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Why Tax Planning is the Perfect Time to Introduce Forecasting to Your Clients

Posted on 30th March 2017 in Advisory

Written by Josie Attard

In Australia and New Zealand, tax planning season is upon us. Each year we all go through the motions to assess how we can help our clients reduce their tax bill, after all, which client comes to us and says they’d like to pay more in tax? In most firms, we’ll ensure we comply with company standards, share the advice and then give clear instructions about how and when to make payments. Sadly, the conversation typically ends here. This blog has been written because, in my opinion, this should be just the beginning. Here’s my advice for increasing your earning potential during tax season…

Stop and think for one second about the importance of cashflow to a business. It is far more valuable that you solve this “pain” for your client than any tax savings would be. Every accountant is talking to their client, or yours, about tax. It’s our bread and butter but it isn’t the making of you and your advice, or your client’s business.

If you work with a large, corporate client and cash is flowing, don’t switch off and think this isn’t applicable because the money’s in the bank. Cash flow, and how cash is used in the business, is where you come in. Clients can overlook the cash required for their pending income taxes and this could place negative cash flow implications. Tax planning season gets the client’s attention and starts the conversion.

The bigger picture

Each year your client’s business will go through so many changes, with highs and lows putting pressure on cashflow. Are they aware of this? Do they understand that looking at the P&L alone isn’t enough? What KPIs are they monitoring? How have they performed versus their budget? Do they even have budget? These are the conversions you should be having every time you speak with your client. If you’re not there yet, fear not, tax planning is your stepping stone.

Tax Planning: Q&A

These are the “big picture” questions you need the answers to so either mock up a quick Dashboard in FUTRLI or pick up the phone and speak to your client.

  • Do we have adequate cash flow to pay our income tax by the due date?
  • Have we paid correct instalments during the year? Do we have the cash flow to fund any tax saving options?
  • Will there be any seasonal fluctuations or changes in the business in the near future that will affect cash reserves?

If you’re still working with a firm that assesses this position by using an Excel spreadsheet (to extrapolate the Profit and Loss to 30th June, run the calculations here and then prepare a letter of recommendation), then you need to share this blog post with them immediately and inform them about FUTRLI.


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Firstly, with FUTRLI, you can speed up this entire process to make huge time savings. However, more importantly, put yourself in the position of that business owner? What sort of experience is that? Do you trust the recommendation? Do you feel that your advisor is really advising you? Do they have your best interests at heart? Are they even really interested in what’s next?

Tax Planning is your opportunity to show your clients that your knowledge and experience is worth far more than an immediate tax saving. This should be the “foundation” work which you use to demonstrate the bigger picture. For example, how about running some scenarios to show them how each option would impact the tax payable and the, even more importantly, cash flow. Again, this can be largely automated so you don’t need to spend hours getting the answers to these questions for the client. But, trust me, they will think you’re a hero when you make their decision making so clear.

Can your client afford your recommendations?

It’s not something you probably want to admit but it has happened to us all at some point. You have advised clients to take certain options to save tax but then realised that they don’t actually have the funds to cover your recommendation or, alternatively they do have the funds now but this will cause them cashflow issues following this.

Run your scenarios though the cash flow using the prior period’s performance to project how the next year will look and what these scenarios could me should they take these tax savings options. With FUTRLI and Xero or Quickbooks this is a breeze, it can create forecasts based on past performance in seconds for you. However, you can easily add non-Xero or Quickbooks organisation manually and bring a client’s data in as a comparative trial balance, not quite seconds but it is still quick and easy enough.

SME’s often get caught up in this idea of paying as little tax as possible, so let’s educate them that this should be a continual part of their financial processes. Not only are you being that proactive accountant, ensuring that your recommendations won’t adversely affect your client (just so that they could save X in tax); you are also giving them an educated decision as to whether that tax saving is worth the potential negative impact on future cash position.

The all important ‘Tax Planning Meeting’ aka a marketing and sales opportunity!
In the next 5 minutes, I am going to quickly walk you through my top tips to create a dashboard, how to invite them etc.

Step 1: Do away with the traditional letter of advice and spreadsheet

Present your client with a live presentation using FUTRLI. Make sure the dashboard is visually appealing, you want them to ask you questions about their business and not about tax savings. You can’t rely on them doing all the talking though – this is two way!

So how do you achieve that? Use the much-improved Text Card to deliver your recommendations. This is where you can add your summary and explain the numbers. FUTRLI gives you a wealth of options, and templates, to make sure you have maximum impact. For example…

  • Graphs give a bigger visual impact than a spreadsheet of numbers
  • Show KPI’s that are important to the business, use the Report card to show these as summary card of these.
  • Use the Cashflow card to compare your recommendations as scenarios

As part of tax planning, you will be advising your client on the group’s total tax position, we used to give the client a summary in a spreadsheet, you can easily create this using the Report card and use of the formula function

 

Step 2: Your board should have them wanting to ask you more questions, so include something that would stand out


Snapshot cards are a great way to achieve this, use this card without a forecast attached to it. They will spot this and make a comment about why the Forecast amount is $0. This is your opportunity! Talk to them and explain that they are not working the forecast information is missing.

Step 3: Invite and share the dashboard with your called 

Let your client know in advance that you are going to share the Dashboard with them, along with an email they will receive inviting them in. Advise them that they will be able to use it and track how the go for the remainder of the year and how they track with your tax projections and cashflow. Invite them to call you to discuss the results and have coffee chat to discuss how you can work together with them. Make sure you comp the coffee and let them know they won’t be charged anything for your time. This is your marketing opportunity. Once you’re in front of them you can tailor a package to help them deliver the business results they would like to achieve.

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