The new era is with us - it just didn't happen!
Peter Towers
Founder of ESS BIZTOOLS Pty Ltd | Certified Public Accountant | Business Advisor | Mentor and Coach
The new era for Accountants in Australia and New Zealand didn’t just happen. In fact, it started about 40 years ago when the Financial Management Research Centre (FMRC) was created at the University of New England.
A few years prior, small computers with software packages designed for accountants developed by firms like Wang Computers, Hartley Computer Software (HAPAS) emerged and later on Solution 6 who were then followed by MYOB and Xero all contributed to the commencement of this new era.
FMRC’s message to accountants was innovate, they went out into the industry and told meetings of accountants, “apart from tax work, let’s try and help our clients more with their businesses”.
The initial technology enabled small and medium sized accounting firms to feel comfortable producing tax compliance work for their clients.
What many accountants didn’t realise was that modern technology would eventually catch up and ambush them.
The once lucrative and predictable tax based business model is falling apart in 2023. Even the Tax Commissioner has indicated that compliance work is on the decline.
Over the last six weeks, we have presented a weekly insight into Andrew Geddes’ thoughts on this evolution.? Andrew was one of the joint founders of FMRC and has observed this evolution very closely.
“You need to look at the trends in the market and understand what’s happening. The Australian Taxation Office is driving through digitisation, robotics and artificial intelligence and are making it very clear that the demand for some of the basic compliance work is going to reduce.” Andrew Geddes.
“The other trend is that team members are always wanting more interesting work.”
What all this is telling us is that the annual set of accounts and a tax return prepared three to nine months after the end of the financial year is not enough financial information for SMEs in 2023/24.
40 years ago, products like ESS BIZTOOLS which have been designed to assist accountants to deliver “Value-Added Advisory Services” were not available.
ESS BIZTOOLS’ vision is that small and medium sized accounting and bookkeeping firms are able to supply a “52-Weeks Business Enhancement System” to SME clients to assist them to run better businesses and to survive the enormous challenges that they are facing.
Where do you start?
Every business client should be introduced to the concept of a basic external Chief Financial Officer service which starts with the client’s bookkeeping system.
The bookkeeping system should ensure that daily information such as “Key Performance Indicators” is prepared accurately and promptly for management.
Most businesses will benefit from a “Weekly Performance Report”, which would include a profitability report and a summary of the key metrics for that business.? This report will convey an immediate message to your client as to how the business actually performed in the previous week.
Large companies establish systems whereby they have “Monthly Financial Accounts” that they are able to analyse and immediately follow up for any unaccounted variations.? We believe that SMEs also require monthly financial accounts.
52-Week Business Enhancement System
But let’s go back to the beginning of the “52 Weeks Business Enhancement System”.
All businesses need a “Business Plan” or at the very least a “Business Review” document prepared on an annual basis.
The Business Plan should be developed from a meeting with the Leadership Team and the accounting advisor and in most instances it would be your responsibility to prepare the final document.
The next step is the preparation of the “Predictive Accounting Report” which is based on the Business Plan – in fact it is the “financial interpretation” of the Business Plan and includes:
When the “Monthly Financial Accounts” are prepared they should be compared to the Budgets and variations should be investigated with the Leadership Team to see whether a problem can be fixed.
There will always be fluctuations in Budget Forecasts and this means that in most cases a “Monthly Rolling Forecast” should then be prepared which will incorporate any changes that are being made in the Predictive Accounting Reports based on the current results.
It’s a good idea for your client to hold a “Monthly Business Review Meeting” to evaluate the business’ performance for that month.? You could suggest to your client that you will facilitate the Business Review Meeting – prepare the Reports – Agenda and then the Minutes and Action Plan from that meeting.
The “Cash Flow Forecast” should be closely reviewed to identify if the business is likely to incur funding difficulties during the year. What can be done to avoid the funding problem?
Capital raising
If the business is unable to borrow money should consideration be giving to raising capital?? You could then explore with your client the capital raising opportunities that are available for a SME:
Utilising Section 708 of the Corporations Act
A company can raise up to $2 million in a twelve month period from no more than twenty investors.? The company is unable to advertise or market that it is trying to raise this capital.
