Asking smart questions of your accountant about tax, your budget and how to best manage your business can seem overwhelming.
We are a huge advocate for asking any question, especially the “dumb question” because when it comes to understanding your business, they are all important.
In Australia we often assume that because we run a business, we also understand the finances behind it. Yet, this is not often the case. Business finance is complicated and while it is not as publicised as personal financial literacy, the Institute of Public Accountants has been advocating for Federal Government funding for financial literacy courses for small business owners. Tax time, the end of June every year, is an excellent time to take a step out of the day to day running of your company and look at your budget, tax and general business issues.
This is why we’ve put together this short list of topics to talk to your accountant about.
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Is my current business structure suitable?
Depending on when you started your business, you will need to regularly review to see if it continues to be the right one for you. In Australia, most businesses are either a sole trader, partnership or a company. Many businesses start out as a sole trader owned and operated by a single person. If this is you, you’ll need to review if you are looking at raising capital, co-ownership, global expansion or if your company profits are too high (not the worst problem to have!). Likewise a partnership structure may need to change if you are likewise looking at capital raising or international expansion.
A quick note that all structures allow for hiring staff so that’s not a reason alone to change.
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What drives my revenue?
This is an important topic to break down with your accountant, even if you think it is straightforward. Even basic business models like consulting need to be aware of potential risks, this can include over-reliance on one client or group of clients, or under-valuing of your time.
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What was my break even point for this financial year?
Depending on your expenses and revenue, a break even point is not always easy to identify, particularly for more complex business models, or with large teams. However, this is an essential point of reference for your business decision making.
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What targets can I set for my business?
Once you understand your break even point, you can work towards the future. Your accountant will be able to help you set targets for the 12 months ahead. In conjunction with a good financial model of your business, these targets can help guide your business growth while keeping track of your fundamentals.
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Are my financial results good, bad or neutral?
Operating in isolation means we aren’t always able to tell how our business is doing. Especially if our main reference is similar companies in the news. Your accountant will be able to give you a broader perspective. Are you doing well in the current market? Should you be more profitable for your revenue base or are you lagging behind? This valuable insight could help you identify strengths and weaknesses in your business.
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What are my biggest liabilities and risks?
As we recover from a pandemic, it is important to keep a check on ongoing risks and liabilities and realise there will always be the unexpected.
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How much tax will my business expect to pay this year?
This is a simple and important question to ask your accountant.
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What tax changes will affect me this financial year?
Although tax doesn’t drastically change year to year, there will often be changes that affect SMEs (especially in election years). Ask your accountant what affects you this year, and if there are any upcoming changes. Although doing anything for tax purposes alone is generally not advised, knowing what you can claim can help if you are making large purchases.
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Do I have enough cash reserves?
Having up to 6 months operating cash in reserve is an ideal situation for any business. However, talking to your accountant about what is suitable for your business at its current stage is a smart idea. They will also be able to let you know how much cash you really have.
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How can I grow my business?
You probably have ideas about how to grow your business over the coming years, but information from your accountant on how and when to tackle this can be fundamental to success. We also have clients who rely on smart financial modelling to direct their growth.
Opening up a conversation with your accountant is an important step for any business owner. Even asking one or two of these questions could help you see your own business in a new light.
We hope this article provided you some insights to better understand your business needs. If you have any questions, we’d love to answer them. Contact us today!
