Predictive Accounting: a "must have" for every client

ESS BIZTOOLS - New Subscriber Benefit

For a limited time, all upfront annual payments will receive an additional three (3) months subscription to their package. That’s a total of 15 months subscription for a price of 12 months!

As an added bonus, ESS BIZTOOLS is offering you a complimentary holiday accommodation package.

You can enjoy a 4-day/3-night stay in a wide range of idyllic destinations throughout Australia. Simply subscribe to one of our packages (paid 12 months upfront or in 4 equal monthly instalments) to claim.

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All upfront annual payments for Starter Package will receive two (2) holiday accommodation packages.

All upfront annual payments for Advanced Package and Financial Forecasting Package will receive four (4) holiday accommodation packages.

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Accounting News

Value of Export Market grants declines again

The value of Export Market Development Grants has declined again against the legislated cap as Austrade begins offering grant agreements under Round Two.

Under changes introduced under the Coalition, the previous non-competitive Export Market Development Grants (EMDG) reimbursement program was replaced with a traditional grants program. The requirement that firms be ‘export ready’ was also scrapped, significantly increasing the number of applicants, but diminishing the size of grants.

Separated into four funding streams, the grant amounts for round two fall well below the legislated cap and represents an average drop of 32 per cent, across all streams, compared to Round One.

CLICK HERE to read more from Innovation Australia.

ATO collectable debt balloons to $45bn, small business on hit list

The tax office annual report says pandemic measures are responsible for a huge increase in non-disputed debt.

Non-disputed tax debt has ballooned out to almost $45 billion over three years with two-thirds owed by small business and the ATO’s collection effort going backwards, its 2021-22 annual report reveals.

The report, released yesterday, shows small business was responsible for the lion’s share of collectable debt at $29.3 billion on 30 June 2022 and it remains “a key focus of our payment strategies”, the ATO said.

Second in the debt league table were privately owned and wealthy groups, which had racked up $8.9 billion in non-disputed debt to the end June, followed by individuals with $4.2 billion.

CLICK HERE to read more from Accountants Daily.

Taxation Office Director Penalty Notices (DPN)

By Colin Tabell – Tax Negotiators

There are two types of Director Penalty Notices (DPN).

The first is a traditional notice where the director receives a warning. This is advice to act to cease further action by the ATO.

The second type of notice has a locked and/or unlocked amount. A locked amount is an automatic personal liability notice to be paid in full. While an unlocked amount offers an opportunity for your client to negotiate a partial payment plan by the company. They then have 21 days to act to avoid liability on to them personally.

We can help navigate the process if a client has received a DPN.

How can you assist your clients not to receive a DPN?

1. Review their client account with the ATO to understand the value outstanding.

2. Analyse a potential payment plan if possible.

3. Consider using the Small Business Restructure Process to reduce total amount due.

We work for you and the Director. Our aim is to look at ways to protect the assets and preserve their wealth whilst achieving the best possible outcome.

If this applies to you, please contact the team at Tax Negotiators by email – help@taxnegotiators.net.au – or phone 1300 277 148. You can also contact Colin Tabell via LinkedIn.

Average cyber crime costs a small business $40k

With an online threat every seven minutes, attacks are up 13 per cent and Australia has become a favourite target.

Each cyber crime costs a small business $40,000 on average and the number of attacks leapt 13 per cent last year to the equivalent of one every seven minutes, the Australian Cyber Security Centre reveals in its 2021-22 report.

Australia was a gold mine for cyber criminals it said, with the highest median adult wealth in the world, and while “destructive” ransomware had stolen the headlines recently more prosaic threats such as fraud and online banking scams were much more common.

“Australia’s prosperity is attractive to cybercriminals,” the report said, highlighting the increase in documented attacks to 76,000 during 2021-22.

“Ransomware groups have further evolved their business model, seeking to maximise their impact by targeting the reputation of Australian organisations.

CLICK HERE to read more from Accountants Daily.

Talent drought fuels race to find offshore accountants

Australian firms already employ hundreds of tax professionals in the Philippines and demand is booming, says outsourcing specialist Cloudstaff.

Accounting has become a boom sector for outsourcing agencies and the trend will only accelerate even with increases in skilled migration, according to one offshoring specialist.

