A lot of people ask me if accountants are going out of business.
Accountant picture from Shutterstock
As the head of accounting of a company that allows small business owners to easily do many of the things their accountant used to do, as well as being an accountant in public practice, it is a question I get asked frequently. A more pointed question however is "Do I see much of a future for accounting professionals in this automated world?"
Some people even ask me if they should sack their accountant once they've got Xero up and running in their business.
My answer is always the same – absolutely not! Thanks to the efficiencies created by cloud accounting the opportunity for accountants and their clients to work closer together has never been greater.
The role of the accountant is changing. Instead of just focusing on historical financial numbers (although these remain important for things like tax and keeping track of how a business is performing) many accountants also provide valuable advice about how to run and grow your business.
There are several milestones in the lifecycle of your business when you should get the input and advice of an accountant.
The first is when you start out. You should consult your accountant on the best business structure for you. The reasons for this are many. The right structure can save you tax each year as well as when you sell your business. It can also ensure that your business and personal assets are appropriately protected from creditors or if legal proceedings are brought against you. And it is important when taking into account what you might want to do with the business in the future whether that be selling it or passing it onto your children.
Your accountant should also review your business plan. We're all a bit starry-eyed when we start a new enterprise, so having an impartial business advisory specialist cast their eye over your plan and the assumptions you make can save you a lot of time and money later on. They can draw on their experience to spot pitfalls you might have overlooked. For instance, they might think you've underestimated your costs or question how you're going to meet your sales projections.
You should also ask your accountant for help before you apply for finance, make a major investment or put your business on the market.
But it's not just milestones you need your accountant for. You should also ask them for advice on the day-to-day running and growing of your business.
Some accountants have set themselves up as 'virtual CFOs'. They do the same sort of strategic and advisory work a chief financial officer would do in a larger company, but because it's for only a few hours a week or a month it's affordable for a small business.
The rise of cloud-based accounting software means your accountant can easily examine your business' real time financial data from anywhere and at any time, not just at the end of the month or the quarter.
They use this information to advise you on how to improve your business.
Broadly, they can act as an advisor and sounding board for any financial and administrative issues.
More specifically, they can help you analyse your financial data and performance, and identify growth opportunities by providing insights on cash flow, pricing, inventory and other financial measures. Your accountant might, for example, notice that you have a lot of stock that's selling too slowly and advise you on how you can better manage your inventory to free up the cash that's tied up in stock.
You should also work with your accountant to set targets for your business. They can advise you on which KPIs you need to grow your business, and help you formulate a plan to hit them. And they can set up real-time cloud based reporting systems to track your performance against these KPIs and targets. This is invaluable to not only measure your success but also to highlight any areas of concern.
They can also look at your business processes to ensure you're doing things as efficiently as possible. A lot of accountants have access to benchmarking data, which will help you compare your own profitability and efficiency with other businesses in your sector.
Finally, even if your tax affairs are very simple, it's still a good idea to get your accountant's advice. They'll be up to date with the latest changes in the tax law and know about all the deductions available to you to help minimise your tax bill.
While your accountant can look over your finances remotely using your cloud software, it's a good idea to have regular face-to-face meetings with them as well so you can go over any issues and problems in detail as well as brainstorm and explore new ideas to help your business grow.
You should think of your accountant as an important partner in your business. The more time you invest in the relationship, the more your accountant will learn about your business and the more valuable their advice.
James Solomons is head of accounting for Xero Australia. Follow him on Twitter @JamesSolomonsCA. The information contained in this article is general in nature and does not take into account your personal situation or you business' circumstances. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an accountant or other qualified professional.