We are now just one month out from the end of the Australian financial year. A great time to check on your goals for between now and then. My view is you will have goals both in respect of your clients and your own business. In short, I’d like to see accounting and advisory firms kicking the following goals between now and 30 June:
- ATO Lodgment requirements met
- Tax planning completed for clients who will benefit from it
- Business planning and budgeting completed for clients who will benefit from it
- Business planning and budgeting for your own business
The last two goals can extend into July but for obvious reasons the first two will not.
- ATO lodgments met
I wrote on more detail on this recently (see here ). You should have already nailed your 85% on time lodgment requirement for the ATO and if you haven’t then you need to get that sorted asap. Yes, I know some stuff can be pushed out a little, but seriously, just get it sorted!
2. Tax Planning with Clients
For many firms May and June is when they reach out to clients to do some tax planning. I hope for most of you this has already started and you have lots of bookings in your calendar for client meetings. In Australia this is a pretty well established pattern but I still observe that some firms are not actively doing this or are doing it with only a small number of clients, when many more would benefit from it. Obviously not every client is going to need this, but I suggest that most, if not all, of your business or high net worth individual clients will. For some firms this can be challenging as it often falls to the most senior people. With the help of a well thought through checklist to use with each client I believe quite a bit of the work can be completed by less experienced team members.
Some of the things accountants tell me they like to cover in tax planning include:
- Considering what income and expenses can be brought forward or deferred as may make sense from a tax and commercial perspective
- Identification of any major changes from prior year – for example there could have been significant transactions that need consideration. Sometimes your clients will do something and not tell you and if you know prior to the end of the financial year there may be some actions to be taken to improve the tax impact.
- A check that the structures employed still make sense
- Dealing with Division 7A and trust distribution considerations
You will have your own checklist you use to guide your conversation with each client. If you don’t I suggest you create one. I have also heard of a couple of tools available to assist including from Change GPS and I think the Cashflow Story team.
As an accounting firm coach and mentor I am often asked how much should be charged for tax planning. The answer, unsurprisingly, is it depends. You may have some clients on an annual package which includes this service. If not, be sure to make it clear to each client the fee to be charged and why it makes sense to complete a review. Often your fee might be broken into two parts – the first being to do the planning review and the second to implement recommendations. The planning review may or may not identify opportunities, but for most businesses there will be something you pick up.
3. Business Planning and Budgeting With Clients
Some of your business clients would no doubt benefit from having a knowledgeable third party (aka their accountant) facilitate a planning day. This might involve helping the client to answer three questions:
- Where is the business today?
- Where does the business want to get to?
- What activities need to be scheduled and completed to get to where we want to get to?
Having helped your clients get clear on what they are going to do in the coming financial year there is a further opportunity to help them build a budget that reflects that. As you know, budgeting can sometimes lead to a rethink of plans because “the numbers don’t stack up”. So the planning and budgeting process might involve a few iterations. Many SME owners are ill equipped to do this and your input will add value.
I’m a big fan of the power of a three way budget – that is P&L, balance sheet and cash. In my experience this allows some very powerful conversations with clients, including a dose of reality! Often an owner will assume they will be able to take a certain amount of cash out of the business, but when the numbers are done it becomes obvious that this will not be sustainable. Oops.
The other great thing about doing budgets with your client is that you can then assist them monthly or quarterly in comparing actual results to budgets and understanding what the numbers are saying.
Popular tools for this sort of work are Castaway, Calxa, Cashflow Story, Spotlight Reporting, Fathom, ProfitSee and FUTRLI (previously Crunchboards).
4. Business Planning and Budgeting for your own business
Having given your clients the benefit of planning and budgeting don’t deny yourself those same benefits! In this instance the knowledgeable third party to assist is going to be someone like me. When I work with firms on planning a key thing for me is to ensure that the goals and aspirations of the individual owner/s are considered and mapped against the goals and aspirations for the business. My experience tells me that an alignment between personal and business goals and alignment between each of the owners, is vital for success. Doing a three way budget for yourself is important too.
There is a lot to do and I believe that if you can achieve these four goals you will not only end the financial year on a positive note, you will have set yourself up for success in the new year.