How accounting practices can guarantee Single Touch Payroll success
Single Touch Payroll is one of the biggest changes since GST. As such, it also offers many opportunities for accounting practice owners and their SME business clients alike, writes Amanda Gascoigne.
I’ve been a passionate supporter of Single Touch Payroll (STP) long before we knew it was going to be extended to small employers. I even put my hand up in September 2016 to volunteer my time, perspective and experience with the ATO to assist with the ‘change management’ aspect of STP.
Nearly three years on, I’m still involved in several ATO STP readiness and focus groups as a voice for accounting practice owners and their SME clients.
Through these experiences, learnings and insightful conversations with many accounting practice owners along the way, I’ve developed a clear idea of the pain points STP may represent for Australian businesses.
But I’ve also come to realise the true breadth of benefits it will bring those who proactively build it into their operations.
Today, I want to share my learnings on STP so that you can derive the most value for your accounting practice.
Get your practice STP-ready with a strategic plan
I believe you need to create an STP strategic plan that is bespoke to your practice and your clients. Sure, some aspects are simply a ‘flick of a switch’, but I believe practitioners should be looking beyond the pure mechanics of STP.
This is your opportunity to use STP to design or redesign your practice.
So what sort of things should you be considering as part of your STP strategic plan? Here are a few ideas to help inspire your own plan:
- What’s your practice’s overall vision and how can STP help you achieve this?
- Which clients do you want to work with?
- Which STP services do you want to offer?
- How will you price these services?
- What accounting software do you want your clients to be using?
Crystallise your practice’s vision first
I hear lots of accountants describing their practice as ‘proactive’.
I see lots of accounting websites with beautiful logos of the various accounting software companies that they’re certified for.
I wonder, then, why so many SME business owners tell me their accountant still has them using spreadsheets and hoarding paperwork that needs to be physically delivered every month, quarter or year?
If your practice aims to have all clients using cloud accounting software and receipt capture technology, then use STP as the motivation to make this happen before 1 July 2019.
In addition to streamlining processes in your practice and improving your practice’s profitability, it has a whole heap of added benefits including giving you and your team the freedom and flexibility to work away from the office.
Also, just because some of your clients aren’t employers and they don’t need STP-enabled payroll software, embracing cloud accounting software will still provide benefit for both parties.
Define your ideal clients, consider saying goodbye to others
Who are your ideal clients?
Ask yourself which are the clients that look to you to advise them on bookkeeping, accounting, tax and business best practices.
The ideal clients are those prepared to invest in and embrace technology, just as they would in other aspects of life. They’re the clients that are willing to pay accounting fees monthly just as they would their mobile plan, business insurance or Netflix account.
They’re the types of clients that will listen to your advice, value and respect what you tell them and plan on working with you for many years to come.
These attributes should apply to all your clients regardless of whether they need your assistance with STP.
But the point of getting you to consider this as part of your STP strategic plan is to encourage you to consider where the value lies in transitioning clients.
This is because you may have clients who won’t see the value in the project, who might resent and resist paying for it, and end up leaving you in months to come.
In the same bucket are clients you’ve tried to help in the past that are not really aligned with you and your practice values. They may be clients with considerable Super Guarantee (SG) outstanding and whom show no interest in remediating the situation, for example.
Your practice’s direction may be at odds with the way some of these clients operate their business and interact with your firm and it may in fact be better for both parties if STP is the reason for you to part ways.
You will most likely find that have additional work will present itself to you as you move your clients to cloud accounting software (not just the STP employers) as you have access to real-time data. The excess capacity that you created from letting go of non-ideal clients will make way for more ideal ones, while also enabling you to offer more high-value advisory services.
Think strategically about STP-related services
The actual Single Touch Payroll software setup and transmission has been made easy by the payroll vendors’ software development teams.
They’ve been working closely with the ATO to make sure their solutions are designed for straightforward implementation and easy to use each pay cycle.
ATO Assistant Commissioner and STP Lead John Shepherd, has been extremely interactive and engaging during his appearances at ATO events, forums and webinars, industry events, on Twitter and as a guest on a number of podcasts.
Shepherd’s commitment and message is: “The ATO is here to make the transition as smooth as possible for employers to ensure they meet their obligations”.
The design of STP has been such that it’s aligned with natural business systems and I’ve been told by both SMEs and accountants that both the setup and the actual transmission definitely have been seamless.
So the question for accountants becomes, how much involvement do you want when it comes to STP?