Australian company Cloudstaff said the Philippines was a huge talent pool for accounting with 750 staff already on its books filling two-dozen different tax professional roles.

“Thirty per cent of accounting firms using outsourcing to some degree,” vice-president of Cloudstaff Chris McDonald said. “Of them, we know that 70 per cent are looking to do more.”

“I think the growth rates for accounting firms taking up outsourced solutions will accelerate. With the unemployment rate as it is, they’re naturally having to look overseas. So it’s only going to grow.”

CLICK HERE to read more from Accountants Daily.

All must probe and plug digital data defences

All levels of Australian government and companies now need to move quickly to find the weaknesses clearly afflicting digital data handling and fix them. No one is far off from the purgatory that Optus and Medibank have endured in the past weeks after criminals pillaged their databases of everything from passport numbers to sensitive medical records. Woolworths MyDeal, and wine seller Vinomofo have also had large numbers of customer data pilfered this month too.

Harvesting customer data is not just a business model for everyone from tech giants to supermarkets, but a dynamic new source of economic growth. The risks of failing to keep that information secure – and the potential damage done to millions of customers’ lives from identity theft or extortion – is also a massive operational vulnerability and an unprecedented political, legal, and reputational liability. Think of angry politicians, a fuming public, class actions and legal perdition. All companies now have to assume that they are going to be hit, even if it’s just a ransomware attack on their own operations. So, what do they do next?

CLICK HERE to read more from Australian Financial Review.

Help on hand for flood-hit small businesses

It can be tricky navigating the support schemes and assistance available, but the Small Business Debt Helpline has advisers at the ready.

Many people are overwhelmed by their situation and “financially and emotionally drained” by the time they call, says Helen Davis of the Small Business Debt Helpline.

The operation helps businesses with fewer than 100 employees struggling in the wake of natural disasters and has financial counsellors on hand to run through the range of available support and offer advice.

“We were established following the horrendous bush fires during the summer of 2019–20, and we very quickly evolved to supporting small businesses impacted by a range of disasters,” said Ms Davis, who is general manager of the helpline, on CPA Australia’s latest podcast.

“We’ve seen businesses impacted by COVID, floods, storms, drought, and mice plagues.”

CLICK HERE to read more from Accountants Daily.

ASIC’s top 10 ways to sniff out fraud before it’s too late

Cryptocurrency scams cost a record $701 million last year and is rising fast, says the regulator.

If your online romantic partner is asking for financial favours, or that celebrity ad fails the sniff test, you might be looking at a crypto scam in the making.

And if you fell victim to the con, you might be one of those who lost a record $701 million to fraudsters last year — a 135 per cent increase on the previous year.

The ACCC’s Scamwatch said its reports showed the two highest loss categories were investment scams, at $293 million, and dating and romance scams at $29 million.

The two cons are highlighted in ASIC’s ‘Top 10 ways to spot a scam’, released this week as part of its campaign to raise alertness to online fraud as part of the ACCC’s Scam Awareness Week.

CLICK HERE to read more from Accountants Daily.

Work/life balance, skills shortages main practice challenges

Accountants need to embrace technology and empower existing staff to overcome current obstacles, survey finds.

Managing a work/life balance as well as attracting and retaining competent staff are the main challenges accounting firms need to overcome, according to a survey by Wolters Kluwer. 

The use of hybrid working was one strategy that could be used to overcome both challenges, the report said.

The Wolters Kluwer Tax Season Challenges Survey found the size of the firm influenced the response. Those with fewer than 50 staff said work/life balance was the most pressing issue, at 59 per cent, while larger businesses listed attracting and retaining talent as their most notable challenge at 77 per cent.

“In 2023, it’s time to focus on improving work life balance which is critical to retaining good talent amidst the current talent shortage,” said Rakesh Naidu, head of product at Wolters Kluwer tax and accounting APAC.

CLICK HERE to read more from Accountants Daily.

Scam losses could hit $4 billion, ACCC warns

With attacks up 90 per cent, small businesses are urged to recognise fraudulent schemes.

Scam losses could double to $4 billion this year, the ACCC has warned as it joins forces with the ATO to raise alert levels for online cons in Scams Awareness Week. 

