At this time of year most business owners are thinking about their annual financial statements and the cost of having them prepared.
From a client's point of view the cost of accounting fees is important but cheaper is not always better. A cheap deal may end up more expensive in the long run.
It's what is incorrectly completed or even missed out in your annual accounts that finishes up costing you more. This can be because you pay more tax than you need to or, if your accounts have been prepared incorrectly, it results in you having to pay penalties and interest to the IRD. It is essential to engage a chartered accountant who is experienced, completely up to date with the latest tax and financial regulations and who provides quality information and advice that you can trust.
Sadly, every year, Alliott NZ receives business from new clients who have issues with the IRD because their annual financial statements have been prepared by accountants whose work was not up to standard.
At Alliott NZ we believe that you should be focusing on getting the best value, service and advice from your accountant rather than trying to minimise your accounting fees.
We pride ourselves on providing high quality, technically expert work and excellent service at a fair price.
We'll provide a written quote to prepare your annual financial statements so that you know how much this important work is going to cost as well as offering a variety of payment options tailored to suit.
A cautionary tale....
A new client approached Alliott NZ with a significant tax problem. Their current accountant had completed three years worth of tax returns and had filed them with the Inland Revenue Department.
This accountant advised that, based on the tax returns they had prepared, the client had a large amount of tax to pay, the IRD would charge penalties and interest on the tax owed and that the amount of tax outstanding was a whopping $75,000.
The clients couldn't understand why their tax bill was so high given that their income level wasn't and they asked Alliott NZ to review the tax returns that had been completed and filed by their current accountant.
After investigation, we found that, not only had their accountant returned their salary as income but they had also treated drawings as taxable when they are not.
We advised the client that, after correcting these basic accounting errors, their real tax bill was closer to $10,000 instead of the original $75 000.
We then had to make a special submission to the IRD on behalf of the client to have their tax returns re-filed and reassessed.
We were concerned because reassessment is not an automatic right – tax returns are only reopened at the IRD's discretion but after negotiation, the IRD agreed to allow re-filing and reassessment.
The client disclosed that they had chosen their previous accountant based on price – they engaged the one who had provided the cheapest quote.
Unfortunately, this turned out to be a far more expensive exercise than they anticipated in terms of the money, time and stress it cost the client.
It is important to engage a chartered accountant who has a reputation for quality, who is experienced and knowledgeable and who can offer ideas and sound advice on how to improve your financial situation.
THE BENEFIT OF ANNUAL ACCOUNTS
At Alliott NZ we believe that you should focus on getting the best value, service and advice from your accountant. Listed below are the ways that high quality, well-prepared annual accounts can help you and your business.
- Help you pay the correct amount and, in most cases, less tax
- Highlight the ways your business profits can increase
- Identify the areas of your business that need improving
- Provide a sound basis for making informed management decisions
- Be used as support documents in bank reviews, when applying for loans and in dealing with the bank
- Provide a benchmark of your business' current and past performance
- Be an integral part of the sales process if you are planning to sell your business