How Can You Double Your Profit In 30 Days? (3 Questions For Your Accountant)

finance profit Oct 01, 2018

You’ve just arrived at your accountant’s office to go over your year-end company accounts and tax return with him. It’s now 6-7 months after the year end and the 9-month deadline for filing at Companies House is fast approaching so you need to get them signed and sorted.

 

Your accountant is your Trusted Advisor, knows a fair bit about your business and as a qualified finance professional should be adding significant value to you.

 

What are the questions you should ask him, that will make the most of the fees you are paying ?

 

A less experienced business owner normally has 3 questions in mind:

 

  1. How much profit have I made this year ?
  2. How much tax do I need to pay ?
  3. How much do I need to pay you this for working this all out for me ?

 

How about you ? What are the questions you ask ?

 

At face value these questions look fine, don’t they ? Well no, not really. Taking each in turn, here’s why.

How much profit have I made this year?

This is fundamentally one of the most important questions in business. The problem here is that you need to ask it and you don’t know the answer already. Waiting until 6 months or more after the year end is no time to find this out. Some of the transactions are from 18 months ago ! It sounds surprising but many businesses who come to me for advice do not have a clear idea of how much profit they made last month. At best this means you make a lot less money than you could. At worst you may be bust without even knowing it.

 

How much tax do I need to pay?

Corporation Tax on a Ltd Company needs to be paid 9 months after the year end. Tax is paid under Self Assessment for sole traders and partnerships. Again, this is too late. Anyone been shocked by an big unexpected tax bill a few months before it needs to be paid ? Roller coaster rides are fun at the fairground, not when your livelihood depends on it. Best practice is to recognise a tax provision each month in your management accounts, and recognise when it needs paying in your cash flow forecast. As I’ve always said to my daughters, no surprises !

 

How much do I need to pay you this for working this all out for me?

Nobody likes large bills without prior approval. Get your accountant on a monthly fixed fee agreement and spread the cost over the year.

 

Okay, I see the problems, what questions should I ask ?

Question 1 - How can I pay more tax ?

Yep, you read that right! For a business to survive, thrive and provide a life of choice for its owners, the fundamental requirement of any business is to make a profit. Industry research indicates that only 40% of small businesses make a profit. Little wonder that only 5% of small businesses survive more than 5 years!

 

Source: http://smallbiztrends.com/

 

Of the businesses which do make a profit, I suspect that many don’t make that much, and certainly not as much as they could.

 

The level of profit you make is a key driver of how much tax you pay (unless of course you are a large Google or Starbucks with a head office in Ireland, in which case normal rules don’t apply). What a good accountant should be telling you is how to increase your profit.

 

The key organising principle in our business when working with clients is:

How can we help you “Double Your Profits In 12 Months…Or Less”Ó?  

One of the first things we do with new clients is analyse their financial statements and develop a Double Your Profit PlanÓ. We then track performance against that each month. In our view this is the key thing a finance professional should be doing with you.

 

Of course, once you have that plan, your accountant should help you to minimise the tax burden as a % of those increased profits.

Question 2 – Are you a Bean Counter or Business ArchitectÓ?

Okay, asking that in person that may be a bit blunt. However, if you’re serious about cranking the profit in your business, you need to know the answer to that question. The fact is you need both skills for your business. Most accountants are bean counters by definition. They’re good with technical rules, numbers, analysis and presenting information. That is critical to your business to make sure you’re making good profits, minimising tax and controlling risk.

 

Finding a Business Architect© however, is a different matter. A Business Architect© is someone with Chief Financial Officer (CFO) or Finance Director (FD) skills who can help you take your business to the next level. They’ll help you scale from hundreds of £thousands to £millions and multiples thereof.

 

Serial entrepreneur and Venture Capitalist, Amy Errett says it well.

"A great CFO is an integral part of creating a world-class management team that can make or break a business. Finding exactly the right person is a difficult task and requires a CEO's ability to understand the most important skills you are looking for in recruiting for this critical role."

You’re looking for someone who can catch the vision of where you want to take the business, and then help you and your team flesh that out into a practical plan and proper financial forecasts. They’ll help you get buy in from your team and investors. They’ll help manage risk. Most importantly they’ll help you deliver the plan by monitoring progress on a monthly basis and make clear the decisions which need to be made to keep on track.

 

These kind of skills are rarely to be found in the same person or firm who have the skills to do your Company accounts and tax return. These skills can be sourced on a pay as you go part time basis if you don’t need them full time.

Question 3 – How can you make me more money ?

A good accounting firm have a wealth of both technical and tax expertise but also have access to other services which might save you a lot of money. However they are very busy people and may not have the time to think about these things. They are also often terrible at marketing the full range of services they provide so you may not be aware of some of these. A good open ended question is a great place to start.

 

More specific areas you might want to ask them about include:

  • Tax planning – what opportunities might there be for them to save you tax, both in your business and personally including:
    • R&D tax credits
    • Capital Allowances
    • Auto enrolment
  • Profit improvement
  • Cashflow improvement
  • Grants and other sources of finance
  • Cloud accounting
  • Monthly management accounts
  • Outsourced accounting
  • Systems integration

 

Any of these services could have a major impact on your business.

So, those are my questions. What about yours ?

If you’d like to have a chat about any of those questions, or if you have better ones, please do contact me on [email protected].

 

I hope these help you get more out of your Trusted Advisors !

Ready to start planning for profit?

Complete our free Profit and Cashflow Scorecard to see where you are today and what steps you can start to take to get your business where you want it.

COMPLETE THE SCORECARD
Close

50% Complete

Where should I send Your Report?