Case Study #1 – Outsourced Financial Controller

Starting Point

The client typically starts with one of the following situations:

• Due to the skill shortage, they have been unable to recruit a financial controller.
• They have recruited a financial controller, which led to further recruitment and a finance function disproportionate to the size of the business.
• An accountant has been recruited, but without sufficient experience and presence to deal strategically with financial issues.
• A competent bookkeeper is in place for transaction processing, but no monthly financial statements are ever produced (with the only regular reporting being to the ATO on the monthly Business Activity Statement). As a result, the owner has no regular information on the profitability of the business.

Strategic Objective

Our role is to provide an outsourced financial controller who overseas compliance, producing regular reporting on financial performance and deals strategically with financial issues.

Approach

Strategic thinking needs to be based upon facts – so the cornerstone of the service is the provision of reconciled monthly financial statements and associated tax compliance (by approximately the fifth workday of the following month).  We also meet with the owner at least quarterly to address trends and financial issues. 

We provide input only at an accountant or financial controller level – leaving routine processing of accounts payable, accounts receivable and payroll in-house.   The aim is to provide a level of service that is proportionate to the size and scale of the business. 

We change your world by getting the basics right first.  Once the monthly financial reporting is in place, these things follow:

• Annual tax return compliance for the year ended 30 June is completed in August or September (not May the following year).
• When the bank asks for information, it takes an hour or so to provide (only as long as it takes to collate the information that already exists on our files). Note – if it takes your accountant four to six weeks to provide information to the bank, that’s because they need to create that information from scratch.
• When the owner asks searching questions on tax or any financial issue, we can respond intelligently within 24 hours (because the P&L and balance sheet for the prior month forms the starting point for addressing almost every financial issue).
• Because of the above the owner feels confident they are addressing the 1% issues in their business (life-changing when a typical business profit is only 5% of sales).
• Overall, the business owner gets the feeling of being ahead of the curve on financial issues……

Case Study #2 – Subsidiary of Foreign Multinational

Starting Point

Similar to that for the Outsourced Financial Controller but also seeking someone who has the knowledge and presence to deal with the corporate head office of the foreign group.

Strategic Objective

To provide a single point of contact who can assist with:

• Routine financial controller and tax compliance work.
• Advice on Australian laws and business practice.
• A corporate mindset – understanding that the ultimate objective is for the Australian operations to seamlessly integrate with the global business.

All at a cost proportionate to the type and scale of the Australian operations. 

Approach

Once again, similar to the Outsourced Financial Controller described above, but also including:

• Monthly or quarterly head office reporting, including on tax effect accounting, foreign currency and international tax matters.
• Co-ordination with the local audit firm and drafting of the statutory accounts.
• Assistance with transfer pricing documentation.
• Liaison with the corporate head office at an appropriate level.

Case Study #3 – Tax Compliance

Starting Point

It’s not usually overtly discussed, but there are two broad approaches to dealing with tax compliance:

• Small business approach. The Tax Agent receives basic records from the client, “fixes” them to cobble together a sensible P&L and balance sheet which are then used to prepare the income tax return.  The primary value add by the Tax Agent is repairing the accounting records, with little or no discussion with the client on strategic taxation issues.    
• Corporate approach. The corporates provide financial statements that have been prepared by qualified accountants in-house.  The Tax Agent thus accepts these quality records upon which the tax return can be based.  The focus therefore is on dealing with items that have a material or strategic impact on the tax profile of the company or group.  The type and level of engagement is governed by the mutual respect between the professional in-house accounting team and the professional external advisors.     

Which level of engagement are you seeking from your Tax Agent?  What level of engagement are you currently receiving? 

Strategic Objective

Our strategic objective is to provide the corporate level of service to all levels of businesses that have in-house staff capable of interacting at that level. 

Approach

We aim to be a high capability advisory at our best when working with high capability clients.  Characteristics of our tax compliance approach includes: 

• Where appropriate, acceptance of the financial statements provided by your in-house team as our starting point. Our value is added in addressing the tax implications arising thereon, not nitpicking over detail.
• Where adjustments are recommended, we always provide alignment journals to retain consistency between your in-house records and published financial statements.
• Our tax return cover letters are written in the positive – addressing material tax items and have they have been dealt in the return (not disclaimers setting out the work we probably should have done but didn’t).
• A focus on strategic issues, including maximising the benefits of tax attributes including losses, tax offsets and franking credits.
• A consultative approach – dealing professional to professional.

Case Study #4 – Tax Consulting

Starting Point

Does this sound familiar.  You identify a potential issue in-house.  Google doesn’t help, so you call your tax advisor.  A week later four advisors come out, each in their area of specialisation.  No-one appears to have overall carriage of formulating a solution.  The matter is discussed, and written advice is promised.  Three weeks later the matter is cold and no-longer front of mind.  The lengthy advice concludes “it depends…”.  The bill is disproportionate to the value add. 

Strategic Approach

Our approach is to provide tax advice within a modern business context.  The advice should be practical, technically correct, tax optimal and provided at the pace of modern business.    

Approach

Whilst every problem is different, our approach typically includes:

• Providing a single point of contact considering all Australian tax implications.
• Meeting with you in person or electronically within 24 to 48 hours of enquiry.
• We work with you to thrash out options, implications and alternatives – often reframing the problem. We generally narrow the scope and sharpen the focus of written advice by proceeding with formal advice on the chosen path forward only. 
• The chosen path forward should be capable of practical implementation.

We’re able to provide a quick turnaround because we have sufficient expertise to either already know or be able to formulate an answer. 

Case Study #5 – ATO Audits

Starting Point 

The taxpayer has been under ATO review for some time, providing information in response to various ATO requests.  Numerous requests for extensions of time have been sought and granted.  Months have passed and the matter doesn’t seem to have progressed.   Tensions have risen with the ATO issuing a draft position paper proposing amended assessments across multiple years.

Strategic Objective

The crucial issue is to formulate a plan to address the issues raised by the ATO and move towards closing out the audit.  This requires dividing the issues into:

• Matters that can be resolved by providing the ATO with more information.
• Matters that can be resolved by providing the ATO with technical analysis on how the tax legislation applies to the information provided.
• Matters where the information available might be incomplete and/or the law is uncertain – meaning these issues might best be resolved via compromise.
• Matters that are beyond dispute and hence are best resolved with the ATO with a minimum of fuss.

In line with the above, most taxation issues include a dispute over the primary tax payable, plus late payment penalties and interest.  Bringing an ATO review to a conclusion requires consideration of the total cost across all three. 

Result

On 18 June 1940 Winston Churchill famously stated, “The news from France is bad.”  On 8 May 1945 the war in Europe ended.  A lot happened in between.

Whilst in no way do we compare our firm to Churchill, the events between 18 June 1940 and 8 May 1945 demonstrates how the ultimate objective is to win the war, not necessarily every battle.   Our firm has the expertise to take clients from “we have an ATO audit” to “the audit is now complete” – albeit it can sometimes be a difficult path in between.  During the process you should be confident your advisor has a focus on the endgame.