How to save accounting costs

LuxDeco z-prince-comic-armchair_2As a chartered accountant I’m often asked how to save on accounting costs and these are my top ten suggestions:

1. Use Xero and ensure your bookkeeping is done well. For example:

  • Finalise GST returns when you file them with the IRD
  • Reconcile bank accounts by checking they match online banking
  • Lock periods after every GST return

2. File and pay all IRD returns on time. This avoids the additional manual work required, by your accountant, to record and reconcile penalties & interest on every single period with these charges.

3. Reduce the number of bank accounts, bank loans & credit cards operated.  This is because each account balance needs to be checked and verified so ten bank accounts is ten times the work.  Most successful businesses only need three accounts:

  • Transaction/Everyday Account
  • Tax Savings account
  • Credit Card

4.  Use the right bank account

  • Run a business only account
  • Aim to pay all bills from the correct entities bank account
  • Deposit all income in the correct entities bank account.
  • Don’t use the company (or trust) bank account to pay personal bills.
  • Avoid using cash or personal bank accounts to pay for the company (or trust) bills because having your accountant manually enter these is very time consuming.

5. Minimise Hire Purchases & Finance Agreements (GEM Visa, Q-Cards, ACC payment plans etc) as financing creates additional work to split interest and principal on repayments.

6. Complete your Accountants Information Checklist carefully and ensure all information is provided in a clear and logical way.  Puzzles take time!

7. Pre-check your Xero to ensure it’s correct:

  • is the list of Accounts Receivable correct?
  • is the list of Accounts Payable correct?
  • do the bank Accounts, in xero, agree to the balances showing on your online banking?
  • if you know your annual sales, wages cost, rent etc check the totals are in line with your expectations on the Profit & Loss report
  • check for negative numbers on the Profit & Loss and Balance Sheet reports.

8. Answer all of your Accountants questions quickly, carefully, clearly and concisely.  Causing confusion is costly and multiple requests for information takes time.  Accountants charge time.

9. Ensure all your different entities (Companies, Trusts, Partnerships) have a valid reason to be separate entities.  The more entities you have the more your accounting costs.  It’s like owning 5 cars and paying 5 Registrations, 5 WOF’s, 5 Insurances even though the distance you personally drive would be the same as if you had only one car.

10. Keep transactions with associates clear, consistent, based on fair market rates and ensure tax treatments & timing match. e.g. March Management Fee Expense deduction = March Management Fee Income – not Loan in one entity, expense in the other.

Copyright © 2014 Boutique Financial Limited Chartered Accountants Auckland. All Rights Reserved. This publication must be read in accordance with the attached disclaimer. The opinions expressed are the originators only and may not be the opinion of Boutique Financial Limited. Boutique Financial Limited accepts no liability for any loss caused, either directly or indirectly, arising from this article. Discussions and conclusions reached are based upon facts provided and current legislation thus any change in the facts or legislation may alter the conclusions reached. This article is not intended to provide an exhaustive or comprehensive statement of tax law and should not be used as a substitute for considered written advice.