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Why Your Accountant Needs to Understand Your Business

Understanding what a business ‘really’ does

From the very start of running an accountancy practice I understood the importance of really understanding a client’s business, not just what sector they operate in but what they actually do on a day to day, week by week, monthly basis.

Knowing that your business is in construction or manufacturing or professional services is not enough.

 

Better communication

Just asking ‘how are things’ isn’t enough.

A great accountant will dig a little deeper, ask about enquiries, orders, workload, resources, new clients, new team members, new product lines, new services, new software, new equipment, the list is endless.

Only by asking more detailed questions can an accountant really start to add value to a business.

 

Why an accountant needs to know what you do

The importance of this became clear to me early on in my career. After qualifying as an accountant in a traditional accountancy practice I left (swearing never to return!) to work in industry.

It was over the next 15 years that I really got to see how important it was for a business to have an accountant who really understood their business.

 

Get involved in the business

I was fortunate to work with some business owners, managing directors and finance directors who positively encouraged me to get involved with the business. Some insisted on it!

By understanding what goes on in a business; the sales, marketing, production, operations, administration, HR, and accounts departments, you understand the significance and vital roles that they all play.

An accountant who has this understanding can then explain to non-finance business owners and managers the financial impact of decisions they make and actions they take.

 

Cheap stock boosts profits but ties up cash

That large financial outlay to buy stock at a very cheap price may sound great for business profitability, but not if it drains the business of cash for several months until that stock is converted into sales and then cash. If you keep in regular contact with your accountant and discuss your business they can point out this type of issue.

 

A boost to turnover but a drain on profits and cash flow

That new big contract may sound great and boost business turnover, but how profitable is it really and what impact will the 90-day payment terms have on business cash flow.

This is where a business savvy accountant can really add value to a business.

 

Tax savings

An accountant who understands your business can also save you tax. If your accountant doesn’t understand what your business does on a day to day basis, the nature of your work processes, procurement, billing and cash collection, then they can’t provide you with the support and advice you really need.

Where you have more than one trading company it’s important to understand the activities and relationships of all companies.

 

Research and Development Tax Credits

R&D tax credits are not claimed by enough businesses. Too many business owners don’t realise they could qualify.

Too many accountants miss opportunities because they don’t understand their client’s businesses well enough. By getting a better understanding an accountant can spot opportunities for claiming R&D tax credits.

 

If you would like to speak to an accountant who will take the time to understand you, your business and work closely with you to get better results, please get in touch.