Your Accountant Is Only Doing Half Their Job

It's that time of year again when everyone's starting to think about tax. Perhaps you've just had your accountant meeting, they've given you your tax bill. Perhaps a little bit of jargon about profit margins, then see you next year. It's really not enough. Your accountant should be helping you make money, not just counting what you made. Here's how to get more from your accountant and what to ask for. Hello, hello, hello, my salon friends. Phil Jackson here, your queen of salons coming all over the internet with another dose of my wise owl wisdom. How on earth are you? Akingly well, I hope. And I'm making it easier to come all over the internet. I've been geeking out this week, my darlings. I've been building myself a new website for this wonderful podcast to live on. So at the moment, we have build your salon podcast.com and it's a bit old and a bit creaky and a bit stinky. But most of all, it's not terribly easy for me to update. So I've been raging against the provider that I use. So I use a piece of software. I'm not going to name it, but I use a piece of software where this current website lives. And it's not very easy for me to update using an API. So it's not very easy for me to update automatically. And you know that I'm a nerd, you know that I'm a geek, you know I love a bit of automation. And so rather than trying to make it work with all these different workarounds, I just went, "You know what? Bollocks to it. I'm going to code my own." So I jumped in and I've been using codecs. I've been using chat GPT codecs for the first time to create a website. And last time I built something from scratch. It took me about 80 hours. So I scheduled in my calendar 80 hours worth of work to get this job done. And I've done it in a day and a half. My God, it's so clever. So I jumped into codecs. Basically I created a document with the scope of the website. Took that into codecs, said, "Build me this website." And it created it, you know it took probably 45 minutes. And it was ugly, don't get me wrong. And then basically what I've been doing is going backwards and forwards with Claude. And saying, "You understand my branding. Let's make this look spectacular." Anyway, you can see the work in progress on my new website, which is queenofsalons.com. That's where the website is going to live. And you can get all of my previous doses of Salon wisdom as well. I know there are broken links on there. I know some of the video titles are wrong. It will get better over the next couple of weeks. But take a look. I think you'll be impressed. And it's reduced my software bill as well from about £60 a month to £3.50. So I'm a happy boy. Anyway, while we're on the subject of money, let's talk about our accountants. So here's what most accountants actually do for Salon businesses. They process your bookkeeping or they tell you off for not doing it properly because you're doing it yourself. And then they file your tax return and tell you what you owe. And then a long time later, they will give you last year's numbers when it's too late to actually change anything. They'll charge you a couple of gram be year for doing it. That's not strategy. What your accountant is doing is keeping you compliant and compliance is no mean feat. It is definitely, definitely worth having somebody who keeps you on the straight and narrow with his majesty's revenue and customs. Make sure that your returns are accurate. Make sure you're paying what's due. But essentially what you're paying for is a historian. You're looking backwards into the business and that's not business advice. That's not someone who can help inform your strategy. And that's my call to arms over this episode. I want your accountant to be doing a lot more to help you make decisions during the year. Now, because of the way that HMRC ask for historical information at the moment, that information could be 18 months old. That's not any use to anybody as far as making decisions in your business is concerned. So we need, first of all, much more frequent financial reporting. Ideally, monthly, if not, quarterly will be absolutely fine. And we're going to have to do this anyway because HMRC are making tax digital, which means you're going to be reporting every quarter anyway. But this is really good news. Everyone's kind of up in arms. Oh my God, this is going to be so much hassle. It's not. It's going to take all of the nasty surprises away from your business. But in the meantime, start getting that information from your accountant. So we need, ideally, a monthly profit and loss. So not just here's what we took in here is what we went out. It is what went out of the business. We want a bit of a breakdown. We want to understand the performance of the business and cost categories where we're spending money in the business so that you can spot problems while you can actually fix them. So we can actually do something about any problems that we're seeing in the business, not 12 months later when it's ancient history and much too late. Now the wonderful thing is if you've got a good accountant, and I'm talking about management accounts here, rather than just compliance. But if you've got a good accountant, they'll also help you start forecasting. So if you can start to see the expenses that you're accruing and you can see when those expenses are going to become due in the business and we start to get a picture of the revenue that we can expect in the business too, we can highlight any problems. We can start to see when that might be a shortfall when we might need to cut some costs when we might need to bring in a promotion to increase revenue. The wonderful thing with that is that we're not flying in the dark anymore, what we're actually doing is starting to steer the business in a much more strategic way. This was the game changer in my own business. And I'm no dumbass when it comes to money. I've got a degree in banking and finance for God's sake. If I can't get my head round it, we might as well all bloody give up. But even I was struggling, I was playing that kind of cat and mouse game with my business all the time. And I promise once we start forecasting and looking ahead, we take away an awful lot of anxiety, awful lot of pressure. Next thing we want to look at is profit margin analysis. We want to understand why we're making less money this month, profit margin wise compared to last month. And your accountant should be helping with that. They should be keeping an eye on whether your product costs are keeping up and it's time to renegotiate. So we're getting some proactive advice rather than just reactive reporting. We of course we want help with our tax planning from our accountants, not