Late payments are the “silent killer of small business” Kate Carnell the Australian Government’s Small Business Ombudsman said in her reaction to the UK based “Market Invoice” report in late 2016.
Australia has the dubious title of the “Longest Debtors Days Outstanding in the World”. The report identified that Australian small/medium enterprises were being paid 26.4 days later than the normal 30 day credit terms – a staggering 56.4 days as compared to the next closest country Mexico with 48.6 days or South Africa with 46.5 days.
These delayed payments are having a significant impact on the viability of thousands of small businesses all over Australia. The government’s Small Business Ombudsman has indicated that she is going to have discussions with government departments and big businesses about improving their payment times with small businesses, however accountants have a very significant role to play in reducing the debtors’ days outstanding problem.
The Early-Stage Innovation Company legislation has been available since July 2016 but unfortunately there has been little publicity about the significant benefits this legislation offers small/medium enterprises and investors.
An accountant rang me last week and asked me whether a “two-year old company that had undertaken a significant amount of research and development to develop a new product was suitable for Crowd Sourced Funding?”
I said no!
I suspect the accountant was a little bit surprised at my answer!
I said I thought the company would be a very suitable candidate for Early Stage Innovation Company status. Why?
Good for your small/medium enterprise clients who want to access grants so as to improve their business activities with a subsidy from the government.
Good for accountants to show your SME clients that you are proactive and acting as the SMEs’ “trusted advisor” to assist them to get a grant to improve their businesses by adding value.
If it’s good for small/medium enterprises and good for accountants why do so many accountants ignore their small/medium enterprise clients desire to know about government grants and, more importantly, the business improvements that your client would have been able to undertake at a significantly cheaper cost because of the grant?
Whilst at the same time depriving your accountancy business team of the opportunity to undertake some interesting work assignments (“real accountants work”) that approximately 50% of the accountancy firm’s fee has been paid for by governments.
Whilst there was some superannuation available in Australia prior to 1983 it was basically organised by employers with advice from accountants.
In 1983 the Federal Government introduced compulsory superannuation with contributions originally at 3% of salary now 9.5% of salary.
This event heralded the commencement of “independent businesses” advising individuals and superannuation funds on their investments.
Most accountants, including myself, ignored the new “financial planning” businesses and thought that client loyalty would preserve the status quo.
This didn’t happen – the accountancy profession significantly underestimated the emergence of a whole new industry – “Financial Planning for Individuals and Self-Managed Superannuation Funds”.
In December 2016 that new investment category has grown to $2.2 trillion, making Australia the fourth largest holder of pension fund assets in the world.
This was the reaction from an experienced principal of an accountancy business when we discussed the opportunities available from “Crowd-Sourced Funding Equity Raising”.
My colleague said “with this legislation virtually any type of client will be able to embark on a capital raising journey, in so doing avoiding the need to borrow from friends and families and taking out second and third mortgages on their own property to fund their business vision.”
“To do this successfully they are all going to need committed accountants offering a true “trusted advisor” service to guide them through and in so doing the committed accountant will have established a “new income stream”.
My accounting colleague is correct – any type of business can have a vision to raise capital from the public – up to $5 million every 12 months can be raised – but, they are going to need a committed accountant/advisers to help them to prepare the “default prospectus” known as the “Crowd-Sourced Funding Offer Document”.
There are a number of opportunities for accountants arising out of the Crowd-Sourced Funding legislation with the first listings on intermediaries’ platforms (website) scheduled from 29th September 2017. Now is the time to get prepared to assist your clients and prospects to be able to avail themselves of this unique opportunity to be able to raise capital from the “crowd”.
At this stage Crowd-Sourced Funding is only available for unlisted public companies. The legislation enables propriety limited companies to be converted to an unlisted public company. Whilst there has been some debate about the requirement for companies to be unlisted public companies, some people with considerable experience in the process of raising capital for small companies are very supportive of the concept that capital is to be raised by unlisted public companies primarily because of the structure of public companies, corporate governance requirements and constitutions that reflect that the shareholders will be more than family and friends which is normally the case within a proprietary limited company.
This could easily be an advertisement in small/medium enterprise magazines as small/medium enterprises contemplate trying to raise capital as Crowd-Sourced Funding Companies. Each of these applicants is going to require assistance from accountancy businesses for the directors to achieve their aims.
In fact, based on an expectation that around 10,000 companies might try to raise capital as Crowd-Sourced Funding Companies over the next 12 months, this could mean that 700 accountancy firms are required to be making a strong commitment to Crowd-Sourced Funding.
The Crowd-Sourced Funding Legislation is brand new and therefore presents a fantastic opportunity for accountancy businesses to get involved with this new service.
No accountancy business in Australia has a “historical advantage” with Crowd-Sourced Funding because this is new legislation.
Now is your opportunity to get involved with a product which will offer a great service that will enable you to diversify your services from your competitors.
Crowd-Sourced Funding is targeted at:
These business entities are traditionally clients of small to medium-sized accountancy businesses. Don’t encourage these clients to go elsewhere for advice that, with a little bit of preparation (maybe only a couple of hours), your firm should be able to present an outstanding crowd-sourced funding service.
Crowd Source Funding is a “new revenue stream” for the Australian accounting industry.
One of the benefits is that you do not require a “special license” to act as an advisor to a company which is interested in seeking capital by utilising Crowd Sourced Funding.
Crowd Sourced Funding presents accountancy businesses with a great opportunity to differentiate your accountancy business in the market place.
Crowd Sourced Funding will not be subject to the competitive pressures and Australian Taxation Office driven changes that are affecting the income tax return preparation market. Crowd Sourced Funding advice and implementation will definitely not be a commodity product!
There are a significant number of components to the Crowd Sourced Funding “revenue stream” including:
Crowd Funding Offers Significant Benefits to SMEs and Accountants
A new opportunity for small/medium enterprises, inventors and entrepreneurs has emerged with the passing by the Australian Senate of the Australian government’s Crowd Sourced Funding Amendments to the Corporations Act.
SMEs and others now have three distinct opportunities where they can raise capital from the public without producing a prospectus. These opportunities for capital raising are: