Have two Accountants

How often have you asked your Accountant a question about a particular deduction or scenario and they look blankly back at you? If this has never happened to you, chances are you are using an Accountant who consults as much as they practice Accounting. For the rest of us, using an economical Accountant means that we can only avail ourselves of the most basic of tax deductions/concessions available to SMEs.

For example, if you're in Australia and assuming your company is structured appropriately (another benefit of an Accounting consultant), you can access the Research & Development (R&D) concession which permits you to deduct 125% of your assessable income (up to 175% for longer R&D commitments). Other countries are sure to have a similar system in place to promote R&D and innovation.

Any work you plan on doing which will cost you money (more than AU$20k in a financial year), grow your products/services, but not directly attract income is likely to fit into the R&D category. By way of example, our company turns over between AU$500k and AU$1m each year and we spend between $50k and $100k (10%) on R&D activities. Our industry sector demands this of us. Applying the concession means our company would effectively reduce the taxable income by between $62,500 and $125,000! That would make a BIG difference to our annual profits. But alas, the company structure I established that was facilitated by my Accountant prohibits me from applying for the concession. The cost to restructure so prohibitive so we are unlikely to be able to access this concession ever. If only I'd spoken to an Accounting consultant before I had setup our company structure.

Another example: I am in the process of selling one of my companies (I have a few - don't we all!). My normal Accountant basically said that he couldn't help me and that, based on the company structure, we would be paying top tax rates on the sale price and would have Capital Gains Tax (CGT) and Stamp Duty liabilities. This would have resulted in a loss of 50% of the sale revenue in fees! Going directly to my Accounting consultant and presenting all the elements of the sale, I have been able to restructure the company and restructure the sale contract which has enabled me to reduce the 50% down to 5%. Granted the consultation and subsequent report cost me AU$5k and the restructuring work another AU$5k, but the cost was well worth the benefit (1,000% ROI to be precise).

I'm not suggesting dumping your Accountant; I'm suggesting you engage another Accountant to use as a consultant. This is how I use the two:

• Business Activity Statements, general taxation correspondence, company and individual tax returns are all handled by my standard Accountant.
• Change of company details for the Tax Office are handled by my standard Accountant.
• Questions about available tax deductions/concessions I direct to our Accounting consultant.
• Questions about the best company structure given a particular industry, particular Director's situations and particular exit strategy I direct to our Accounting consultant.
• Questions about structuring for sale or managing a sale, I direct to our Accounting consultant.

It is quite likely that, your Accounting consultant will be able to work with your standard Accountant to minimise costs for you (this is how my Accountants operate). The Accounting consultant will also be a Chartered Accountant so could theoretically implement all of the recommendations they suggest for you. However, their standard Accounting rate is likely to be much higher than your standard Accountant's rate. Therefore, they will generally be happy to guide your standard Accountant to implement their recommended changes. They'll know what should and shouldn't be outsourced to your standard Accountant but feel free to ask them about the Pros and Cons regarding any particular change they recommend.

Track all contacts with customers and suppliers

The purpose of this system is to keep a record of your contacts/experiences with each customer/supplier. Use a diary, Word document, Excel spreadsheet, database, I don't mind... just make sure it's easy for you to use and easy to review afterwards.

Tracking your suppliers

Anytime you call or visit them or engage their services, make a dated note of their performance. Nothing to advanced, just private notes to yourself such as "excellent and prompt advice", "avoid Julie, she's rude and grumpy", "never have a stock of those pens I like" or "really not very knowledgeable about tax minimisation strategies".

Tracking your customers

Anytime you call or visit them or they buy a product or engage your services, make a dated note of what was provided and how the transaction progressed. Nothing to advanced, just private notes to yourself such as "easy sale", "slow accounts department", "although they bought product X, these guys are probably better suited to product Y" or "would be a perfect customer for Y if we ever start providing Y".

Why track them?

There are quite a few reasons to document contacts with your suppliers/customers. Here are a few examples:

• You need to be able to review your perceptions of your suppliers when you are assessing whether or not to keep them as a supplier (see Performance manage their suppliers)
• You need to be able to review your knowledge of customers when you gathering customer feedback (see Actively seek customer feedback)
• You need to be able to assess your customers as leads for future business (see Setup a customers list)
• Your staff members are unlikely to be with you forever. You need to keep detailed information about your customers outside of your employee's heads.

Setup non-suppliers lists

Once you've setup your suppliers list (see Setup a suppliers list) you'll need to make a few more related lists.

Same columns as the suppliers list, but with an additional column for notes/reasons. Make three of them; one for potential suppliers, one for rejected suppliers and one for previous suppliers.