The ACCC’s Scamwatch said its reports, which capture just part of the overall activity, were already up 90 per cent as of September this year with over 166,000 incidents and $424.8 million in losses.

It said in 2021 Australians filed more than 286,600 reports with Scamwatch, detailing losses totalling $324 million, which along with reports from a dozen other organisations added up to $2 billion in losses.

The ACCC will set up a national anti-scam centre with $10 million in government funding announced in the recent budget.

CLICK HERE to read more from Accountants Daily.

Predictive Accounting: a “must have” for every client

By Peter Towers – ESS BIZTOOLS

Predictive Accounting has become the latest buzzword of our industry, yet not enough people know what it is and how it can be used.

The detailed reports that flow from Predictive Accounting offer unique opportunities for accountants, like yourself, to use your skills, knowledge and software to help your SME clients prosper.

By properly analysing predictive accounting reports, you can interpret your client’s vision for raw material acquisition or product acquisition, labour needs, production, completed stock , marketing, sales, debtors, creditors terms and payments. Adding further value, these reports will help you prepare individual business unit budgets, cash flow forecasts and projected balance sheets.

Armed with all this data, you can then become the client’s “Financial Storyteller”. You can take their corporate vision and break it down into a series of financial reports which identifies a path for the business and its leadership team to follow to achieve that vision.

From your client’s perspective, this is the most important role that you, as an accountant, can play in the way you work with their business.

That’s why I support the concept proposed by US accountant Adam Hale. Adam believes that undertaking the “Predictive Accounting” role should be a compulsory service for every business client.

These forecasts produced from Predictive Accounting are serious stuff.

When proposing Predictive Accounting to potential SME clients, you should be emphasising the need to prepare:

• budgets,
• cash flow forecast with the key drivers, and
• projected balance sheet for 5 years with an annual review

You really need to let them know from the outset that Predictive Accounting is a compulsory service that your firm will provide as part of being their accountants, and you should be prepared not to accept their business if they don’t agree.

The preparation of your client’s budgets, key drivers, cash flow forecasts and projected balance sheets will allow your accounting team to gain an in-depth understanding of how your client’s business operates.  

According to Adam Hale, the aim should be to have an understanding of your client’s business affairs that is “1 inch wide and 1 mile deep”. You will be well on the way to acquiring that intimate knowledge when your team undertakes the in-depth “business of business” review. This process involves meeting face to face with the client’s leadership team to discuss the vision on which you’ll base the business plan and Predictive Accounting process.

From the client’s point of view, they’ll end up with a document giving them a series of targets to be met throughout the year. This makes a lot of sense because the weekly performance reviews and monthly financial accounts have a direct link to targets that the leadership team helped to develop.

One of your most important functions is to supply information that’s easily understood by the leadership team and gives them periodic reports, so they can review actual performance against those targets that were set in the budget process.

Aside from weekly performance reports and monthly financial accounts, there is a range of other tasks that you can perform during the year to help your client operate at an optimum level.

These include: 

• Debtors Review – Is the Debtors Days Outstanding improving?
• Work-in-Progress Analysis – Are invoices being raised regularly? Do any jobs appear to have been left in work-in-progress for an extensive time?
• Creditors Analysis – Are payments being made in accordance with supplier’s terms? If not, could this cause problems if supply is cut off?
• Cash Flow Position – Does the business need additional funding? Where would this be obtained? Does the business have assets that could be offered as security? Is the leadership team interested in trying to raise shareholder capital? Which private company capital raising opportunity is this client eligible for?
• Charge Out Rates – As a manufacturer or a tradie business, does the client need to review the charge out rates being used? Have these charge out rates being based on appropriate productivity percentages, team member working hours, external purchases for their clients, mark-ups on external purchases, business overhead expenses? Will the targeted profit in the budget be achieved? Is there a need to adjust the charge out rates being used?
• Business System Documentation – Does the system need to be reviewed to ensure it’s up-to-date? Is training needed to ensure the client’s team members are familiar with the system documentation?
• Business Valuation – Does the client’s business need to be revalued?

As part of the Predictive Accounting process, your client’s business operations should be revalued by you annually, based on its current performance.

