CAs are dull and colourless, but to SMEs (Small Medium Enterprises), they are trusted advisers, valuable sources of information and providers of many services
Bland, boring and colourless are just a few of the common stereotypes that spring to mind when describing an accountant. But these are just urban myths. In the small and medium enterprise (SME) world, the accountant holds the status of a hero, one who fights for entrepreneurs against the multiheaded monsters of fiscality, government regulation and foreign competition.
While not an exhaustive list, here are at least a few such services.
Preparation of Financial Statements:
Basic preparation of financial reports can involve a lot of added value. “There’s a lot of value simply in giving a SME the exact report it needs,” Lavigne says. “For example, an obvious question is: should it have reports in line with the new IFRS rules or with Canadian GAAP? What level of credibility do you need to give them: a basic “Notice to Readers, a “Review Engagement” or an “ Audit Report”?
Just sorting out the regulatory constraints that underpin those choice implies a refined level of knowledge on the accountant’s part
Helping Startup Companies:
There are levels where accounting goes beyond report preparation and reaches the heights of strategy — if not art. This is what Pierre Bélanger, president of Dagua Inc., witnessed while working with an external accounting firm. A startup firm, Dagua has attracted major investment partners with its groundbreaking self-contained water filtering station, which uses ozone rather than chemicals to make contaminated water drinkable.
With a few simple manoeuvres, the accountant changed the company’s financial position. Dagua was spending a lot of money promoting its product before it was ready to come off the production line. “We were showing heavy losses,” says Bélanger.
A seasoned businessman, Bélanger did not see how he could present more favourable statements. The accountant took advantage of special laws applying to startups to capitalize marketing expenses that were going to show results in only three or four years. “We transferred more than $2 million in expenses and showed results that were much better aligned with our company’s position in a startup’s life cycle,” Bélanger says.
Diagnocure, a well-established biotechnology company in Quebec City, benefited from the fiscal expertise of a large accounting firm. “During the corporate restructuring, it made a difference,” says financial manager Frédéric Boivin. When Diagnocure bought a firm in the US and opened a US subsidiary to market its new diagnostic test, it faced conflicting scenarios. For example, it could incorporate the companies in the US, create limited partnerships, make one company dependent on the other, or liquidate both and control everything from Canada.
“We ended up forming a limited partnership for the company we bought out and set up a general partnership with the one we created. When the general partnership will have fulfilled its objective, it will absorb the limited one and, as profit shows up, it will be transferred to the parent company in Canada to help it cover its losses.”
Cash Flow Forecasting:
Dagua found its accountant’s high value area was financial forecasting. “His expertise proved essential,” Bélanger says. “Sure, management knew what the money inflows and outflows were in a few areas, but those represent maybe 10 out of 60 lines in a spreadsheet. We were at a loss concerning the way to account for cash flows around real estate, purchases, diverse depreciations and sales tax inputs. Our accountant knew.”
Accountants are uniquely qualified to address many issues in family successions, says Robinson, whose firm specializes in such succession issues as estate freezes, valuing the business and transferring shares. But the real value accountants can bring is in the soft skills of dealing with people, emotions and egos.
The full value an accountant can bring to SMEs is even greater. In fact, the whole is so colossal, you may wonder how accountants remain so unassuming.
- Does the article give you a sense that the Accountant is more than an Accountant?
- What do you understand from Succession Planning? Ask your teacher, for more details.
- How important is Cash Flow Forecasting for a company?
This article was edited from the CA Magagine, authored by Yan Barcelo, to read all the Ten Ways that an accountant provides value to SMEs visit the camagazine link.