Getting your accountant to understand your digital business

SBO calcumulator

“My accountant doesn’t get my business” – something that we hear all the time from the entrepreneurs we work with.

If you throw out terms like CLV, MRR, CAC and Churn to accountants, most of them will be left scratching their heads wondering if you are speaking finance, English or PHP.

Professional service providers are now offering ‘startup’ packages or services to try to capture a chunk of this growing market. Some do it well and have an understanding that a high-growth tech company has different fundamentals to your local café, others simply add a new section to their website and voila! They’re ‘startup accountants’.

The challenge for accountants and business advisors is keeping up to date with evolving business models and understanding the drivers of modern age tech companies and what metrics they should be monitoring.  For an early-stage startup, EBITDA is just not going to cut it.

Modern, digital businesses are a completely different and unique business model compared to small businesses. The numbers you measure, the context you’re operating in, and the choices you need to make are completely different from the businesses that form the bulk of the clientele of accountants.

What gives?

It’s actually not your accountant’s fault they aren’t helping you with these services. Rather, it’s because it’s not their job.

It is a two-fold problem:

  • 99% of small business accountants are tax agents. Their technical expertise, role and revenue stream is dependent on tax compliance. That is filing your tax returns, dealing with regulatory bodies, keeping you compliant. And the parameters of tax compliance are structured around the businesses that have been around for many years before eCommerce and SaaS came onto the scene.
  • They don’t have a forward-looking lens. Tax and compliance are inherently backwards-looking matters. Enhancing your business’ performance tomorrow doesn’t have a tax or compliance implication now, so there is no reason to look in that direction.

They’ve spent their entire career specialising in this field of accounting, and they are optimised for traditional businesses, and they are fantastic in their domain.

Getting what you need

Medium and large businesses engage with more than one accountant in their business.

Yes, they still have an accountant to manage tax compliance, but they also have other forms of accountants – ranging from financial accountants, financial manager, management accountants and CFOs.

The role of these accountants are focused on the future growth and financial operations of the company. They do business financial planning, developing and reporting on KPIs, cash flow management and forecasting and providing insights to the owners and managers on what the numbers are saying. Ultimately, the goal is to leverage these insights to improve profit, cash and financial value of your business.

Overall, there is a big difference between a commercially minded financial manager/CFO and a tax accountant.

Indeed, they are both technically accountants. But your tax accountant’s focus is tax compliance.

The financial manager’s focus is on driving financial performance. These are completely different frames and capabilities.

The chart below breaks down the roles and responsibilities of a tax accountant vs a management accountant/CFO.

SBO Solopreneur

It’s rare to find this type of strategic financial accountant in the small business space.

Why? Well firstly, they cost a lot. Many small businesses can’t justify the costs of a full-stack finance team, costing upwards of $300k of fixed annual salary costs in their business.

But secondly, it’s quite a narrow field of expertise. It takes a different approach of accounting to blend commercial and financial strategy and apply that to fast-growing business.

That’s why we started SBO.Financial – a different type of accounting firm to provide the full stack of financial services – from CFO, management accounting and bookkeeping, for a fraction of the cost.

If you want to learn about how to set up a Minimum Viable Finance function, read the guide by clicking here.

Yes, we are accountants, but we don’t do tax returns. You can’t be everything to everyone.

Rather than replacing your accountant, it’s likely that you need a different type of accountant altogether.

As Elvis Presley once said:

I have no use for bodyguards, but I have very specific use for two highly trained certified public accountants.

I figure Presley meant one accountant to handle the taxes, the other to handle the financial growth and management of his empire.

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This article was updated on 17 May 2024.  It’s not…


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