In preparing the annual valuation, you need to take into account the improvements that have been made to the client’s systems. This will help you determine the level of the multiplier that you use in the valuation process. Your report should note that the change in the multiplier you’ve used reflects the improvements that the client has made in their business processes – hence, the higher valuation.

Predictive Accounting is the foundation for an effective internal financial system for your SME clients. 

You already prepare financial accounts for each business client, comprising profit and loss and balance sheet as if it were a “compulsory process”. So Predictive Accounting reports of budgets, key drivers, cash flow forecasts and projected balance sheets should actually become a “compulsory service” supplied by your firm. Your SME clients may not know it yet, but Predictive Accounting is destined to become a key driver for future business prosperity.

The ESS BIZTOOLS Advanced Product Package includes the product packages that you will need so you can offer an effective Business Advisory Service/ Virtual CFO Service for your clients.

A complimentary webinar on our Advanced Product Package is being presented on Thursday 17 November at 11:30 AM AEST/12:30 PM AEDT. Click here to register your attendance.

If you have any questions please don’t hesitate to contact us to arrange a discussion – please ring on 1800 232 088.

PlanGuru – assisting accountants to be the “financial storyteller”

By Paul Barnaby FCA – PlanGuru

PlanGuru was founded by Ed Wielage, a US accountant and visionary, when it comes to IT products that help accountants, business owners and CFOs, both virtual and permanently employed.

Back in the 1980s and 1990s, Ed had a company called Cogent Technologies and they developed and sold a product called Workpapers Plus. This allowed auditors and accountants to enter data into workpapers (on a laptop when they were first available), which would automatically populate ledger applications when the user was later “back in the office”.

Cogent Technologies was as widely known and regarded in the USA, as Solution 6 was here in Australia and New Zealand.

Following the sale of Cogent, Ed developed a budgeting tool, as he envisioned that this would have a use in the accounting profession and SME managers who were tired of the inability of other products, such as Excel, to deliver the outcome which was not only error prone, but just unable to deliver the 3-way budget or forecast. This led to the formation of PlanGuru LLC, with its CEO Christian, Ed’s son.

In 2013, respected advisor to the accounting industry reached agreement with PlanGuru to supply local support and installation assistance in Australia and New Zealand.

In 2022 at present, PlanGuru has thousands of users in the US, and is endorsed by the top firms offering business advisory services. PlanGuru is also sold – and has local support – in UK and Europe, as well as Australia and New Zealand.

Holiday Accommodation Package Competition

We would like to congratulate Tony Condon of Townsville Tax Services for winning the Holiday Accommodation Package prize. We hope you enjoy your well-deserved holiday!

There’s still time to enter our next holiday accommodation package giveaway. For a chance to win the competition, CLICK HERE to enter.

The winner will be drawn on Wednesday 16th November 2022 at 9.30am AEST/10.30am AEDT. Good luck!

Grants Update

There are number of grants for which your SME clients might be eligible.

Want to know what they are? Click here for a list of current grants, prepared by ESS BIZTOOLS.

ESS BIZTOOLS - Feature Product Package

This week’s feature product package is the Advanced Package.

The ESS BIZTOOLS’ Advanced Package includes everything within the Starter Package – plus Publishing Rights and subscription to ESS BIZGRANTS.

Click here to find out more about this package.

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Free Webinars

ESS BIZTOOLS Advanced Package – Thursday 17th November 2022 at 11.30am AEST (12.30pm AEDT)

Previous Webinars

Want to know more?

Visit www.essbiztools.com.au. You are also welcome to visit www.essbizgrants.com.au, a website that can assist in the identification of government grant(s) suitable for your clients.

If you would like to have a discussion about how this concept of virtual CFO services can be supplied by Australian accounting firms please ring our Managing Director, Peter Towers, on 1800 232 088 and we will arrange a complimentary 15-minute Zoom meeting to discuss your firm’s position and to give you our advice.

We believe that this is the blueprint for the delivery of an enhanced range of services by Australian accounting firms to assist SME businesses to add value to their businesses and to assist accountants not only to attract but to retain outstanding talent who want to be involved in the delivery of “real accounting services”.

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