let us look at it as if you were having a conversation with a client, who says:
“How do I commercialise my invention??I think it’s ready to market.”
Inventors tend to be full of optimism, and often, unrealistic.
Most aren’t aware of many of the issues that need to be worked through to successfully commercialise their inventions.
As accountants, we need to start at the beginning of the Innovation journey…
Research and Development Phase
This is what your client would have been working on and, hopefully, not for very long before they’ve decided to contact you.?There are significant R&D benefits available to SMEs, but only if the proper arrangements are put in place at the right time.
There are some questions you will need answered.
Have they developed a prototype? ?Does the prototype work??Has it been evaluated by an expert??Have they considered what it will look like as a final product?
Who paid for the R&D expenditure??Have they heard about the R&D Tax Offset that is administered by the ATO?
If they want you to claim the R&D Tax Offset for them, there are some important matters that you will need to consider:
Research and Development System
If you are incorporating a company to claim the R&D expenditure, you will need to set up an appropriate R&D administrative system.?Fortunately, at ESS BIZTOOLS, we can ease your pain, as we have developed all the necessary paperwork and forms you and your clients will need to support claims for the R&D Tax Offset.
Our R&D Tax Offset package also details the searches that you or your clients need to make regarding “prior art”.?Prior Art is the process of determining that your client’s invention is unique and hasn’t already been invented by anyone else in the world.?Extensive record-keeping is required for those searches.?If you contact us, we’ll be happy to talk you through the process.
Prototype
Depending on what the invention is, it is always best to prepare a prototype of what the new product will look like and how it will function.?Of course, there may be many changes before the final commercial product design is available, but the initial prototype is very important, if you need to raise loan funds or capital to finance the project.?Most people do.
Market Research
If your client is going to try to raise funding to assist with their R&D project, they will need to do some market research.?It is best to appoint a market research consultant to do this review if there is money available, because the results are likely to be more accurate.
This is very important!
The primary focus of market research is to identify the key components of the prototype, and then compare what your client envisages their prototype will look like as a final product, against what is currently available in the marketplace.
This research should be documented on a spreadsheet, identifying the key components of the prototype.?It should include a comparison of what is included in other products currently available and why your client’s invention is better.
A focus group could form part of the market review process, when your client has the protection of a provisional patent.?If the group members also have some knowledge of competing products, the feedback from them could prove beneficial in determining the final design of the product.
Project Budget
Your SME client needs to take the time to carefully consider what expenditure is going to be required to get to a “commercial ready product”.
Items to be considered include:
Funding Required
You and your client will now have a better idea of the level of funding that is going to be required to take the project from the current prototype to the final commercial product, when customers will start paying the calculated price to your client.
Is this funding currently available?
For most entrepreneurs, the answer will be NO, so you will need to consider whether your client can raise capital from the market.
Capital Raising Opportunities for SMEs
The Australian Government has passed legislation that lets a private company raise capital direct from the public, without having to produce a prospectus using:
Section 708 of the Corporations Act
Under this provision, a private company can raise up to $2M of capital over 12 months without issuing a prospectus or advertising.
This form of capital raising is limited to a maximum of 20 investors.
Early Stage Innovation Company
A young company may qualify as an Early Stage Innovation Company.
This status lets investors in the company receive an income tax benefit on their original investment, so long as that investment is made after a specified date.?To avoid Capital Gains Tax on that investment, the shares must be held for longer than twelve (12) months and less than ten (10) years.
Investing in an Early Stage Innovation Company has become popular for sophisticated investors.?They understand the significant benefits available to them from investing in a qualifying company.
Crowd Sourced Funding Equity Raising Company
The most recent form of capital raising for SMEs is Crowd Sourced Funding Equity Raising.
Private companies and unlisted public companies may be eligible if they have an aggregated international turnover of less than $25M and gross worldwide assets of less than $25M.
These companies cannot be listed on a stock exchange anywhere in the world.
Eligible companies are able to raise a maximum of $5M from the public in a twelve (12) month period making this form of capital-raising very appealing.