Early Stage Innovation Company (ESIC)
ESIC could be an opportunity for a company that has been incorporated for less than three years and in some cases less than six years with income of less than $200,000 in the previous twelve months (not including any grant funds from the Accelerating Commercialisation Grant) and expenditure of less than $1million in the previous twelve months.
The company then has to pass one of two tests – the first test is known as the “Gateway Test” in which the company needs to accumulate 100 points.
The second test is the “Principles Test” where the company has to supply answers to five questions and those answers are then submitted to the Australian Taxation Office and AusIndustry for review to determine whether the company will be accepted as a company that can attempt to raise capital as an “Early Stage Innovation Company”.
The Australian Government was aware of the difficulty that small start-up businesses, that have been involved in the development of new technology, systems or methodologies have in securing funding and for this reason incorporated special “carrots” for investors who invest in a company that is deemed to be an “Early Stage Innovation Company”.
The investors receive 20% of their investment in the company up to a maximum of $200,000 for a Sophisticated Investor and $10,000 for a Retail Investor, off their taxation liability.
Those investors who have held the shares allocated as part of this process for more than twelve months and less than ten years avoid having to pay any Capital Gains Tax when shares are sold.
The benefit for the company is that they have been able to raise the capital.
Crowd Sourced Funding Equity Raising
This is another funding opportunity available for a company with an international turnover less than $25million and gross value of assets of less than $25million and not listed on a stock exchange anywhere in the world.
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The legislation requires Australian Securities & Investments Commission (ASIC) to appoint “Crowd Sourced Funding Intermediaries” to coordinate this capital raising process.? The company will need to appoint one of these Intermediaries because it is only via those organisations that the capital can be raised.
A company can raise up to $5million in a twelve month period by utilising this methodology of raising capital.
These are some of the fundraising opportunities that are available for your clients.? Virtually all SMEs require professional assistance for any of these capital raising processes.
Each of these companies is going to need:
This is a brief overview of some of the initial services that accountants and bookkeepers could make available for SME clients.
There are additional services which we will summarise in a future article.
Can you incorporate these types of services into the packages that you are offering SMEs?
There are suggestions that accountants haven’t got the time to devote to offering Advisory Services even though there appears to be market demand for Business Advisory Services. This demand did not exist 40 years ago and has been created by the ongoing improvements in technology, software and the availability of systems manuals to assist in the delivery of enhanced services.
It is interesting that Trevor Marchant, the Developer of “The BOSS factor Library” says that interest in his new service “THE REFERRAL CODE” is attracting a growing number of Accountants from all over Australia who are wanting referrals to quality clients – presumably who are seeking Advisory/Chief Financial Officer Services.
Andrew Geddes indicated in one of our recent podcasts that “Accountants Need an Understanding of What Is Happening in the Market”.
This will present either a “CHALLENGE for your Accounting/Bookkeeping Firm or will create an “OUTSTANDING OPPORTUNITY”!
Special Upcoming Webinar
ESS BIZTOOLS is presenting a special FREE webinar, “Scaling Up Services”. This feature webinar will be held on Wednesday, 11 October 2023 at 11am AEST. Register below to attend.
CPD point eligibility for CPA Australia members (must attend the duration of the webinar).
ESS BIZTOOLS Product Packages – Special Offer
Product packages to assist your firm to implement Business Advisory Services as outlined by Andrew Geddes.
Each new subscriber will receive a three (3) day Discounted Holiday Package for subscriptions completed by 18 October 2023. Click here to find out more.
Starter Package
Monthly payment: $149 including GST (normally $197 including GST)
Discounted upfront payment: $1,529 including GST (normally $2,100 including GST)
Click below to find out more and to subscribe.
Advanced Package
Monthly payment: $239 including GST (normally $596 including GST)
Discounted upfront payment: $2,519 including GST (normally $6,500 including GST)
Click below find out more and to subscribe.
Financial Forecasting Package
Monthly payment: $578 including GST (normally $917 including GST)
Discounted upfront payment: $6,199 including GST (normally $11,000 including GST)
Click below to find out more and to subscribe.
Want to know more?
Visit www.essbiztools.com.au .
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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