Is $5K reasonable to pay an accountant annually?Oct 19, 2022
This was a question posted recently on Facebook and I felt an urge to respond.
You see I’ve read similar questions before and have bit my tongue, but the frequency of these questions are getting more regular and the comments they are attracting are increasing.
Could it be that it’s tax time?
Or could it be that there truly is confusion in the market place due to so much misinformation, disparity and variation?
Here’s my response and a few extra musings for good measure. Enjoy and feel free to share.
Firstly, I believe $5,000 is reasonable for annual compliance work if a business is a small to medium sized business, good quality advice and support is provided throughout the year and the accountant and their firm are proactive which may include a tax planning review. There are of course many other factors affecting price including location, frequency of meetings, use of software , quality of information provided and qualifications and experience of the advisor.
There would be many small to medium sized businesses paying in excess of $5,000 and in the majority of those cases, their accountants are providing good value for the work they are doing and they have also been successful in articulating that value. Where there seem to be an element of confusion, disconnect and potential resentment from small business owners is in the range of $1,000 to $5,000.
Secondly, I’d like to give an insight into the value of a good accountant as I know many accountants won’t go into this themselves with their clients.
As a disclaimer, I’m a chartered accountant (was recently made a Fellow) and had my own practice for 18 years and when I went into accounting, it was a very well regarded and valued profession and it still is in many circles. I no longer have a practice and this month I’m celebrating my 20th year in business. When in practice, I prided myself that I gave quality advice, charged appropriately for it and had a very successful and profitable practice – my clients appreciated the work I did, respected what I charged (mid range) and were inspired by my success and what I was doing outside my practice.
Degree qualified accountants have studied full-time for at least 3 years, part-time for at least 6 years and many a combination.
Chartered Accountants (CA’s) study for a further 18 months and are only eligible to commence the program after a certain amount of practical experience in a firm.
Chartered Accountants are then required to undertake 120 professional development hours across every 3 years and many do more than that if they have other designations.
And if your accountant is a CPA or IPA, they too have similar requirements which you can read about on their respective websites which I have provided a link to. An area of concern that has been in the media in the last week and a possible reason for the widespread variation of pricing for accounting, tax and BAS services are the number of people offering these services that are not registered agents and could be lodging via their clients myGov account or online business portal. You can find out if your agent is registered here.
So let’s look at what I believe is the number one factor that is making accounting look easy and DIY’able, is downplaying the important role of an accountant and in turn is putting even more price pressure on what has always been a bit of a “grudge” spend by business owners – accounting programs.
I absolutely love programs like MYOB, Xero and QBO and would recommend to any business that they embrace cloud accounting software as a non-negotiable when they start a business. But for some reason, so many think that these programs replace their accountant and all the work they used to do. As such, the value of a well trained and highly qualified accountant has diminished in the eyes of businessowners.
Software summarises income and expenses and categories it which merely replaces manual cashbooks, excel spreadsheets, folders/ziplock bags/shoeboxes and biscuit tins of yesteryear. Some also have payroll functionality and single Touch Payroll functionality.
Software does not interpret tax law.
Software does not interpret and advise of Fair Work obligations.
Software does not provide asset protection or tax minimising advice.
Software does not organise payment arrangements.
Software does not liaise with the ATO or other government departments such as ASIC on your behalf.
Software is not a trusted advisor.
Software does not provide that listening ear, put things into perspective, help you navigate challenging times, help you establish solid foundations in your business, help you grow your business and help you exit your business when the time comes.
Accountants do not merely just jump into your software, press a button and produce your BAS’s, financial statements and tax returns. Extensive checks and balances are performed, reconciliations attended to, adjustments, reallocations and additional entries not to mention consideration and implementation of tax minimisation strategies and whole raft of other compliance tasks and formulation of business improvement and growth advice coming from those figures.
Accountants take on a high level of risk in the work they do every day to ensure their clients comply with the law. They can get sued, lose their registrations, their reputations and their livelihood if they do not detect errors, omissions, false statements and do not take reasonable care in ascertaining a client’s state of affairs and to ensure taxation laws are applied correctly.
Accountants will also connect you to other trusted advisors in the event that you need them eg a good bookkeeper/HR advisor/lawyer/financial planner etc.
And the list goes on.
A good accountant does all of this.
Business owners don’t see this and accountants probably don’t go into all of this with their clients. But then, do you go into the nitty gritty of what you do and the risk you take when delivering a good or service to you client or do you quote a price that is sufficient to cover your costs, overheads and provide you with sufficient profits to make a good living and then wait for your client to say yes or no?
I now work with accountants helping them to understand their value, to help them understand their worth and to help them price their services appropriately to ensure they are getting a return for all of their years of study, the risks they take interpreting and applying tax law each and every day and to cover the costs of running their business which are ever increasing just like everyone else’s.
So for anyone questioning what they are paying their accountant here are a few questions to ask yourself?
Are you getting great advice and support from your accountant right now?
If the answer is NO, it doesn’t matter how little or how much you are paying that accountant, go searching for one that will and there are plenty out there that will offer that level of service at all different price points, but please don’t shop on price alone. Think about what happen’s in your own industry and the horror stories you have heard – accounting is no different!
If this answer is YES, but you are still curious as to whether you are getting good value for that service, ask yourself these questions.
How does the money you pay for your accountant compare to other professionals you pay in your business?
How does the money you pay your accountant compare to what you charge for your services?
Why not have a frank conversation with your accountant where you articulate what you are after, what your concerns are and reset the relationship and the fees and engagement going forward.
At the end of the day, I tell accountants there are more than enough clients for everyone and vice versa for business owners.
The secret is finding a match that will result in a mutually beneficial, respectful and long-standing relationship.
If you are an accountant reading this and would like to share this with you clients, please do.
In return, I would love you to connect with me and here’s how to do it.