just tax filing. We want them to be telling you what you should be setting aside each month. And that can be as simple as a percentage that we tweak and change over maybe two or three years. And perhaps they should be also giving you some strategies to reduce your bill legally when not avoiding tax, reducing tax. But they should be telling you when it's time to spend more money in the business and what particular categories we can afford to spend more on so that when we get to this time of year, there's no nasty surprises with our tax bill and our corporation tax. We want strategic business advice from these accountants and we want them also to understand our industry. Now, I'm not saying you need to find an industry specific accountant. I've been down that path and actually it was an absolute fucking car crash. It was the worst accounting advice I've ever had. I actually think you're better off looking for somebody who deals with businesses of your size rather than your particular industry. So if your turnover is 250k, find someone who specialises in that size of business. I think the advice will be a lot stronger, but they do need an understanding of your industry so that they can spot if your wage costs are 45% and the industry standard is below 40%. And they can spot whether you should be making a particular profit margin compared to your competitors or other people in the industry of a similar size. So I'm not asking you to go to a specific, an industry specific accountant, but they do need industry specific knowledge. And they should be benchmarking so they should be comparing your business to similar businesses of your size in your area, saying actually your rent's a lot higher relative to revenue or your retail margin doesn't seem to be as good as the average. So that we start to get some context to know where we're winning and which areas of our business need attention. So the questions to ask your accountant, number one, can I get much more regular profit in loss reports, ideally every month, if not at least every quarter, if they say no, time to change accountant, if they say yes, but charge extra thinking about it, think about it, it might be worth it or it might be worth getting a separate bookkeeper who can give you those bits of information as you go along. If they say you don't need monthly figures, you're with the wrong accountant, you need data to make timely decisions. Question number two, what should my profit margin be? If they say something like it depends, push for an actual number. If they don't know the industry benchmarks, they're not specialized enough in their knowledge, they need to go and do the bloody research so that they can give you good advice. They come out with something like 10 to 15% minimum, they probably know what they're talking about. If they're trying to give you a number like 25%, plus they're probably a little bit unrealistic if you're a premises-based business. Question number three, how much should I be setting aside monthly for tax? If they can't give you a percentage or a number, they're not helping you with tax planning, and this really annoys me. I don't want an accountant who helps me get out of a tax hole at the end of the year, and want an accountant who helps me avoid the bloody pitfall in the first place. No surprises, no scrambling around at this time of the year. Question number four, where am I wasting money? A good accountant will spot areas of your business that you're overpaying, maybe services that you don't use inefficient processes. They're saying everything looks fine to me, they're probably not looking close enough. And question number five, what's one thing I should work on this quarter? We want some strategic advice, not just compliance. They should be really specific. Increase your prices. We need to see revenue grow by 4%, or cut your product costs by 3%. Reduce those staffing hours. Let's get the wage bill down. They can't answer, they don't understand your business. If they won't answer, they're scared of liability, and you have the wrong accountant. So red flags, when do we need to change accountant? If they're only contacted you once a year, that's not enough. If they don't understand your business, that's not enough. If they can't explain things in plain English, in language that you understand, that's not enough either. It took me a long time to get reports in a format that I could digest quickly and make decisions on my business, and you deserve that too. God knows, you're paying plenty for it. So my accountant was giving me reports that I didn't understand, couldn't make sense of quickly, couldn't make decisions off the back of. In the end, we came up with a traffic light scheme. Everything in green was okay. Everything in yellow needed looking at. Everything in red was a problem. And that made it so much more digestible, so much easier for me to run my business. And also, as a little aside, because we have little enough confidence in our industry as it is. If you've got an accountant that's making you feel stupid for asking questions, that's definitely not good enough. And given my number, I'll give them a bolicking over the phone. So making the switch is not always easy. Choose your time carefully. For me, it's after they've done my year end. Then I know I've got plenty of time to make sure that we're compliant, ready for the next quarter. What your accountant can't do is run your business for you. They can't fix your business model for you if it's fundamentally broken, but they can give you good strategy advice. They can help you figure out where money is leaking from your business and they can give you numbers to help you make informed decisions. So there we have it. What have I missed? What's your experience with your accountant? Have you got an amazing one? Have you got a different way of dealing with your accountant that makes life easier? How are you keeping ahead as far as the finances in your business are concerned? If you need help with this, check out the information in the description box below. I'd love to be helping you over the next 12 months with my ultimate clarity. It's a 90-day program that gets the next 12 months set up profitably for you as far as goal settings concerned, as far as pricing is concerned and as far as marketing is concerned as well. This is our last episode of February. I hope it's been a splendid month for you. March starts in our next episode on Monday. Let's make it count shall we? Just a few short days until I'm coming all over the airwaves again. If you want to get in contact with me in the meantime, my email address scrolling at the bottom of the screen right now, fill at billjourcelon.com and until next time, please take care.