Avoid Overpaying Accounting Fees

Business, Journal,  Principals

It’s that time of the year again: Close off your books. Package up your records. And have your accountant crunch the numbers. But when it comes to costs, how much is too much?

I often hear people complaining about their accounting fees come tax time and I can understand why. It’s difficult for an accountant to demonstrate the value of their work when all the client would see is the end product – pages of numbers and some nebulous instructions about how much tax they have to pay or how much of a refund they would receive. No wonder it’s dubbed a ‘grudge purchase’ by many.

The reality is the visible end product is only the tip of the iceberg in terms of ‘deliverable’ value. The real value is in the accountant’s work paper file – a collection of work papers that support all the figures in the financial statements, which are then carried forward into your tax returns. If you’re “lucky” enough to get audited by the tax office, the work papers would be your first line of defence. A high quality set of work papers would not only save you time and money, but also the mental and emotional angst that comes with being audited.

In many ways, the value of what a tax accountant delivers is similar to that of an insurance policy – the peace of mind from knowing that if something happens, you’re covered. Having said that, there are many things you can do to minimise your accounting fees. After all, most accountants still calculate their charges by the time spent doing the work. That means the more you can do, the lower be the cost. Here are some insider’s tips on how you can effectively achieve this:

1. Engage a qualified specialist accountant: Accountants aren’t made equal and virtually anyone can call themselves an accountant in Australia. Just because someone has an accounting degree, doesn’t necessarily mean they’re well equipped in undertaking your annual tax work. In my opinion, always look for a qualified Chartered Accountant (CA), Certified Practising Accountant (CPA), and/or Certified Tax Advisor (CTA). Accountants with these designations have sat through stringent and gruelling post-graduate exams to gain their qualification and comply with continuing professional education to maintain their membership. If in doubt, you can confirm the professional designation and membership with the relevant professional body. Further, look for an accountant who specialises in the area in which you operate. For instance, for a real estate agency, it’s worthwhile looking for an accountant who specialises in property.

2. Go digital: Gone are the days when tax accountants would happily accept shoe boxes full of dockets and receipts. While you may still inflict this on your accountant, you will most certainly be paying for it. User-friendly accounting programs for small to medium enterprises (SMEs) like Xero and MYOB are affordable and reasonably easy to use. The subscription fees you pay will also be tax-deductible.

3. Use a bookkeeper: If the thought of keeping a set of books gives you hives, rather than giving your accountant all the source documents, consider hiring a bookkeeper to do that task at a fraction of the cost. Depending on the size of your business and volume of annual transactions, you don’t always need monthly bookkeeping service. Many smaller SMEs only need quarterly bookkeeping service to coincide with the lodgement of their quarterly Business Activity Statements (BASs)…and yes, most bookkeepers would prepare and lodge your BASs for you as well. Using an accountant to do bookkeeping (unless they have a dedicated bookkeeping service on offer) is like going to a specialist for your annual general health check – they can do it but you’ll be paying for it unnecessarily.

4. Cut the meeting: Once you use the same accountant for a couple of years, they become familiar with your affairs and probably don’t need to meet with you before they start your tax work for the year, unless there have been material changes in your business or affairs (e.g, you sold the business) during the year. Contrary to some people’s beliefs, briefing the accountant on a business they’re familiar with that hasn’t materially changed seldom improves efficiency in getting the work done. Instead of meeting with your accountant, consider the next point.

5. Ask for a checklist: Ask your accountant to provide a checklist of the things they need to get the work done. This includes things like the last page of the bank statement with the account balance at 30 June, loan statements for the year, invoices for depreciating assets etc. Better still, provide the information in electronic format. Software like Xero has functionalities for you to insert everything to the file. Therefore, if you or your bookkeeper progressively attach these source documents into the file throughout the year, you’d blitz through the checklist without the annual drama of hunting for bits of paper sitting in your glove box.

6. Check that all key accounts have been reconciled: As part of the checklist, your accountant would normally ask you to check that a number of key account balances have been reconciled, which include bank accounts, loan accounts, debtors (receivables), creditors (payables), and payroll. Having these account balances fully reconciled signals to your accountant that your books have been maintained accurately and completely. One of the biggest time wasters for accountants, which translate to higher fees, is to reconcile accounts that don’t reconcile because it’s always difficult to find what someone else has done wrong during the year. Your bookkeeper would be doing this as part of preparing the BASs for the business, so it should be nice and clean by the time your accountant enters the picture.

7. Refrain from a piecemeal approach: After going through your accounts, your accountant would usually give you a list of queries to enable them to complete their work. Where possible, try to give them all your answers at once, rather than in a piecemeal fashion. Prolonged to and fro adds re-familiarisation time on the file, so the more streamlined the process, the more cost efficient the job is. Ideally, an efficient process should involve the accountant reviewing everything provided upfront, you answering any queries all at once, and the accountant finalising the job. Any extra correspondence due to incomplete or inaccurate information provided adds extra costs. If it’s your accountant whose approach is piecemeal, it may be worthwhile to discuss this with them to ensure both parties are being as efficient as possible.

8. Ask for an indicative fee quote: While it may be difficult for the accountant to provide a close estimate of the fees to do your annual tax work when you first engage them. However, it should be reasonably easy to estimate once they’ve done the work and know the extent of what’s involved. There’s nothing wrong with asking for an indicative fee quote. Chances are your accountant is already working to a fee budget behind the scenes, so it wouldn’t be difficult to share that information with you. Naturally, if you need your accountant to do something that’s not ‘out of the box’, e.g. specific tax advice if you’re admitting a new business partner, it may be less straightforward for an estimate. Even so, it’s reasonable to agree on an indicative but non-binding ballpark to ensure your fee expectations are agreed upfront and throughout the job to save you from getting a nasty bill shock at the end.

9. Build a long-term relationship: By far the best way of working with your accountant is to build a long-term relationship where they’re like your business partner rather than an annual service provider. This type of relationship enables your accountant to provide you with proactive and holistic advice because they understand your affairs well. A strong long-term relationship also enables your accountant to provide you with end-to-end advice seamlessly, from starting your business, optimising the tax payable by your family, to providing you with succession and estate planning advice. A good accountant stays with the family for generations. Naturally, your accountant would retire one day but an ongoing relationship enables them to tee your children up with the next generation of accountants going through the accounting firm, providing an organic and effective transition between generations.

In summary, while accountants can charge more if there are inefficiencies in the way their services are delivered (just as you see annual tax work as a ‘grudge purchase’), reconciling your accounts is ‘grudge work’ for many accountants. Most would rather spend time charging you for work that we know would deliver real value to you like analysing your business’ performance and providing you with advice on how to achieve your financial goals. Optimising the annual tax work process is ultimately a win-win for both parties involved.


Important disclaimer: No person should rely on the contents of this article without first obtaining advice from a qualified professional person. This article is provided on the terms and understanding that the author and BDO Services Pty Ltd are not responsible for the results of any actions taken on the basis of information in this article, nor for any error in or omission from this article. The article is provided for general information only and the author and BDO Services Pty Ltd are not engaged to render professional advice or services through this article. The author and BDO Services Pty Ltd expressly disclaim all and any liability and responsibility to any person in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this article.