This is something to think about very carefully especially as you’re most likely juggling March 2019 BAS, 2019 FBT, the last of the 2018 annual accounts and tax returns, on top of tax planning.
Some questions to consider:
- Will you do it all in house, or can you outsource to a reliable and trusted bookkeeper that you can work closely with?
- Will you offer your clients a payroll advisory service where you audit their current payroll system and processes, make recommendations and map out new procedures?
- Will you offer clients an initial setup of STP-enabled software?
- Will you offer STP and payroll systems training?
- Will you offer a review service of their lodgements post STP implementation to ensure all information transmitted to the ATO is complete and accurate?
- Will you offer a review service to make sure clients are meeting PAYG and SG obligations as well as their STP reporting obligations?
- Will you advise on the likely ATO ramifications for past SG obligations that haven’t been met that will become obvious to the ATO once they start reporting via STP? And a service to complete the necessary Superannuation Guarantee Charge statement?
- Will you offer a service for STP year-end reconciliation and finalisation?
- Will you process and lodge STP information on behalf of your clients using ‘no-cost’, or ‘low-cost’ solutions available to micro-employees? (Be aware of your potential accessorial liability, which will cover underpriced STP services).
- Will you offer a service that moves clients to an online accounting solution as part of your STP service?
Pricing for STP-related services
How are you pricing for the other services you provide? Is it based on time taken or on value provided?
I’ve used a combination of both, and for most of the services I offered, I came up with a standard or minimum price for each service. That price was calculated based on several factors, but ultimately it comes down to being profitable for me to offer that service.
The advantage of this method is that there are no surprises for the client. They could say ‘yes’, or they could say ‘no’.
One of my first bosses, Professor Frank Clarke used to say to me, “Amanda, what you lose on the merry-go-round, you pick up on the ferris wheel”. And that was my rationale when I set my standard fees and it served me well.
As you think about STP pricing, consider your 2019/2020 pricing for other services. This is your opportunity to remedy some old legacy pricing that’s costing you dearly.
This could be a new era for you that ensures your practice is delivering your potential profits in full.
Some things for you to consider as you determine your pricing:
- STP implementation is a one-off investment for your client
- There’s an element of training and familiarisation that you and your team will invest in that should be taken into account
- You’ll develop efficiencies the more STP implementations you do, but that doesn’t diminish the value of your services, so design your pricing to take full benefit
- Accountants and bookkeepers assisting clients with STP processing and reporting may inadvertently be caught out under Fair Work’s accessorial liability laws. If you decide to offer such a service, please consider what additional functions are required before you hit ‘submit’ to the ATO. For example: pay rates, pay classifications, national employment standards, modern awards, PAYG withholding and SG obligations.
What STP accounting software do you want your clients to be using?
Some accounting practices choose to be product agnostic when it comes to accounting software.
Others will choose only a very limited number of products, and some will basically navigate their way through anything and everything.
When I was in practice, I sat in the middle and only worked with clients’ cloud accounting software from two vendors.
This created efficiencies for myself and my team. We could spend more of our time providing the advice and services our clients wanted, needed and were happy to pay for.
This is an excerpt taken out of a client seminar I ran in April 2014:
Here are five reasons why cloud accounting will change your business (and your life) for the better:
Multiple versions of data files are gone and backup is automatic
The file remains in real time, all the time
Data entry is so yesterday
Business owners can make better decisions
It offers mobility, flexibility and a better lifestyle
I wanted to share this with you to empower you to make a choice of what products works for you and your team. Those that will allow you to standardise and systemise the work you do so that you too can spend more time providing the advice and services that your clients want, need and are happy to pay for.
The point to be made here is one that underpins this entire article: there are ‘no-cost’ or ‘low-cost’ solutions available to micro-employees purely to deliver STP data to the ATO.
If recommending such a product is not in alignment with your overall strategic plan for the clients you wish to work with and the services you wish to offer, then it may not be a product that you wish to work with.
I’m unsure as to how such products will integrate with your existing software and processes, but if manual reconciliations and processes are required that in turn increase the costs of delivering BAS or year-end services to clients, that reduce your profits of delivering those services, and that add more mundane, repetitive work that should be by now redundant due to feature-rich, online accounting software,
I’d be questioning whether to recommend any no-cost or low-cost solutions in your overall STP strategy.
Regardless of which path to STP success you choose, I’m excited to hear all about the journey and how it helps transform accounting practices across the country.