A common discussion point with accountants the length and breath of the country is the continued pressure on fees, the uncertainty of client retention, and the apparent difficulty in charging a fair fee for services rendered. Research shows that not charging enough can have a number of consequences. In the short-term these consequences can be overcome, but in the medium to long term they become harmful and are potentially devastating. The most common signs of long term difficulties in a business are:-
1.FINANCIAL - In the short term, the accountant will settles for earning less to retain clients but hopes for recovery in fee growth.
2.PERSONAL – If pressure on fees continues the accountant will often work longer hours and do more of the work himself. He will do this rather than paying others to do it – which compromises and the quality of his output, affects the time he is able to spend with his family, and perhaps even his health.
3. SERVICE - The practitioner cuts corners on service in order to keep things “within budget” compromising and harming the interests of his clients and in the long run his business.
Sadly, in these extremely tough economic times, evidence suggests that practitioners are being forced to make all three of these compromises. Recent research of the accountancy industry reveals some thought provoking facts:-
- More than half of accountants are making what economists would regard as losses.
- 73% of practitioners are planning to improve their profitability in 2011.
- 82% of accountants suffer from stress, 77% think they work too many hours, and 71% say that their life-work balance is a problem.
- 63% of practitioners said that they would like to improve their work-life balance in 2011.
- 36% of clients are not highly satisfied with the tax service they get from their accountants.
- 90% of clients don’t believe their accountant is saving them as much tax as they should.
- Up to 90% of accountants are failing to give clients the tax advice they should.
Why not take a few moments to assess your firm's service level by answering five short questions. Only give yourself a “Yes” if you can positively answer every single aspect of the question.
1. Incorporation - Do you know for a fact that in the last 12 months you have identified every single one of your firm’s clients who technically qualifies to save tax by incorporating and capitalising (your best guesstimate of their) goodwill, and given them a robust up-to-date estimate of how much tax they could potentially save between now and when they want to dispose of the business, so that they can make a fully informed decision as to whether incorporating is right for them given their current mindset, profitability, drawings, and tax regime? And have you completed the picture by also giving them a robust estimate of how much extra cash they may be able to claim in tax credits while they draw down their resulting loan accounts?
2. High earner restriction - Have you taken into account the Finance Act 2010 changes to the high earner restriction when advising on the level of preliminary tax to pay for 2011 last November? The new restriction applies where adjusted income is €125,000 and specified reliefs exceed €80,000.
3. Change of year end – Do you know for a fact that in the last 12 months you have identified every single one of your firm’s clients who technically qualifies for saving tax by extending their accounting period (perhaps because of falling profits during the recession), and given them an estimate of how much they could save, so they can make a fully informed decision on the right year end for them?
4. Asset protection - Do you know for a fact that you have identified every single one or your firm's clients who trade through a company and have retained reserves in cash form on their balance sheet? Have you considered how to separate this cash in the business to build in asset protection for those clients and have you discussed this with each of them?
5. Intellectual Property - Have you identified which of your clients are carrying out activities that would qualify for R&D tax credit relief - a tax rebate of 37.5% of expenditure? Have you provided your clients with a briefing note on the R&D tax credit scheme.
There is nothing magical about the five tax planning ideas in this survey. They are simply the first questions that spring to mind, and could have been replaced with dozens of other equivalent tax planning ideas.
Did you score 4 out of 4? If you didn’t, you are not alone. I often put these questions to accountants and less than 10% score full marks.
Whether your practice is small, medium or large our tailored service offering will help you to leverage your client portfolio and to identify new business development opportunities. We will ensure that you are kept up to date in relation to relevant tax changes and that you have the information to confidently discuss emerging tax issues with your clients. By working with us, be assured that you will provide a valuable active taxation service to your clients thereby giving them every reason to have confidence in your continued ability to meet their needs.
