A recent study by American software company Intuit revealed that only 19% of Australian businesses use an external accountant.
Intuit’s Financial Fitness Startup Study revealed that 53% do their own Business Activity Statements, even though 4 in 10 (40%) have only a basic understanding of business finances. 25% of Baby Boomers are likely to use an external accountant/bookkeeper (Gen X – 19%, Gen Y – 14%), and only 12 % have a bookkeeper or finance manager.
Moreover, most of these businesses failed the Intuit Financial Fitness Test which covered common accounting terms and concepts like balance sheet, cash flow, risk, depreciation, and capital structure.
According to Nicolette Maury, Intuit Australia’s managing director, there are two main reasons why many start-up businesses do not engage external accountants:
- Cost Issues
“One is that they run on the smell of an oily rag, and their perception is that it’s too expensive for them to be using an accountant,” said Maury. What these businesses and firms failed to consider is that there is an abundance of competitive labour force in less expensive countries and they can capitalise on it. Sending their process-driven tasks offshore can help them refocus on client facing (nurturing, sales and advice) and other value added services. According to her, “The opportunity here is to help them understand what the value is that the trusted adviser can [provide] in terms of helping to grow the business more quickly.”
- Lack of Awareness
“The second is that often they don’t know what they don’t know,” said Maury. These businesses don’t understand their finances and run the risk of missing opportunities to grow. As the first step to fix this problem, accountants should step in to help them identify a need. Their role here is to help these businesses create meaningful information out of the numbers in their spreadsheets in order to get a clearer picture of their business value and make better decisions.
This study underscored the importance of financial education and the opportunity for accountants to become proactive in advisory services. “There’s a really strong role for the accounting profession to play, not just in terms of compliance but also in terms of educating some of these start-up businesses in the basics of financial fitness,” Maury added.
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