Time For Accounting Firms To Stop Charging For Outdated Annual Financials?
In the current pandemic world where SMEs must make snap decisions and pivot fast, one accounting firm is upending the local financial services industry – which it describes as too stuck in old ways – by scrapping its fees for outdated annual financial reports.
"There's no value in annual financials in a Covid-19 environment because, by the time the information is ready, it's almost useless. We cannot in good conscience justify charging fees for it," says Niran Iswar, director of BetterCo advisory and accounting firm.
"I think SMEs have been sending accountants a message for years, and we haven't listened. It's an industry-wide problem where clients wait to the last minute, or even past the deadline, to submit necessary paperwork like income statements and receipts.
"This says businesses don't value the annual statements – beyond tax filing – unless they need it to get a loan. As a result, we've decided to change the way we work, and charge, by shifting our clients to a monthly, bi-monthly or at worst, quarterly reporting regime."
Iswar says that even when it comes to applying for loans, most lenders rely on up-to-date information (thanks to real time data reporting) held by the Inland Revenue Department rather than requesting the last set of financial accounts.
"I cannot emphasise it enough. Heck, I'll even plead with SME owners – please shift to timely financial reporting. Up-to-date information, together with the right advice based on that information, is essential for surviving and prospering in 2021 and beyond.
"It's past due time to throw out the 'time-based model' of accounting in favour of a value-based model. Covid-19 and advancing technology have irrevocably changed the business environment," Iswar says.
At a minimum, SMEs should have up-to-date reports on profit and loss, the balance sheet, fixed assets registers and aged payables and receivables.
1. Forward, not backwards
To date, the accounting industry has been backwards looking rather than forwards looking, but the dynamic nature of businesses in 2021 means keeping a 'constant' hand on the tiller is essential.
"Today's business environment is like the weather. It's constantly changing – one minute sunny, the next a storm. Know where you are going and what you want to achieve, and then use timely financial reporting to respond when things change. It will keep you on track," says Iswar.
2. Be vigilant
"It's better to be able to see a cashflow hole coming rather than get caught in one," says Iswar. "Once you know what you're up against, you can take steps to fix the situation like reducing stock or diversifying your income."
3. Purpose top of mind
When you know your purpose, you can refer to it as a tool to help you make quick business decisions that will help keep you on track towards your business goal.
"By asking the question, 'Is this in alignment with our purpose?' you avoid getting waylaid. Without a purpose, you quickly fall below the line of not taking ownership or responsibility for your actions," says Iswar.
For more information: https://www.betterco.nz
Located in Newmarket, Auckland, BetterCo is a business advisory and accounting firm started to help Kiwis build better businesses and better lives.
The outcome of a merger between Cloud Accountants (established in 2009) and NexGen Accounting (started 2012), BetterCo is jointly owned by five New Zealand born business partners who work with SME businesses throughout New Zealand.
Regardless of industry type – creative, builder, beauty stylist, manufacturer, retail shop owner, bar, restaurant, investor or professional service provider – BetterCo aims to protect the business and help it thrive in any conditions.