Anytime you talk to a potential supplier, add them to the 'Potential suppliers' list and include any comments you like next to them eg. "sounds like they know what they're on about". This list is the basis for all further lists ie. all suppliers should start on this list. The ways a supplier can move between the lists are as follows:

1. When you actually use a supplier, move them from the 'Potential suppliers' list over to your 'Suppliers' list.
2. If you decide to use someone else (as opposed to the supplier on your 'Potential suppliers' list), move the overlooked supplier to the 'Rejected suppliers' list and include a reason why you went with someone else eg. "not as polished as the opposition" or "don't really have an SME focus".
3. If you never use a supplier on your 'Potential suppliers' list, just leave them on the list - no harm.

Don't pay invoices blindly

Don't pay an invoice until you know you have got what you've paid for. Ok this is pretty obvious if you're in a retail shop buying a printer, but it can be a bit more challenging in terms of things that get delivered to you.

Be particularly wary if your supplier asks for part-payment for a product or service but won't clearly articulate this on an invoice. Make sure that, if you are going to pay before you get something, that the invoice clearly stipulates the exact details of the product/service and include Terms and Conditions for a refund, should the product or service not meet your expectations.

Its a lot harder to get back money you've paid than it is to not pay for something in the first place. Say for example that you send an order to a supplier, they send you an invoice, you pay it and then the item is shipped to you. But the item that arrives by courier is a different model to the one you bought. In these situations its very important that this is noted at the time it arrives and that you don't accept the delivery.

To ensure you don't get stuck with something you didn't want, make one person responsible for receipting goods and ensure that they check every good against the order/invoice details before they sign for it.

Make sure that, any time you have 'an incident' related to the above, that you make a note of it against the supplier (see Performance manage their suppliers).

Share their suppliers list

Its a good idea to share your 'Suppliers' list with other SMEs in your network (see Setup a suppliers list).

Perhaps avoid sharing your 'Rejected' and 'Previous' supplier lists and definitely avoid sharing your private comments log. You don't need a defamation law suit.

If you share your list on a regular basis, your network will get the idea when your Marketing supplier changes from one revision to the next.

The list will also be a valuable tool for your staff members as you grow. Its often hard to communicate how you like doing business (and who you like doing business with), and this knowledgebase will assist in communicating your likes/dislikes to your team.

Performance manage your suppliers

Not all of the suppliers who made it onto your Suppliers list will stay there forever (see Setup a suppliers list).

They have to 'deliver the goods' on each and every conversation and engagement. Be tough on them; after all, your customers will be tough on you. Suppliers should only remain on your list if they consistently deliver high quality products and/or services.

If you like, set some Key Performance Indicators (KPIs) against which all of your suppliers will be rated eg. SME understanding, efficiency, estimate Vs cost accuracy. Then, say on an annual basis, sit down and review your supplier activity logs against the KPIs together with your account details of spend with them, and start culling!

To be fair, I suggest that you call and discuss your concerns with any SME suppliers who are performing marginally before you dump them and give them a chance to repent (see Actively seek customer feedback), but it's entirely up to you.

On the other hand, if you have a supplier who has consistently met or exceeded your expectations/KPIs, be sure to call their Managing Director and let them know (just think about how good it would be if your customers volunteered positive feedback!).

Setup a suppliers list

Over the years I've needed to engage a lot of suppliers to either support or improve my business. Every SME needs the basic necessities such as an Accountant, office consumables supplier and telecomms provider. You're unlikely to forget these providers.

However, there are often more obscure needs such as a Contracts or Intellectual Property Lawyer that you may need to engage on an ad hoc basis. You could keep a pile of business cards, but in my experience, you tend not to remember who didn't return a phone call or who provided poor advice 18 months ago. You could throw away the business cards of these 'black-listed' providers, but you are throwing away valuable corporate knowledge.

For example, you may accidently re-engage one of these 'rejected' suppliers when you find their beautiful 1/4 page ad in the local paper and not remember your past experience with them until it's too late. So I strongly recommend you make a simple list. I suggest in table format using either Word or Excel (recommended because you can turn on sorting and filtering).

The basic supplier list components are as follows:

• Service type
• Supplier name
• Key contact name
• Address - physical
• Address - postal
• Phone number - Office
• Fax number - Office
• Phone number - Key contact
• Mobile number - Key contact
• Website.

If you've read my post on outsourcing (In My Humble Opinion, SMEs should... Outsource non-core activities), your list will grow pretty quickly in the first few months.

Related posts:

• Performance manage their suppliers
• Share their suppliers list
• Track all contacts with customers and suppliers
• Setup non-suppliers lists.