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5 questions business owners need to ask their accountant

I work with accountants every day. It's all we do at Proactive Accountants Network - help accountants make a difference with their clients. As part of that work, we run Client Advisory Board (CAB) sessions, where an accountant invites 10-12 of their clients to give feedback on the firm and provide insights into how they could better serve them.

We always ask the clients in the room how often they call the accountant when they have a question, and the results vary dramatically. Some say they speak with their accountant several times a week while for others, perhaps once a month. But there are always some who admit to never calling their accountant, usually because they are worried they might get a bill for the call.

It is critically important to keep the lines of communication open so you, as a business owner, can contact your accountant without worrying about how much you might get charged for the privilege. And so, my first recommendation of a question you should ask your accountant is:

1. Can you provide me with a fixed fee for the work you'll do for us? Please bundle in ad hoc access to you for short phone calls and emails as part of that fee.

Almost always, the clients who speak to their accountant several times a week have that arrangement in place. When the barrier of 'what might this cost' is taken away, you are much more likely to call and talk with your accountant before you make an important decision. I also observe that, in many cases, clients who regularly communicate with their accountants tend to be the more successful business owners in the room.

I believe it is fair for your accountant to provide you with an inclusive price to cover quick calls and emails, but if more work is required or a project emerges from the discussion, it should be priced separately.

With that question out of the way, what else should you be asking your accountant to make the best use of your unfettered access?

2. What is my break even point?

This refers to the level of sales required to fully cover general business overhead, and it is the point where you start to move into profit. Depending on your business, you might break this down to a monthly, weekly or daily breakeven point.

It is not as simple as it might seem, since some costs vary with sales volume, whereas others are fixed. Your accountant will be able to analyse your cost structure and let you know the level of sales required to break even. Depending on your business, if your average transaction value is predictable, you will even be able to break this down further into units required to be sold. If you don't know these numbers, be sure to ask your accountant to do some work on it for you.

3. What drives my revenue?

If you ever think (or if your accountant ever suggests to you) that you need to increase sales, do you know where to start? What are the key drivers of your revenue? In many businesses, revenue can be broken down to this formula:

 Number of Customers  x  Transaction Frequency  x  Average Transaction Value = Revenue

It may or may not be this same formula for your particular business. Ask your accountant where you should focus. Your accountant might tell you to concentrate on one or more of the following areas:

  • Retaining existing customers
  • Generating new leads or enquiries
  • Converting leads to new customers (or new jobs)
  • Getting existing customers to buy from you more frequently
  • Analysing your pricing strategy
  • Looking at ways to sell more on every transaction

There are a variety of strategies to look at. For the benefit of this discussion, let's talk about pricing. In my experience, too many businesses have little knowledge about the impact of pricing on their sales. For example, many businesses offer discounts to people who don't ask for them, or make assumptions about what will happen if they increase prices, which leaves money on the table.

Ask your accountant this: At my level of gross profit margin, if I increase my prices by 20%, how many of my customers could I afford to lose before I am any worse off? The number might surprise you - and help you with your pricing strategy.

4. Are my financial results good, bad or indifferent?

If you're lucky, your accountant will take you through an analysis of your financial performance each year, pointing out key ratios such as gross profit percentage, days locked up in receivables and inventory, and others. (If they are not doing that, then ask them to do so!) But the question to ask is: Is that good, bad or somewhere in the middle? Who knows, for example, if a gross profit of 42% is where you should be? Ask your accountant what the trends are like: Is the number increasing or declining, or steady? And depending on the response, what is the accountant's insight as to why that might be happening?

Equally as importantly, ask about benchmark data. Comparative data by industry is becoming more readily available. For example, in Australia the ATO provides key benchmarks on its website for a variety of industries. Your accountant can easily access these and compare your business to the 'norm.' You can then have a quality discussion with your accountant about what action you might take to fix your weaknesses and, more importantly, build on your strengths.

5. What are your most successful clients doing?

Most accountants work with many business clients. Some are very successful; some are doing OK; others, of course, are struggling. So why not ask your accountant what their observations are on what their top 10 clients are doing to make them successful? It is a great question to ask, and if you pick up just one idea you could implement to improve results, it is worthwhile.

In all of the surveys, the accountant is cited as the most trusted business advisor. Make sure you are making the most of the relationship with your accountant. I often tell accountants that they should ask more questions. Here, I am encouraging business owners to do the same. It's my hope that a double pronged approach will have a dramatic impact - not just on your business, but on the economy as a whole. 

 By Colin Dunn
 Director of Proactive Accountants Network Pty Ltd