1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting
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Helping Canadian businesses beat the odds!
Edmonton Accounting Firm | How much it costs
Hi there and welcome to another edition of ask spurl CPA. Today we’re talking about accounting fees and I’m here with me from our, Edmonton Accounting Firm from here. So many thanks for, for joining us today. Maze new at the firms. So me. Tell us a little bit about your educational background and arriving here at the firm.
I graduated from nate and I graduated with a degree and counting has been a big, big part of my life. I was in the accounting club, I did tax volunteering and I just want to help as many as I can.
Excellent. So she’s sufficiently nerdy enough to work here with the rest of us. So that’s excellent. That accounting club and accounting degree. Excellent. So the quote that I have here today, um, it’s from a red adair who he used to specialize in extinguishing uncapping oil. Well, so big serious business and he said if you think it’s expensive to hire a professional, wait until you hire an amateur. And the statistic that’ll have concerning this accounting fee topic is one of our favorite ones is 50 percent of all businesses. They’re out of business in five years and 29 percent of these businesses are out of businesses because they’ve run out of cash. So the story that we have, you know, business owners, they come to us and they have no idea how much they should be paying for fees and they’re looking for an account, but even more importantly, Edmonton Accounting Firm they have no idea about how much inadequate service will cost them if they make the wrong selection in an accountant. Moreover than just the accounting fees. So that ended up paying extra tax. So may what do you think are the, you know, the questions that are important that these business owners should be asking when they’re looking, how much they should pay for an accountant in hiring an accountant?
Well, they should be asking them like, what are the three ways accountants normally charge? So
three ways that they’re normally charged is number one. Uh, you know, the conventional way is by the hour. So the accountant puts in an hour, they build a client one hour. The second way is the accountant is going to charge them a flat fee, but usually a flat fee per service, so a flat fee per year in. Um, and then the third way is the accountant is going to charge a flat fee every single month. So a set fee every single month. Um, you know, the overwhelming majority are charging hourly fees. The old school you put in an hour, you get billed for an hour. Um, there are some charging flat fees by the service. Edmonton Accounting Firm, so a flat fee for the year end, um, and probably even more rare is accountants charging a flat fee by month. So those are the three ways.
So speaking of hourly, how does emily billing often create an adversarial relationship?
Yeah, the hourly billing, he really does create that adversarial relationship because, I mean the accountant is almost a, they have this motivation to take longer. So, you know, the longer they take they more they get paid and I’m not sure that’s the best way. I’m not sure that’s putting everybody on the same page, you know, as the accountant, you know, investing in the templates and equipment. And technology to do their job quicker and not only that, the client, every time the client calls up the accountant, they’re wondering, Hey, do I really need this work? Is the accountant just want to make some extra money this month off of me? Uh, I put in some extra hours. So, um, I think it takes away a little bit of that, that a trust relationship because you know, the kind of have competing motivations, right? Um, so sometimes the, Edmonton Accounting Firm, you know, the accountant can be doing something that maybe is not absolutely necessary and sometimes if there’s something absolutely necessarily needs to be done, but the client doesn’t have the confidence, the, you know, let them exercise to professional judgment because they’re wondering is this going to be an unnecessary cost?
So what is required before the accountant? So in order for the accountant to provide a fee equal, they have to have in Alberta a CPA has to have a complete understanding of the business. So sometimes clients, you know, they call ring, ring, ring, hello, how much does it cost for accounting services? It’s kind of like calling up a car dealership and saying, how much does it cost for a car? I mean, it depends. What car do you want, Edmonton Accounting Firm what options do you want a, what’s going on in a business that’s even more so, but you have to have a complete understanding of what’s going on in the business. You know, how big is this business? How many employees are in this business, you know, what’s been happening in the past. Whereas this business going in the future, um, you know, what sort of challenges does it have, you know, is being audited for the last eight years from Cra.
Are we finally on selling this thing? Do we want to grow this thing? Um, you know, that also started to give the accountant idea of how much work is involved, you know, a fee quote that just comes over the phone in 10 seconds. It’s just not worth it. Edmonton Accounting Firm, so, uh, you know, I, I wish I could, I could, I could talk to people out there and then before they do that, it doesn’t matter if you get a few or not. It’s not going to be realistic, there’s no way to do, unless they have some sort of a, a clairvoyance, there’s no way for someone to accurately project what the fees are going to be without having that complete understanding of the business. So when I quote a fee for the year end, what does this include? Normally the year end, uh, normally the fee for the year end, it’s only going to include the corporate year end, so the financial statements and the corporate tax return.
So sometimes it’s gonna include a personal term, but normally it’s just financial statements, corporate tax return. Um, so people, when they do get a fecal, you know, they might be thinking it means something else or more than that, but it’s just satisfied actual statements, corporate tax return, full stop. That’s normally what’s included in a, in a flat fee, quote flat fees. How do monthly flat fees demonstrate that the firm is confident in the surfaces? So generally would affirm is charging monthly flat fees. They’re confident that it’s providing everything that the, the customer, uh, required because of the customer becomes unhappy. They’re probably gonna stop paying those a flat fee. So we’re the weather, you know, people charge know a, a, a, an annual flat fee and sometimes they get that annual flat fee upfront. Edmonton Accounting Firm, you know, they locked them in, right? Then we have your money, we have a set fee, we have a contract for this amount and you pay us this amount wherever it’s monthly you, we requires that, you know, the, the client is happy moving through the process, not just at, at one particular point in time. So I think it just demonstrates that confidence at the firm thinks that they can actually, you know, the Aa, they’ve quoted the right amount of work, not too much, not too little and the client’s going to have a good outcome of the work too because they’re going to start to see what’s the outcome, what’s the tax I’m going to pay on that. The, the accountants, confident that the client is going to be satisfied with that. And you know, continue to be a client. Continued to pay the monthly fees.
