Frequently Asked Questions
Why are accountants so boring? And why can’t I understand what they are talking about?
Unfortunately accountants have no one else but themselves to blame for being stereotyped as being boring and at times difficult or impossible to understand. A large portion of most accountants work is the summarising and restatement of historic transactions and while history can be a good indicator of things to come, it’s not terribly exciting.
Accounting is littered with legal and accounting jargon which accountants like to use when they want to look like experts. What these supposed accounting experts do not realise, is that you probably do not understand the jargon and if you are confused then they have not done their job properly.
Luckily, stereotypes are not the rule and there are exceptions. There are accountants who are not boring and who you can understand. Remember it’s the accountants’ problem if you do not understand them and not yours, and real accounting experts are those who can make a complex subject sound simple.
Do you really need an accountant?
In short. No. The IRD does not require that you use an accountant to prepare your financial statements and income tax returns. You can do them yourself. People normally choose an accountant to do their financial statements and tax returns because:
- accountants know how to prepare accounts and income tax returns (so you can focus on running your business); and
- accountants know what you can claim and what you can’t so they should help you to maximise profits, and minimise costs/tax.
What’s the difference between accountants, Chartered Accountants, bookkeepers and tax agents?
Chartered Accountants are members of the NZ Institute of Chartered Accountants. They have studied for seven years to achieve their qualification and are required to undertake ongoing professional development. They are bound by a code of ethics and professional standards, and hold a professional qualification from NZ that is internationally recognised. Chartered Accountants are like the Ferrari’s of this world in that they are superior to Bookkeepers or tax agents who could be described as being a Lada in that they can be unreliable and not of the quality a business needs.
Some Chartered Accountants hold Certificates of Public Practice which means they are qualified to offer accounting services to the public and are subject to a review once every three years by NZICA.
Anyone can be an Accountant or bookkeeper. If you decide to use an accountant or bookkeeper, you should check their qualifications and experience because they could range from nothing to as good as a Chartered Accountant.
A Tax Agent is someone who is registered with the IRD to prepare and lodge income tax returns for taxpayers. Being on a tax agency list means you have 365 days in which to prepare and lodge your income tax return. Taxpayers without tax agents will only have 98 days. The IRD sets lodgement targets which must be met by the agent to maintain their agency listing. Tax agents can be anyone – accountants, Chartered Accountants, bookkeepers …
Since accountants are all the same, is it best to choose one on price?
Just like everything else in life, you get what you pay for. Consider a recent client who paid $550 for his financial statements but paid just over $15,000 in tax. Had he paid for a quality service he would have had tax of $10,980 to pay. He thought he was getting a great service until we pointed out his mistakes. He is now a client and knows that our fees represent excellent value for service.
A very low price can be a good indicator your accountant is not spending money on training courses to keep up to date with changes affecting business, or they are not employing good quality staff but instead are using junior staff who know or do very little, or they spend little on systems to ensure deadlines are kept, or have little money to afford Professional Indemnity Insurance, or spend little on technology losing any advantage of cost savings associated with modern information technology, or worst of all they take short cuts which will cost you more in the long term.
When looking for a new accountant, low prices are sometimes offered as an incentive to get a new client and their work. It is not uncommon that once the honeymoon period is over the accountant then starts charging ‘normal’ rates.
When it comes to choosing the right accountant for you, it should come down to the value you get for your money and not whether an accountant is the cheapest or not.
What should I be asking my accountant?
Ask them about:
- Their skills and experience.
- Their charge out rates and expected costs.
- The services they can offer you and your business.
Find out if they:
- Are interested in you and your business (or do they just talk about themselves).
- Talk in a language you can relate to.
And don’t be afraid to ask your accountant, “How can you help me?”
What should your accountant be able to do for you?
At the very least, your accountant should be able to:
- Keep you on the right side of the IRD
- File an accurate tax return
- Minimise tax
- Avoid serious tax-related penalties
- Explain tax law and regulations clearly
- Know many ways to save taxes
- Reduce uncertainties
- Keep up to date with changes
- Save time
- Mention risks
- Assist business to make legitimate claims
- Avoid taking deductions that fall within any grey areas of tax law
Optional extras could include:
- Health checks on your business
- Budgeting and forecasting
- Tax planning
- Succession planning
- General business advice
Why haven’t your accounting fees come down now that you are using accounting software?
Any output from accounting software is only as good as the information entered. We frequently find users of computer software use the wrong codes when entering transactions (e.g. GST coded on personal expenses, hire purchase payments coded to fixed assets, general expenses full of unknown entries, suspense accounts with transactions that need to be recoded …). When data has been coded to the wrong place, time must be spent correcting that data entry. Generally speaking, the use of a computer system doesn’t lead to cost savings until the software is being used properly.
Good accountants will offer to review your accounting software and provide you with recommendations so transactions are coded properly. As you use your accounting software better, the services offered by your accountant normally shift from that of compiling the data to providing advice on how to do better based on the data which means your accounting fees won’t necessarily decrease.
Is there anything you can do if you think your accountant has charged you too much?
If you have concerns that the fee your accountant is charging you is too high, then you have a number of options available:
- Query the invoice with your accountant and ask them to explain why the invoice is high (higher than last year? higher than estimated?)
- Ask for a breakdown of the time behind the invoice.
- If your accountant is a Chartered Accountant (member of NZICA) then you can use the Institute’s Fee Resolution Service.
- If your accountant is a Chartered Accountant (member of NZICA) then you can always lodge a formal complaint to the Institute.
- If you believe you have been overcharged, and you cannot sort it out with the accountant, and the amount in dispute is less than $15,000 ($20,000 if both parties agree) then you can consider using the Disputes Tribunal. You can find out how that works on the Tribunal’s website.
- As a last resort, you can always consider getting a new accountant … someone who listens to your needs, someone who works with you and your business helping you achieve your goals, someone whose fees are reasonable, and who offers you ways in which to manage their fees.
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DAA goes that extra mile to look after you. We can offer meetings at your premises or home. Our mobile meeting service is also available after hours, and best of all, are provided at no extra cost! This is ideal for people who want to meet but not available during usual working hours.
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