Save on accounting bills
Come and listen to a “story about a man named Jed”. Okay his real name isn’t Jed but I bet some of you are now incredibly angry because the theme song to ‘Beverly-Hillbillies’ is stuck in your head, on repeat. However, if you’ll allow me, I’m going to stick with the name Jed because client confidentiality means I have to be incredibly careful.
But back to the story. Jed is notorious in our office for throwing a king-sized wobbly when he received our annual accountancy bill. It’s fair to say he well and truly flung his toys out of the pram and left in a huff, determined to save money by having his brother take over. Being a corporate accountant, his brother wasn’t a specialist in tax and did silly things like searching the internet, instead of tax legislation and case law, to justify claiming Jed’s daily takeout coffees as “liquid capital”. Eventually Jed’s shareholder loan became overdrawn, GST no longer reconciled, imputation credits red-lined into debit and he was trading while insolvent (slightly illegal).
Fast forward and Jed shuffled back shame faced and begging us to take him back because he wasn’t enjoying the ugly letters the tax department had started sending him. We were hesitant to take him back for fear of his dodgy-DIY-accounting damaging our reputation. But take him back we did, and our bill to put things right was gargantuan. The IRD bill for penalties and interest was even worse because unsurprisingly his claims for caffeinated liquid capital were rejected and he had to back-pay fringe benefit tax on his shareholder loan. Even once Jed was back under our tender loving care, he received IRD audits every year for quite some time afterwards. So given Jed’s experience, what is the best way to save accounting fees? Read on for our pragmatic tips:
Reply at warp speed. If your chartered accountant asks you for something, reply immediately, Don’t leave them hanging for days because leaving them in the middle of your accounts is like stopping heart surgery half way through. They have to stop what they’re doing and stitch up your file, only to open it up again when you finally reply.
One hit. Give your accountant absolutely everything in one hit. Try not to dilly-daddle sending multiple emails and incomplete information. The more emails you send, the more your accounting fees will be.
PDF. Sending your accountant PDF files is a winner move. Sure, they can convert your phone photo’s to PDF’s but that takes time and you’ve probably guessed your mission is to minimise your accountants time.
Avoid general expenses. General expenses and office expenses are both easy targets. It’s the first places investigators look. Chances are if you don’t already have a perfect category for your claim, you shouldn’t be claiming it.
Avoid Rounding adjustments. Rounding adjustments need to be cleared and if your chartered accountant is the one stuck clearing them, at hourly rates, your bill will grow eye wateringly.
Say no to company donations. Making donations in the company name creates more work for you chartered accountant. They need to check your receipts meet every legal requirement and ensure your company profit exceeds your donations. Making donations in your personal name is smarter.
Credit card in the company name. Take a moment and double check that your business credit card is in your company name, because using a personal card in your company means mental gymnastics for your accountant and loses your claim for card interest and fees.
Upload every bill to Xero. It’s free storage (and disaster resilient) so you’d be silly not to upload every tax invoice to your Xero file. Your accountant can simply click into the invoices in micro seconds, instead of having to down tools, email you for the invoice and wait excitedly for your reply (pricey). If uploading them all is overwhelming then start by uploading invoices for fixed assets, property, domains and intangibles.
Pay from the right place. Sounds simple but so many people get this wrong. If it’s a bill for your company, pay it from the company bank account. And if it’s a bill for your Trust, pay it from the Trust bank account. Never pay from your personal bank account or (you guessed it) it creates more work for your accountant which increases your accountancy bills.
Just a couple of bank accounts, please. Any normal business only needs three accounts. An everyday account, a savings account and a company credit card. Perhaps a PayPal for foreign currency but any more and we tend to see unreconciled accounts and major bookkeeping issues.
Reduce entities. Just like having lots of cars, the more entities you have the more accountancy costs. Average mum and dads with a company for their business, another company for their intellectual property, a trust for their family home and an investment trust is just overkill. This type of structure is ridiculously expensive to run and meant for bigger fish.
Pay the IRD on time. This is a non-negotiable for most of you but some people have a relaxed approach to paying the IRD. Every time I see people paying the IRD last, I’m stunned because it puts you directly on the IRD radar. It also damages your reputation and means the IRD is unlikely to grant you a favour when we need it. The cost of IRD penalties and interest is generally the most expensive form of finance and on top of that it takes an incredible amount of extra work by your accountant to record and reconcile late paid IRD bills. Just don’t do it.
Say no to Sharesies. Smart accountants won’t act for you if you have Sharesies or crypto investments (unless you’re loaded) because the cost of administering these investments correctly is huge. Typically idots claim they’re long term investments but the IRD deems them traders with tax on every buy/sell (ouch).
Xero isn’t space-invaders. Take a tiny moment and think through every transaction you reconcile in Xero. It’s easy to click, click, click that OK button in Xero (like a game of Space-Invaders) creating a giant mess of accounting spaghetti which your accountant then has to unpick strand by strand, hour by expensive hour.
Stay solvent. Not only is it illegal to trade while insolvent but it also means extra accountancy costs so a great rule of thumb is to never take more money out of your company than you’ve put in or earned.
So now you’re in the know, are you going to accept the mission? The mission to make your accountants life easy-peasy which will keep your accounting bills down and save you from horror stories like poor Jed’s …. ‘just a poor mountain man, barely kept his family fed’ especially after the financial ramifications of his disastrous adventure into the realms of DIY accountancy. And no, we haven’t asked if he’s stopped sulking and started talking to his brother yet.