Predictive Accounting Reports
To go out and raise capital from the public, it is vital that appropriate Predictive Accounting Reports are prepared by an expert to identify the projected financial performance of the company for at least the next five (5) years.?Of course, that expert should be you, their accountant.
The documentation you will need to prepare includes:
Action
When you are faced with the prospect of advising an SME client on how to get their invention from the drawing board to market, where do you start?
If you are thinking about tackling this process for the first time, we’d like to have a discussion with you before you “jump out of the frying pan into the fire!”
We can help ensure that you will be on top of the most appropriate R&D strategies to benefit your clients.
ESS BIZTOOLS has developed detailed product packages to assist accountants, like yourself, to give the right advice to your clients on every stage of the innovation journey, as we have discussed in this article.
Do yourself a favour.?Visit www.essbiztools.com.au to review our materials, including the Research and Development Package.?To get an idea of what is included in this package, click here to receive a complimentary document – Planning a Research and Development Project Flowchart.
Selling Advisory Services
Accountant to client: “What is this recurring payment of $3,000 per month for?”
Client: “I’ve got a Business Coach.”
Accountant: “You know I could be doing that.”
Client: “You never told me about that!”
Sound familiar?
There is a lot of revenue to be made in providing business advisory services.?However, your SME clients need to be aware that you are indeed providing them, otherwise you could be missing out on the income stream for which your firm could benefit – not to mention the opportunity of having the “bragging rights” of being a part of your SME client’s business growth.
ESS BIZTOOLS presented a webinar, featuring Trevor Marchant of Marchant Dallas, which provides accountants and bookkeepers some tools on how you could sell your professional services in a professional, effective way.
Click here to watch the webinar recording.
The BOSS Factor Library for Accountants
ESS BIZTOOLS has been appointed a distributor of The BOSS Factor Library for accountants, prepared by Marchant Dallas Consulting.
You are invited to become a member of a rapidly growing list of accountants who have joined The BOSS Factor Library, because they are committed to personal and professional growth for themselves, their team, and their clients in the areas of business, leadership and life.
The BOSS Factor Library is a fantastic resource for your firm to utilise internally for team training and development, and also utilising in your role as the Financial Storyteller for SME clients.?The articles within the library will assist you to convey the key messages in relation to business growth and prosperity to your clients!
For a small amount of $450 (plus GST), you will have access to an array of publications on business, leadership and life, to give your team and also share with your clients.
14 articles have been added to the library, bringing the total articles to 64.?The library is updated on a regular basis.?Click here to view the list of articles.
Click here to find out more and to subscribe.
ACCOUNTANTS DAILY ARTICLES
Loan letters a legal minefield, accountants warned
CA ANZ says members should resist pressure from clients and decline requests for finance letters.
Accountants enter a legal minefield if they provide “finance letters” for clients and should refuse requests to be involved in risk assessments by lenders, says CA ANZ.
Members could be sued if a client defaulted on a loan and their insurance would almost certainly fail to cover them, the body said in response to a clamour of demand for advice on the issue during a recent webinar.
Professional standards general manager Kristen Wydell, who ran the webinar, said members were unsure how to respond to such requests but felt pressured by clients and banks.
“The latest advice is that you’re strongly advised to decline an engagement request like this from your client,” she says in CA ANZ’s next podcast, to be released January 10.
CLICK HERE to read more.
Time for action on loan letters, professional bodies told
Members say their representatives should be doing more to prevent banks putting accountants on the spot.
CA ANZ’s “just say no” advice on loan letters has struck a chord with Accountants Daily readers who have called on the professional bodies to take a stronger stand on the issue, find a solution, and even ban members who comply.
Comments in the wake of previous report, ‘Loan letters a legal minefield, accountants warned’, confirm the problem is widespread and increasing despite lobbying efforts by CA ANZ to lender associations and regulators.
The comments also highlight the dilemma when clients request a loan letter and accountants face the prospect of complying or losing the business.
Steven McDonnell of McDonnell & Co in Brisbane said such demands were on the rise and “always problematic” while Michael Bachmayer of Bachmayer Accounting in Ipswich, Queensland, said you were damned if you do and damned if you don’t.
