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Why a good Accountant is an Investment and not a Cost
Date: Jan 17, 2022
“Working with a good Accountant is invaluable - it is not a cost. It is in an INVESTMENT.”
That’s quite a statement to make but is it really true?
Many business owners pride themselves on how little they spend with their accountant. But this is one fee you shouldn’t look to cut. To see your accounting or bookkeeping investment as a necessary evil is incredibly short sighted for your business.
It is normally the expenditure that is the first to be challenged, to try and get it reduced or get it cheaper elsewhere, or the last cost a new business owner looks to spend.
But if you saw it as an investment for your business now – for your staff, your family and for the future of your business. What would that look like?
- Fewer sleepless nights as you know that everything will be okay because you already know the facts to make decisions on
- Planning that holiday, new car, more family time, and realistically working towards making that happen
- Working with someone that just "gets it" - they understand the reality of what you're going through and can support you
- Making positive changes every day, continually taking small steps towards your ultimate aim and what you want to achieve
Investing in the right accountant from the beginning to help you set up, change and develop your business could be life changing as well as keeping you safe and compliant with all the regulations.
A growing business should be investing at least 3% of their TURNOVER into their finance work.
As a business owner we’re more than happy to spend money in much larger amounts in other areas of the business, such as marketing, because we see a tangible effort give us a reward back (i.e. sales) when it is done well.
What if you looked at the investment in the finance work, using the 3% of turnover investment basis, as a positive and so as the finance fee increases this actually means your business is making more money and becoming more valuable.
Your accountant does need to be delivering the work to justify the 3% of turnover basis but as your business grows you can’t just get the “bookkeeping done”. There needs to be
- regular management accounts analysing and challenging the business performance to date
- cash flow forecasts to see where the business should be heading
- quarterly challenges to the cash flow vs actual performance and actions plans put in place to pull the business back to expectations
- annual budgets (at a minimum) on the anticipated business performance with fully justified and evidence-based assumptions agreed
- Succession and staff planning to support the business growth
- A proper strategic plan of at least 3 years that encompasses all the above and more, which can be adapted for changes to your business or the external factors that could affect it
If you are ever considering selling your business, then these are some of the basics that would need to be in place. There is so much additional work done by the external business who may want to acquire you, and their own accountants, and every figure will be challenged. It is your responsibility as a business owner to know these figures. You can’t do this if you haven’t invested in the finance work with a good accountant.
If you even want to get to the starting line of being an eligible business that another company may want to acquire then you need to:
- Start NOW!
- Invest in your finance function properly - at least 3% of turnover
- Find a good accountant who will support you, challenge you and hold you accountable to your actions. You must take responsibility as a business owner.
- Get your data accurate - you will need a minimum of 3 YEARS of accurate data and reporting, potentially 5 years.
- Bookkeeping is not enough - yes it needs to be 100% accurate and every figure explainable but the way you report, understand, analyse, challenge and change your business is even more important and this has to be done consistently for years not months
- The business must be able to function without you
(these are just some of the basic elements to get started with - there is so much more involved in reality)
Even if you're not looking to sell your business now or in the future, your future self and future business will thank today’s version if you invest properly in your finance work.
You’ll have choices in your decision making rather than only one option, and you could end with the business that you are striving for and which delivers the success, be that monetary or otherwise, that you want.