Why focussing on tax savings can hold you back

Hi, it`s Nishi Patel from N-Accounting. In today’s video, what I wanted to talk about is why focusing on tax savings can really hold you back in your business. What I want to do is just put this all into context and explain why I want to film this video. One of the biggest challenges business owners have in this country in my opinion, is that they form a relationship with accountants solely around tax. Everyone knows tax is a cost to a business so what you’re essentially doing is you’re forming a relationship with a specialist around a particular cost in your business and reducing that cost. Reducing costs is a good way to improve your profitability, but why I really want to film this video is reducing costs and tax, why it might be a good way to improve your profitability. It’s definitely not the best way to improve your profitability.

This is why it’s so important to actually talk about this because people have relationships with their accountants in order to reduce their tax. Business owners will say, “Well, if you’ve got an accountant who will lower your tax bill, then they’re a good accountant.” But actually, no. An accountant that will lower your tax bill in my opinion is average at best because the people who say you’ve got a good accountant if they’ll lower your tax bill don’t really understand everything else accountants can do and that’s why they’re actually missing out on the bigger picture and everything else that accountant can do to improve their profitability.

Ultimately, if you want to improve your profitability, you want to focus on the thing that’s going to have the biggest impact, not one of the things that will have the smallest impact. Most businesses in this country, they can’t afford a finance director or an accountant to help hold their hand all the time and pay loads of money for it. If you’ve only got a limited amount of time with a financial expert, then you shouldn’t be using that limited amount of time on saving tax. What you should be doing is asking them questions like, “How do I improve my margins.” “Fine,” they might say, “Okay, well let’s lower your tax bill. Let’s lower your other costs.”

But what they should really be saying is, “Okay, let’s review your pricing. Let’s make sure your pricing is relevant for the work you’re actually doing. Let’s do a little bit of benchmarking and see what other people in the industry actually charge. Let’s actually start looking ahead in terms of your cash flows to make sure that you’re getting the right kind of funding and you’re taking the right amount of money out of business and you’re investing it wisely in terms of growing your business.” There’s actually a lot of stuff a really good accountant can do beyond the tax side of it.

Actually, what I would say is good accountants don’t talk about tax because good accountants just do tax. Ultimately, a good accountant will have built tax efficiency into all of their processes and everything we do. That’s one of the things we do. We probably don’t talk about tax that much with our clients because every checklist, every process we have in our business is does the checks that are necessary minimize the client’s tax bill in a safe and responsible way. This is why, in my opinion, I don’t think good accountants should really talk about tax. What they should be doing is talking about profitability, is talking about succession planning, the long term of the business, helping people bridge the gap between where they are financially and where they want to be. That’s why I think a lot of businesses are actually missing out.

What I’d like to do is offer you a free strategy session because unlike a lot of the accountants out there who just focus on tax, what we actually do is we do all the other stuff as well, all the other stuff that business needs to actually grow. We’ve got an Apex program and as part of that, I’d like to offer you a free strategy session. What we’ll do is we’ll value what your business is currently worth and then work with you to understand where you want to take it in terms of take home pay and the business value when you want to sell it. We’ll talk about ways to actually bridge that gap.

Thanks for listening. Remember, if you found this video useful, remember to like, share and follow. But just the takeaway point is really if you’ve got a relationship with an accountant, don’t waste that relationship talking about tax. If you trust them to be good at tax and to get the tax stuff right, and if you don’t trust them to get the tax stuff right, then what you really need to do is find an accountant you do trust to get the tax stuff right because that shouldn’t be your discussion point. The discussion point should be improving your margins and growing your business and improving your pricing. I’ll see you at the next video and thanks for watching.

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Free online training for small business owners

How to Create an Exit Strategy...

This session will cover:

  • The THREE things stopping you from scaling your business
  • The ONE thing you MUST do if you’re serious about exiting on a high
  • The tried and tested model you must implement NOW to lock down a high-value business sale later

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