CLICK HERE to read more.
How 100A multiplies the compliance burden
The ATO’s trust distribution ruling comes with a whole raft of requirements for consultation and documentation.
With the finalisation of ATO documents TR 2022/4 and PCG 2022/2 in relation to section 100A ITAA 1936, accountants must now turn their minds to what they will require in practice. Will the requirements of the ATO, as set out in these documents, mean more work for accountants in relation to their trust clients?
Unless a client’s trust affairs are relatively simple, I think it almost certain that if an accountant wants to follow what the ATO requires, particularly in relation to PCG 2022/2, there will be more work, at least in some or all the following ways:
CLICK HERE to read more.
Three ways to solve all your s100A problems
The ATO’s approach to trust distributions was the biggest tax issue of 2022, but there are some clear ways through the confusion.
The ATO’s draft guidance on section 100A released in February and then the finalisation of those views in TR 2022/4 and PCG 2022/2 in December was one of the most important tax issues that public practice accountants have faced for years.
In my view the implications of the ATO’s stance on the operation of s100A is more significant than the reach of Division 7A and the ATO’s changed views on unpaid present entitlements owed to private companies that were made known about 12 years ago.
Unless the government decides to change the way in which trust income is assessed for tax purposes, accountants will forever need to be concerned about how the ATO could potentially use s100A to attack even the most commonplace trust arrangements. The finalised ATO documents only serve to heighten that concern.
While we now know a good deal more about how the ATO thinks s100A could apply, the majority of trust arrangements will fall outside the green zone and red zone as discussed in PCG 2022/2. This means accountants will be dealing with the risk and uncertainty of advising clients without knowing whether the ATO finds the arrangement acceptable or not.
CLICK HERE to read more.
Federal Court decides Guardian AIT appeal on s100A
Long-awaited decision leaves a central question about “ordinary family or commercial dealings” unaddressed.
The Full Federal Court has handed down its decision in a long-awaited Section 100A case on trust distributions, dismissing the Tax Commissioner’s appeal against Guardian AIT but setting aside four orders by the Federal Court in relation to the second respondent in the case, Alexander Springer.
领英推荐
The original 2021 decision had rejected s100A assessments by the Commissioner on the trustee, Guardian AIT, which added up to more than $5.5 million including substantial penalties for the three years in question, 2012-14.
An alternative assessment of the beneficiary, Mr Springer, and applied Part IVA and made an assessment with penalties of more than $5.3 million.????????
The ATO did not appeal the primary judge’s decisions in respect of the 2014 income year but contested 2012 and 2013.
CLICK HERE to read more.
‘Fundamentals of running a business’ the 12-month focus: KPMG
Challenging economic and operating conditions has business leaders looking for ways to grow and increase revenue, says chief economist.
Over the next 12 months businesses will place a greater focus on the “fundamentals of running a business” while still acknowledging the consistent strategic challenges such as talent retention and acquisition, according to KPMG.
KPMG chief economist Brendan Rynne said the key emerging obstacle that the firm found in its annual survey of 473 senior executives was business growth.
While the worries around staff retention and cyber security were fairly consistent, the focus of CEOs on the hurdle of growth has jumped from 11th in the list of challenges businesses face up to sixth, with it listed as one of the top four challenges for firms in the next three to five years according to Dr Rynne.
“I was pleasantly surprised that the fundamentals of running a business, of making sure that you sell enough to create a profit, is still at the front of mind for many CEOs in the country, for me that’s a positive sign,” said Dr Rynne.
CLICK HERE to read more.
2023 crystal ball: Four things that will happen, and four that won’t
CPA Australia has gazed deeply into the future and come up with some predictions that just might come true.
The future is always uncertain. The world has been through a tumultuous few years that very few of us could have predicted. However, there are some signs about what 2023 might have in store for accountants, businesses and the economy.
Here are CPA Australia’s predictions about what the future may hold.
