5 Smart  Ways an Accountant Saves Your Business Money 

When most small business owners think of an accountant they think of them as a cost that comes and goes—a compliance officer really, you give them a shoe box of receipts and they return a return and you pay them.

This view is completely wrong.

A good accountant isn’t an expense, they are an investment. Their job is obviously to keep your books in balance but their real value is in optimisation. It is not just about the standard tax deductions you can claim, it’s about finding the leaks in your cash flow and spotting the structural weaknesses that are costing you money every single day.

Here are 5 hidden ways a professional accountant can save your business money, well before tax season even comes around.

1. Structural Tax Arbitrage: Beyond Simple Deductions

Most entrepreneurs will be familiar with the basic rules of being able to claim office supplies, internet charges and business mileage. That’s standard tax prep. A strategic accountant looks at tax arbitrage though, which is about the way you structure your business entity and the way you pay out.

Should you be paying yourself a salary or via corporate dividends? Should you incorporate at this point or stay as a sole proprietor? The financial implications of those decisions are huge.

An accountant will look at your net income and your personal financial objectives and then work out the ideal mix of salary and dividends to minimise both your company tax and your personal income tax bracket. They’ll know how to structure internal asset transfers, how to use capital gains exemptions and how to set up a holding company structure to keep your profits out of the higher tax brackets.

2. Optimizing the “Cash Conversion Cycle” 

You can have a very profitable business on paper and still go bust if your cash is effectively trapped. That’s the paradox of cash flow. It is all to do with a sub-optimal Cash Conversion Cycle (CCC) which is the time it takes for a dollar which you have spent on inventory or on operations to go through sales and back to you in the bank as cash.

Accountants do not just look at what you have spent in the past. They look at the future as well, at how quickly your money is moving. They will look at your A/R and your A/P to see exactly where the cash is getting held up. You might find that your net 30 terms are actually averaging 58 days to collect, which is a massive drain on your working capital.

By reworking your invoicing triggers, putting in place automated collections and renegotiating your vendor payment terms you’ll get your cash flow moving. You will be able to avoid the need for any short term loans or lines of credit at all just to get your payroll paid.

3. Reduce the Stealth Cost of Entity and Regulatory Drift

As your business grows, your operations will change however many times your legal and tax structures remain the same. This is called entity drift and can be very costly.

For example using the same business structure you had while generating $80,000 in revenue could cost you tens of thousands of dollars in lost tax incentives once you cross $500,000 or when you expanded your sales to another province/state, you haven’t adjusted your tax collection settings. This can lead to large back taxes and penalties.

Your Accountant will give you advance notice. They will monitor your growth figures against your local and International tax limits, so you don’t go into penalty territory. This ensures that you don’t have any compliance issues that could turn into an audit. Meaning you won’t get hit with huge legal fees, interest or back taxes.

4. Remove software bloat

SaaS (software as a service) bloat is an unseen cost drain for many small businesses. Small businesses often run many different systems including invoicing apps, project management and payroll and inventory software.

A modern, tech savvy accountant will look at how you run your business and see where you’re running too many systems and creating duplicate work for your staff.

They’ll move you into a cloud based accounting system (such as Xero or QuickBooks Online) that integrates with specific programs (such as Hubdoc or Stripe). This removes any human error in your data and saves you and your team hours of work each week. This means less labour costs for you in your payroll.

5. An Unbiased Reality Check On Your Profits

Entrepreneurs can be very biased and often see increasing gross revenues and automatically assume their business is succeeding. However, revenue is a vanity number. Profits show sanity!

An accountant will provide you with an unbiased look into your margins. They will take the emotion out of your products/services and calculate how much your true COGS is. They will also take into account all the hidden variables such as shipping differences, storage and labour inefficiencies.

In many cases an accountant will highlight that your best selling product is actually your least profitable or even making a loss. Knowing what clients/products/services are costing you money will help you raise your prices with confidence, cut out your unprofitable products and concentrate on growing your business in a high margin way.

Conclusion 

Seeing an accountant as only a tax agent is like seeing a smartphone only as a phone. There is so much more to them! 

A professional accountant will optimize your structure, speed up your cashflow, keep you compliant, streamline your tech and also ensure your margins are being audited. They will take your financial data and turn it into a profit making machine! Frequently the amount they save you will be far more than the fee they charge. Visit the best accountant in Toronto

FAQs 

Q1. Is hiring an accountant a cost?

A1: An excellent accountant is an investment. Although they do cost you a fee, there are usually significant tax savings, cash flow solutions and strategic advice they will be providing that will give you much more back than you will spend.

Q2. How can an accountant help with cash flow?

A2: They will help you optimise your Cash Conversion Cycle. An accountant can look at your invoicing and payment terms to ensure that you are ensuring fast payments and negotiating better terms from your vendors.

Q3. What is entity drift and how can it cost me?

A3: Entity drift is a situation where your business has grown, however your legal or taxation structure hasn’t. This can cause you to miss out on large corporate tax benefits. It can also cause you to inadvertently pay large amounts of money due to regulatory fines.

Q4. Can Aura Finance help me save money on monthly software costs?

A4: Yes. A modern accountant will audit your technology stack to ensure you aren’t paying for any unnecessary software. They will also connect your tools together so they work seamlessly in the cloud, reducing the amount of manual admin you have to do which reduces your payroll costs.