Having regular conversations with your accountant can make a huge difference to the success or failure of your business.
Your accountant has a huge amount of knowledge available to you. Their exposure to hundreds of businesses, knowledge of the tax system and understanding of your personal and business goals means they truly are best placed to add value few others can when speaking to you.
But when you’re sat in front of them, whether to review your accounts, or just to catch up, what questions should you be asking to make the most out of that time?
Here are my top five questions that I work with my clients on, to give them confidence and assurance, concerning their business.
What’s my future tax liability?
A simple, but important question. When it comes to it, what is your corporation tax bill, and can you afford it?
Corporation tax is usually payable 9 months and one day after your year end. But finding out your bill close to the deadline can sometimes spell disaster to the underprepared business owner.
One of the best defences against a large tax bill is foresight, and the best time to ask this question is before your year end date, so approximately, 10 months before your tax is actually due.
This is because your accountant will have 11 months of accounting data to hand and can predict reliably what your corporation tax will likely end up. Also, because your year end hasn’t passed, you may have several opportunities to reduce your corporation tax bill, including use of annual investment allowances (AIA) and pension contributions.
Top tip: check your year end date, and make sure you have a meeting in with your accountant a few weeks before that date, if unsure, check your company up on Companies House.
Am I tax efficient?
Ask your accountant are you truly tax efficient. That is, are you making the most of your allowances and schemes available to you.
For example, it might be that your salary could be altered, or you could make contributions into your pension to reduce your tax.
A good accountant will be able to evaluate your options to reduce your household tax burden, taking into consideration everything from corporation tax to your entitlement to child benefit. They will do this not through suspect expenses, or sailing close to the wind, but a good working knowledge of the tax system.
Top tip: Get a good grasp of your household situation; what personal income you need, what your spouse earns, what your goals are as a household, as this may give your accountant good advice on how to plan for you effectively.
Is my margin strong enough?
Each business works on a margin, whether gross (that is your gross profit after costs related to sales) or net (that is your net profit after all overheads are included too). Whilst businesses have their own unique clients, systems and circumstances, in most cases they largely sit in similar industries and have similar considerations. Construction and trade businesses will work on their gross margin and need to ensure they are earning enough from each job (after factoring in time, labour, materials and travel) to cover their overheads and pay the shareholders a profit. Service businesses have less of a margin, but a greater emphasis on the value of their time.
Top tip: Where is your business compared to with your accountants’ clients similar to your business. What do they do better than you and how can you improve?
How can I check in on my financials regularly?
The number of businesses who have little or no visibility of their financial accounts until they are prepared at year end is astounding. Getting your accounts at the end of the financial year is like being the manager of a football team and simply being told the result, without having any influence on the game at all.
Being able to see your results, close to real-time, is hugely important. Coupled with financial literacy, and you will be able to spot issues early on, and opportunities to improve.
Top tip: If you’re not on cloud accounting software already, invest in some. And if you are, ask your accountant how to navigate and read some simple reports. A profit and loss is a simple but powerful statement. A balance sheet, whilst more complex, is even more important, as it tells you the ‘position’ (strength) of your business at any one time. Bookkeep regularly, or if you can’t do this, invest in the support to give you this information.
Ask for advice on your targets
Discuss your plans with your accountant – your aspirations, your goals and where you want your business to go, and even, what an exit might look like. Your accountant is an important sounding board to your ideas and can help you manage the fine line between risk and reward.
Taking it a step further, does your accountant and their services support those goals? If you are reaching £1m in turnover, would management accounts begin to give you clarity on job margins? If you are struggling to get a clear picture of your books, do you need regular bookkeeping? A good accountant will help you build the picture to achieve your targets and help you get that data through your accounts.
Top tip: a good accountant isn’t necessarily a good entrepreneur, and you need to be aware of the difference. Accountants are trained to be risk-averse, but good accountants can strike a balance between ensuring your ideas and strategies aren’t reckless but equally give you options and routes to grow. Your accountant could be the partner or director of their firm; they are a business owner too.
How does Mayflower Accountancy support our clients?
Our clients, as standard, are invited to a quarterly session, where we walk through everything from tax planning and forecasting, to exploring opportunities to grow their businesses. We keep them informed on changes of legislation, and also act as a guide, and coach, to help them implement their ideas.
We support our clients to implement technologies to improve their business and explore ways they can save tax and grow their margins.
One meeting is always typically timed to occur before the year end, so corporation taxes are no longer a surprise.