Four things that probably will happen
1.????Hacks and data breaches
2.????Businesses to diversify suppliers and customers
3.????Digital services crackdown
4.????Natural disaster preparation
Four things that probably won’t happen
1.????Major cost-of-living relief
2.????Skills shortage fix
3.????Tax reform
4.????A full return to the office
CLICK HERE to read more.
Eight new year resolutions every accountant should adopt
Shake off the cynicism and set yourself up for success in 2023 with these good habits and admirable goals.
A new year is an opportunity to start over with fresh ambition. We all have goals we want to achieve, growth we want to foster and bad habits we want to kick. Setting resolutions is a great way to set yourself up for success, personally and professionally.
Here are CPA Australia’s top eight New Year’s resolutions for accounting professionals.
1.????Commit to a data diet
2.????Start a diary
3.????Break up or make up
4.????Get financially fit
5.????Quit procrastinating
6.????Improve your technology
7.????Give back
8.????Take time off the tools
CLICK HERE to read more.
Why digital payments will fuel the post-pandemic economy
COVID accelerated the pace of digitisation and it has become essential to get through the downturn.
Digital payments have become ever more important since the pandemic, with the RBA finding we made an average of 625 electronic transactions per person in 2020-21 compared to just 275 a decade earlier.
The shift to more distributed ways of working has led to both suppliers and buyers being forced to speed up the digital transformation of their payment systems. This was highlighted in a 2020 Mastercard survey, which showed that 82 per cent of SMEs had implemented a change in the way they receive and send payments, and 67 per cent said those changes were caused by the pandemic.
It's not just behaviour and changes to the ways we work that have forced digitisation. The unstable economy brought on by the pandemic and other global factors, which led RBA deputy governor Michele Bullock to call the outlook for the global economy “quite worrying”, is likely to do the same with plenty of research suggesting that economic downturns lead to greater digitisation, which in turn can be an effective future-proofer.
CLICK HERE to read more.
‘Migrants vital’ to meet demand for 10,000 extra accountants a year
Australia needs to rethink its attitudes to skilled migration and get rid of caps, say accounting associations.
Australia needs 30,000 additional accounting, audit, and finance professionals over the next three years to meet demand and the professional bodies say revisions to the skilled migrant program are a vital part of the answer.
CPA Australia and CA ANZ point to a huge gap between the declining number of domestic graduates and an Australian Bureau of Statistics (ABS) forecast that Australia will require 338,362 accountants by 2026 — almost 10,000 extra a year.
In a submission on the 2023–24 permanent migration program, the bodies said the annual cap on skilled migration and changing attitudes to migrants were harming the nation’s appeal.
“Australia’s approach is the most uncertain as it can change annually,” said the submission.
CLICK HERE to read more.
CPI crunches small business margins: COSBOA
Inflation result means sector profits will suffer and caution is the watchword, says small business body.
Higher-than-expected inflation of 7.3 per cent is crunching small business margins, killing profits and forcing a cautious approach to 2023, the Council of Small Business Associations says.
The latest ABS figure for annual CPI to November showed prices rising at the highest level for more than three decades and up from 6.9 per cent for the year to October.
COSBOA chair Matthew Addison said the figure – which came in above forecasts – revealed the increasing cost of doing business and it was hurting the small business bottom line.
“What we're seeing is not so much the increased activity level but increased prices of doing those activities,” he said.
CLICK HERE to read more.
Why accountants must heed creditor duty decision
A UK Supreme Court ruling confirms a duty of directors to creditors — and it has implications for Australian accountants.
This is an important update in the Australian corporate and insolvency law context because, in BTI 2014 LLC v Sequana SA and others [2022] UKSC 25, the UK Supreme Court (its highest) confirmed the existence of a duty owed by directors to creditors in certain circumstances (creditor duty).
Before this decision, there was some uncertainty as to whether the directors of a solvent company owed any duties to creditors rather than solely to the company itself and its shareholders. This decision has provided much-needed clarity — especially at a time of global economic uncertainty and an expected increase in insolvent Australian companies.
