Business Advisory

Practical financial insight for better business decisions

Business advisory should make an important decision clearer. It should not produce a collection of charts that are never used, or broad strategic language disconnected from the realities of the business.

Compact Accounting provides practical accounting and tax input for privately owned businesses that want to understand performance, improve financial visibility or work through a specific decision. The starting point may be a problem, an opportunity or simply the sense that the existing reports do not explain what is happening.

The scope can range from a focused piece of work to periodic advisory meetings. It depends on the decision being considered, the quality of the available information and the level of support the business actually needs.

Understanding what the numbers mean

Financial statements describe a business, but they do not automatically explain it. A profitable business can still be short of cash. Revenue can grow while margins weaken. Tax obligations can rise after the cash generated by the underlying activity has already been spent. A healthy bank balance can also conceal unpaid GST, PAYG withholding, superannuation or income tax obligations.

Useful advisory work connects the reports to the operating reality. It may examine:

  • where profit is being generated and where it is being lost;
  • the difference between accounting profit, available cash and taxable income;
  • gross margin, labour costs, overheads and pricing;
  • cash-flow timing and upcoming commitments;
  • whether management reports are timely and reliable enough to support decisions;
  • how drawings, loans and transactions between entities affect the broader position; and
  • what assumptions are driving a budget or forecast.

The purpose is not to turn every owner into an accountant. It is to make the financial information understandable enough to support deliberate decisions.

Support shaped around the issue

Depending on the engagement, Compact Accounting may assist with:

  • management reporting and interpretation;
  • cash-flow reviews, budgets and forecasts;
  • pricing, margins and cost analysis;
  • year-end and pre-year-end tax planning;
  • understanding the accounting and tax implications of a business structure or change in circumstances;
  • reviewing a significant asset purchase or finance proposal from an accounting and tax perspective;
  • considering the financial information relevant to buying or selling a business;
  • modelling the effect of a growth decision;
  • identifying signs of financial pressure early; and
  • establishing a practical reporting rhythm for the owner or management team.

Not every business needs all of these services. A useful engagement begins with a defined question: what is the owner trying to understand or decide?

Before a commitment is made

Some of the most valuable conversations take place before a contract is signed, a price is announced or funds are committed.

For example:

  • Can the business carry the cash-flow effect of a new vehicle, employee, premises or loan?
  • Is growth improving profit, or mainly increasing working-capital pressure?
  • What does the purchase price of a business appear to assume about maintainable earnings?
  • How would a proposed transaction affect tax, GST, cash reserves and existing obligations?
  • Is a low-margin service consuming more owner time than the reports reveal?
  • Are the financial records reliable enough to support a lender, purchaser or management decision?
  • What should be monitored if conditions weaken?

The analysis may not produce a single perfect answer. It should, however, expose the assumptions, trade-offs and areas requiring further investigation.

Reporting that is proportionate and usable

Advisory does not have to mean a monthly board-style reporting pack. For some businesses, a concise quarterly review of a small number of measures is enough. Others may need a short period of more frequent cash-flow monitoring or a one-off model for a particular decision.

Where periodic meetings are appropriate, the agenda should remain grounded in the business. That may include recent performance, cash commitments, tax obligations, emerging risks, owner priorities and actions agreed for the next period. Others may need a short period of more frequent cash-flow monitoring or a one-off model for a particular decision.

Working with other advisers

Important commercial decisions often cross professional boundaries. Accounting and taxation are only part of the picture.

Compact Accounting does not provide legal advice, lending or broking services, or financial product and investment advice. A business acquisition, sale, restructure, property purchase or finance arrangement may also require a lawyer, licensed finance professional, financial adviser, valuer or other specialist.

The role of the accountant is to contribute within the accounting and tax scope, identify issues that warrant further advice and help ensure that the different pieces of the decision are considered in the right order.

Bring the question forward

If your business is facing a decision, reporting problem or period of financial pressure, it is usually better to discuss it before the matter becomes urgent. Contact Compact Accounting with a short outline of the issue and the decision or information you need. We can then determine whether a focused review, reporting engagement or ongoing advisory arrangement is appropriate.

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