And how does the monthly fees improved? Cash flow for business.
Yeah, I mean businesses, you know, whenever possible they want to avoid these one time lump sum charges because that’s not how, you know, they get paid, they don’t get paid, you know, an accountant wants to charge you in June when they do your December year end, you know, the client doesn’t get all their revenue in June. Edmonton Accounting Firm, so they can be staring down the barrel of a big bill, but they only have been a one twelfth, one twelfth revenue in that month, but the, they’re asking the pay the county fee for all 12 months. So that poses a bit of a challenge. Right. And of course sometimes they get management accounting fees, but if all your fees were like that, if you had to pay all your entire phone bill, um, and you have to pay all your rent and he had to pay it all in one month. Yeah, that’s going to be a challenge. So anytime you can smooth out that cash flow is better for business is less stress on the cashflow
for the business. If you’re looking to keep expenses low, why does it make sense to pay for planning?
Yeah, um, so it, it, it makes sense to pay for planning because you know, there’s a number of things that will often be excluded from flat fee. So like I said before, they’re there, they’re only going to have the, you know, year end and tax return included with those flat fees, but often they’re excluding planning. They’re excluding, you know, what a cra call up and ask for any questions. What about the t four and t five? What about the personal tax return? Edmonton Accounting Firm, they don’t have like a kind of drives me nuts. It’s one of my big pet peeves of accountants is, is uh, you know, they, they give a report but they caught for a very narrow range of service knowing full well that the client is going to need more and they’re going to ask for to do more throughout the year. Um, it’s Kinda like the construction guys, they want to give the, the, the low bid, they want to be the low bid on the job knowing full.
Well, as soon as they knocked down the wall, they’re going to say, well, I didn’t know that this a 75 year old house had brass wiring behind it. Of course she knew that what was behind that wall, you knew a reasonable amount of work that’s going to be done. So it’s the same thing with the planning and planning be done, you know, of, of uh, of course it does make sense for finding to be done because, you know, the accounting fee is going to be so much less than what the tax that business owners are going to pay a and without any planning, that business owner is willing to start to make bad decisions and bad decisions that are going to far away the accounting fee or the kind of thing quite frankly is going to end up being, you know, insignificant normally in, in the scheme of things compared to how much tax we’re going to pay and how much business bad business decisions are going to cost. So, Edmonton Accounting Firm, you know, if you’re looking to keep expenses low, um, you, you, you want to have someone on your side and not just someone on your side, but a process in place that you can keep your single biggest expense of your entire life minimize, which is tax and the way to do that as you have an efficient plan in place.
And how long does planning take compared to tax returns and financial statements? Yeah,
that’s a great question. So, uh, sometimes people think planning is just the afterthought and the actual financial statements and the tax returns. Those are what take time. Now with modern software these days, the tax returns and financial statements, I almost said it’s not, it’s not unusual for those to take a lot less time than doing the plant. So believe it or not, the plan takes more time then doing the tax returns and financial statements. You know, we’re losing, you know, software that’s using text recognition software. It’s pulling feeds, automatic feeds from the bank statements. Um, you know, so, you know, it’s sometimes you can do a set a year end in a financial statements in, Edmonton Accounting Firm, you know, two to four hours, um, but the plan is going to take you far longer than that. So in terms of how long it takes, a lot of people don’t do planning because it takes longer, not because it’s not required. Um, they don’t have an efficient way to do the planning.
And how can you determine if the planning quoted will be adequate?
So all you have to do, if you’re out there searching for an accountant, his accountant that, oh yeah, we do planning. When you asked him, it’s like, okay, what are those plans look like when you’re done? They should be able to pull out a document a, then they should be able to go through it and say, Hey, this is what we’re going to consider. These are the, the items that we’re going to give recommendations on, you know, this is the outcomes, this is how we quantify if the plan is working, if it’s not working, um, and it should be meaningful to you. It should address all the questions that you’d go into the, the office, Edmonton Accounting Firm, often we have clients who come in and say they have lots of questions and as soon as we take them through the plant, it’s like when your plant answers all of our questions is, that’s what it was designed for.
Right? Um, so the accountant should be able to show you what a formal plan looks like and it shouldn’t be one or two pages that spits out from a tax program. It’s something that’s actually going to require a little bit of a work. Um, you know, our template here is it’s 30 pages, you know, that we’re going through. That’s the starting point for the template. So it should be a meaningful document. There should be a meaningful deliverable that they can show you a and if they don’t have that systematic approach, either a, Edmonton Accounting Firm the planning’s gonna take too long or B, they’re just not going to do the planning. Um, so again, if, if you’re wanting for planning is going to be adequate, ask them to see what the plan is likely to look like once it’s done. So that’s all the time what we have here today. Uh, again, you know, if you have any questions, I’d like you to leave a comment below and hit that subscribe button. We look forward to having you back again. Thanks very much.