One implication of this case may be that creditors who are not paid in full through the liquidation of the insolvent estate, may be able to pierce the corporate veil and sue directors for their loss. Accountants should be mindful to advise their directors and company clients of this expansion of potential director liability. Further, accountants may also wish to bring this potential avenue for recovery to the attention of their clients who may be creditors of an insolvency company.
CLICK HERE to read more.
ATO figures reveal final 2022 DPN tally
After a slow start in May, the office went up through the gears with director penalty notices.
The ATO accelerated up through the gears on debt collection in 2022 to issue a total of almost 18,500 director penalty notices, figures released yesterday reveal.
The office also unsheathed a fresh weapon in its armoury by disclosing the tax debts of almost 500 businesses to credit referral agencies for amounts of $100,000 and above.
The final figures show that more than one in three directors failed to act after an April mail blitz by the ATO warned 52,000 directors about debts involving 30,000 companies.
By August, the ATO had issued 7,000 DPNs and was dispatching them at the rate of 120 a day. For the final five months of the year, it was also referring about 20 businesses a day to credit agencies after sending warning letters to more than 29,000.
CLICK HERE to read more.
Agent linking talks ‘highly productive’, says ATO
Office optimistic that another meeting with professional bodies can address concerns.
A meeting with tax professional bodies yesterday to thrash out disagreements over the revised agent linking regime was “highly productive” the ATO says, and it is optimistic that the eventual result will “address concerns”.
The professional bodies went to the meeting demanding changes to the complex six-step system, unveiled by the ATO in early December, saying it will be a burden on small business.
The meeting ended with the ATO sticking to its guns, according to one participant, but the office expected further meetings to achieve agreement.
“It was a highly productive discussion in which we received a range of feedback on how the proposed solution will impact both taxpayers and their representatives,” an ATO spokesperson said.
CLICK HERE to read more.
Small business owners need to put themselves first: ASBFEO
The single-minded focus on the “daily quest to keep the doors open” is impacting the mental wellbeing of owners, says Ombudsman.
After a Treasury survey found one in five is diagnosed with problems, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) says small business owners must put themselves first when it comes to mental health.
Bruce Billson outlined five techniques to help small business owners manage the daily stress of keeping the doors open, including:
"Too often the daily quest to keep the doors open and manage the many immediate demands prevents time being spent thinking about the health, future and goals of your business, and for that matter your own health.”
CLICK HERE to read more.
Top accountant ‘the key to success’ for start-ups
A record number of fresh firms are expected in 2023 and having the right financial processes in place will be critical to their prospects, says accounting firm’s CEO.
Good accountants, bookkeepers, and financial processes are paramount to the success of start-ups according to Platinum Accounting Australia CEO Coco Hou.
Ms Hou said starting a firm could be the highlight of an individual’s career but there were countless obstacles for those creating something from scratch.
“Starting up a new business is one of the most exciting things you can do as part of your career journey, however it can also be one of the most stressful and expensive,” said Ms Hou.
“There are lots of costs associated with setting up a new business so it is important that you take care to manage costs or you will put yourself in a precarious position from day one.”
CLICK HERE to read more.
Grants Update
There are number of grants for which your SME clients might be eligible.
Want to know what they are??Click here for a list of current grants, prepared by ESS BIZTOOLS.
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ESS BIZTOOLS - Webinars
Upcoming Webinar - The BOSS Factor - Featuring Trevor Marchant
Thursday 2 February 2022 at 11am AEST - Click here to register
Previous Webinar - Selling Advisory Services - featuring Trevor Marchant
Want to know more?
Visit www.essbiztools.com.au.?You are also welcome to visit www.essbizgrants.com.au, a website that can assist in the identification of government grant(s) suitable for your clients.
If you would like to have a discussion about how this concept of virtual CFO services can be supplied by Australian accounting firms please ring our Managing Director, Peter Towers, on 1800 232 088 and we will arrange a complimentary 15-minute Zoom meeting to discuss your firm’s position and to give you our advice.
We believe that this is the blueprint for the delivery of an enhanced range of services by Australian accounting firms to assist SME businesses to add value to their businesses and to assist accountants not only to attract but to retain outstanding talent who want to be involved in the delivery of “real accounting services”.
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