Category Archives for "Accountant’s Minute"

Accountants…. Action Required Now to Assist Businesses to Reduce Debtors!

Have you contacted your clients to ascertain their debtors’ days outstanding?  How many of your clients have debtors’ days outstanding similar to the average figure determined in a worldwide review that identified Australia as having the “longest debtors’ days outstanding in the World”?

The review, covering 80 countries, determined that Australia had an average debtors’ days outstanding of 56.4 days which was substantially higher than any other country!

This is a national disgrace!

If accountancy businesses are performing as the “trusted advisor” to a small/medium enterprise surely this means proactively assisting your clients to get their debtors’ days outstanding close to 30 days as part of the job description.

Where do you start?

Crowd Sourced Funding Equity Legislation Passed

At long last the Australian parliament has passed the legislation that will enable companies to raise capital from the public.  This is a great decision for small medium enterprises, entrepreneurs and members of the public who wish to invest into a new type of company!

The legislation indicates that the only entities which can raise money using the crowd sourced funding equity method will be an unlisted public company.  The legislation enables a proprietary limited company to be able to be converted to an unlisted public company to enable the company to then be able to raise money from the “crowd”.

Unlisted public companies will be able to:

  • raise up to $5 million every 12 months
  • be able to do the company must have group turnover less than $25 million and have group assets of less than $25 million

Retail investors will be able to invest up to $10,000 every 12 months into a company.  The “cooling off period” for retail investors is five days.

Sophisticated investors are not subject to any investment limit and there is no “cooling off period” for them.

Accountants… Reducing Debtors’ Days Outstanding Will Help Your Clients Survive!

90% of small business failures are due to poor cashflow” Ms Kate Carnell the Australian Government’s Small Business Ombudsman said recently.

Australia has the longest debtors days outstanding in the world”.  A survey of over 80 countries found that Debtors Days Outstanding in Australia was 26.4 days higher than the normal payment term of 30 days meaning that debtors’ days outstanding on average are 56.4 days.

Where to Start?

Identify your clients that have debtors’ days outstanding in excess of 40 days or:

  • had bad debts in excess of $10,000 last year; or
  • received a “Preferential Payment Claim” from a liquidator.

Why not have a conversation with your client about the benefits of you undertaking a review of their debtors’ system to ensure that it is working appropriately?

CFO’s Services – Highly Desirable for Accountants to Provide

Accounting Market Pulse (produced for the Commonwealth Bank) December 2015 edition identified that the main areas of expected growth for accountancy businesses over the period from 1st January 2016 to 30th June 2017 would be:

  • Business Advisory Services
  • Management Consulting

A key component of Business Advisory Services and Management Consulting Services is supplying a Virtual Chief Financial Officer Service to small/medium enterprise clients.

In various surveys produced over the last 15 years involving thousands of small/medium enterprise operators one of the continually identified services required by the SME market was related to Chief Financial Officer Services.

Implementing the Next Level An Important Task for Accountants!

Whilst there is some debate as to the degree that individual accountancy businesses will be affected by changes in the marketplace relating to taxation returns, financial advice and superannuation fund audits, you would be a very brave accountancy business if you elected to reject these changes out of hand!

At the very least why not have an each way bet!

There are numerous examples all around us about changes that are occurring in the business community – think about:

  • video stores
  • travel agents
  • retailers

now competing with businesses such as Amazon and other internet selling organisations.

As a “numbers orientated person” my suggestion is that in the first instance you identify what the “Potential Fee Slippage” might be for your accountancy business.

Accountants – Are You Ready for the Next Level?

There is no doubt that there are changes in the accounting market.  These changes are occurring at an ever faster pace!  How you respond to these changes will significantly affect what your accountancy business looks like in a few years’ time.

Potential “fee slippage” is a relatively new problem for accountants.  “Fee slippage” is caused by a number of things including:

  • Australian Taxation Office changes
  • “commodity” status of the tax return preparation work
  • outsourcing of work to lower cost countries
  • competition
  • technology changes – a recent report prepared by “Times Higher Education” identified that the accountancy profession is at the highest risk of having jobs eliminated by technology when compared to a number of other occupations. The tasks of accounting, taxation and financial management were identified as having a staggering 95% probability of being automated!  “Digital disruption” is driving manual and repetitive tasks out of accounting.

A Customised Debtors Systems’ Manual is a Great Way for an Accountant to Help SMEs

Accountants can assist small/medium enterprises to reduce their Debtors’ Days Outstanding by producing a Debtors Systems’ Manual.

A written debtors’ manual, together with targeted training of the small/medium enterprise’s staff responsible for credit sales/debtors will assist an individual business to play its part in reducing Australian small/medium enterprise’s debtors’ days outstanding “from being the worst in the world.  Described by Australian Government’s Small/Medium Enterprise Ombudsman, Kate Carnell as being the “SILENT KILLER OF MODERN BUSINESS“. (Australian Financial Review article)

Debtors’ Days Outstanding “Silent Killer of Modern Business”

Australia is lagging the rest of the world in terms of late payments described as the “silent killer of modern business” by the Australian government’s Small Business Ombudsman, Kate Carnell late last year. (Australian Financial Review Article)

An international study of 30,000 invoices from 80 countries undertaken by UK-based “Market Invoice” found that Australian businesses were being paid 26.4 days later than the traditional payment period, far later than the next latest country, Mexico with 18.6 days or South Africa with 16.5 days late.

Based on the traditional 30-day payment terms, this means that Australian small businesses are being paid on an average of 56.4 days.

Ms Carnell said that “In Australia more and more small businesses are falling victim to the unscrupulous payment practices of some big businesses – and even government departments – that are quite frankly a drag on productivity”.

Do You Have a Strategy for 2017?

Whilst compliance work is still important, it’s no longer the only “game” for accountants/advisors!

The key 2017 challenge for accountants and advisors is “responding to client requirements for accountants/advisors to provide ‘additional commercial services’ “.

Accountants/advisors need to be adding value to clients by providing commercial services which assist the CEO/owner of a small/medium enterprise to operate their business with reliable current information from their key advisor so they can make informed decisions and add value to their businesses.

Resolutions for 2017

I’d like to take this opportunity of wishing you, your colleagues and your families a very Happy Christmas and I hope that 2017 will be very prosperous for you and your business.

Over the last six months the team at ESS BIZTOOLS has brought you comments on a wide range of business issues that, we believe, are important for accountants to think about as you plan the services for your clients.  As part of that planning, I would urge you to take into consideration feedback from the small/medium enterprise community as to the services that they require.  There have been a number of surveys conducted over recent years by CCH, MYOB, Smithink, universities and other organisations that have all indicated that small/medium enterprises want additional commercial services.