Research Proves Accountant + Advice = Revenue Rise

Research Proves Accountant + Advice = Revenue Rise

• Business advice from accountants proves valuable yet most SMEs have tax-only relationship
• Financial ignorance apparent in almost 10% of who don’t use an accountant
• Wellington businesses least likely to engage an accountant

New research released today reveals that small to medium business operators who use their accountant as a business advisor rather than simply for compliance purposes have a greater likelihood of financial success than their peers.

The March 2013 MYOB Business Monitor discovered that SMEs who have an advisory or consultative relationship with their accountant were much more likely to see a revenue rise in the past year. They were also more optimistic about revenue in the year ahead and had significantly more work in their pipeline for the next three months.

Despite survey results showing an advisory/consultative relationship is best for business, findings reveal the majority of New Zealand SMEs have a tax-only relationship with their accountant. 57% defined their relationship as being for tax return completion or GST reporting only. 28% had an advisory/consultative relationship, meeting with them regularly throughout the year for strategic business advice. The remaining 15% did not have an accountant.

Over one in three (36%) of those with an advisory/consultative relationship reported a rise in revenue over the past year. Just 30% of the other SMEs reported a rise.

According to MYOB’s New Zealand Executive Director, Scott Gardiner, accountants are in a good position to give valuable business advice to small and medium business owners.

“Many business operators only use their accountant for tax compliance at the end of the financial year, not realising the potential breadth of their service offering. Yet the costs of a working relationship with an accountant should be considered in terms of the value brought to the business and not just the up-front payments,” he says.

“Our research discovered SMEs using an accountant for financial analysis, general business advice and/or consulting on profit strategies, strategic planning and the like are 20% more likely to enjoy increased revenue than their peers. That’s a strong case to dig a little deeper and explore the possibilities of the relationship.”

Tellingly, 9% of businesses without an accountant said they didn’t know if their revenue rose or fell in the past year.

When comparing the major cities, Wellington-based business operators were the least likely to have an accountant. Over a quarter (26%) of respondents based there had no accountant relationship, compared to 17% in Auckland. Business owners in Christchurch were the most likely to use an accountant, with only 12% having no relationship.

Revenue increase a key benefit from engaging accountant
When looking to the year ahead, those business operators who enjoyed an advisory/consultative relationship were most likely to expect a revenue increase, at 43%. 41% of those with a tax relationship and 36% of respondents with no accountant relationship expected the same.

When those without an accountant were asked if they expected their revenue to increase, 10% said they didn’t know. Only 5% of those with an advisory relationship and 4% of those with a tax relationship were unsure.

“Of concern is the financial confusion that seems to result when an accountant isn’t consulted at all. They’re skilled at providing clarity around finances, including cashflow and revenue trends. By receiving this important advice business owners will be in a better position to understand where to allocate resources for the year ahead,” says Mr Gardiner.

Accountant advice can relieve pressures and create investment opportunities
Business operators who had no accountant relationship also reported differing pressures and investment focuses than those who employed the services of one.

The pressures of competitive activity and retaining existing customers ranked higher for the former group, with 63% and 62% respectively saying these would likely affect their business in the next year. Those with an advisory relationship reported these pressures at 61% and 55% respectively whereas those with a tax relationship only were even lower still at 55% and 51%.

When rating their likely investment areas for the coming year, over one quarter (26%) of those whose accountant was an advisor said they planned to increase the amount they pay employees. This percentage was much lower for those with only a tax relationship (14%) and those with no accounting relationship (15%).

“Getting sound business advice from someone outside of your business can make it easier to identify the areas within your business that need particular focus. Working across a wide range of industries and clients, accountants are in a prime position to evaluate key areas that a business can build upon in order to succeed,” says Mr Gardiner.

Advice on compliance most valuable
Nine out of 10 business operators who have an advisor/consulting relationship with their accountant find value in the service the accountant provides. 49% of this group said the service provided was ‘very valuable’ and 41% said it was ‘valuable’. Only 8% said it was neither valuable nor invaluable and 3% said it was ‘relatively invaluable’.

A resounding 91% of those with an advisory relationship believed the most valuable service they receive was ‘keeping my business compliant with tax, payroll and other regulations’. This was followed by ‘advice on how best to manage the money that flows through my business’ (43%) and ‘advice on strategies that will help me grow my business’ (33%).

Top 5 valuable services accountants provide
Keeping my business compliant with tax, payroll and other regulations - 91%
Advice on how best to manage the money that flows through my business - 43%
Advice on strategies that will help me grow my business - 33%
Providing me with the right advice and documentation for obtaining funds to grow the business - 25%
Advice on what operational business moves to make e.g. setting pricing - 17%

“As businesses are realising the revenue and other growth potential to be had through such simple actions as meeting with their accountant more regularly, they begin to value that relationship a lot more. It is this value that we hope more and more New Zealand business operators will begin to experience for themselves as they realise the true potential of their business,” says Mr Gardiner.

ENDS

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