It’s not easy running a business that is seasonal, or one that goes through waves of increased activity like an accounting practice. Provisional tax returns (IRP6s) are due this August 2017 and can easily disrupt the day-to-day business of your accounting practice. What’s more, getting the numbers wrong will create a huge amount of stress (and debate) in 12 months’ time.
The problem with IRP6 returns is the risk of understatement, which could lead to severe penalties and interest, which can often only be waived if you can prove that it was “not your intention to avoid or delay the payment of provisional tax”. Convincing SARS that you deserve this exception is near to impossible.
Tax practitioners also have the added problem of needing to finalise the current years’ performance evaluation to ensure that estimates are completed and accurate, in addition to finalising the last set of Financial Statements (AFSs).
While doing this for monthly clients is not that difficult, it is very challenging for annual clients, who practitioners may not see all that regularly and whose accounting records are often not up to date or accessible.
Cloud accounting goes a long way in solving problems like these, by enabling accountants to see their clients’ books, as and when they need to, on a single ledger. Cloud accounting has also given accountants the opportunity to increase the predictability of their businesses, allowing them to plan better.
The significance of this can be explained as follows:
Most restaurants have menus that allow you to order certain meals. You cannot simply walk into a restaurant and order something that is not on the menu. Why? Because the chef needs to prepare some of the food ahead of time to serve your meal within a specific timeframe once ordered. The chef would not be able to do this, if he has a restaurant full of people ordering meals that he has done zero preparation for, or that he has no experience in cooking.
Traditional accounting firms are like restaurants without menus. Accountants at traditional firms receive information from business owners in multiple formats and at various times. There is no set structure, or menu, that is followed. The result is that accountants often end up having to deliver on an order that they were unable to prepare for beforehand. During the provisional tax season, this creates unsettling waves of additional work.
Let’s think about this for a second:
- SARS has consistent formats for how information should be submitted to them. Why do accountants not have consistent formats for how clients should provide them with information?
- SARS has non-negotiable deadlines for when information should be submitted. Why do accountants not have clear deadlines for when information should be provided to them?
- SARS has specific returns that should be submitted. Why do accountants not have specific productised services that they deliver?
- SARS manages its relationship with taxpayers and accountants primarily through an accessible, online portal. Why do accountants not manage their relationships with their clients through an accessible, online portal?
Cloud accounting enables accountants to prepare and plan ahead, while introducing their clients to products and services that solve many of their operational business frustrations.
By using tools that save time, accountants can develop their own menu for existing and potential clients, with clear process structures. This not only enables accountants to plan and execute their responsibilities more productively, but also ensures a better client experience.
Most accountants have seen it all covering multiple industries, dealing with strong willed entrepreneurial personalities, and seeing first-hand the effects of failing to implement proper financial procedures. Perhaps they should be insisting a little harder that their clients order from the menu.
By Colin Timmis: SA Head of Accounting – Xero