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What’s the purpose of your accountant?

The answer to this question seems to be obvious – to do the administrative chores! You want to get the taxes right, declarations submitted on time, and answers to your questions when you have them. The last one is already a stretch to some accountants, though, as they often have too much on their plate or they just don’t know or care about the client. While we are not advocating on choosing the most expensive accountant, it does make sense to be thoughtful of the accountants promising ridiculously cheap prices. Meaning, they are working with too many clients to have sufficient time to spend on each client.

Let’s make a quick calculation. There are some service providers in Estonia who say their services start at 15€/month + VAT. For the sake of simplicity, we won’t include VAT to our calculations, because VAT belongs to the state anyway. If it’s 15€ per month that you make per client, then how many clients do you have to have in order to make a decent salary, pay the office (OK, it can be a home office as well), any supplies and utilities that come with providing the service?

Let’s say the accountant is satisfied with the 1200€/month gross salary. The company expense to pay out that salary every month is
1605,6€ (includes all the social taxes and insurances, pension etc). The expenses on the office and other necessary stuff like the internet is 200€/month. So we’re looking at a total 1805,6€ total expense per month. Ok, so the company should make some profit as well, and if there are other employees, then there should be some profit per each employee. Let’s say company needs or wants to make 200€ per month profit per accountant – it’s an extremely low number and not an actual goal anyone would set for their business, unless the company employs hundreds of people, but let’s just run with it.

So, we are now at 2005,6€ in required revenue per month. This accountant needs to serve 133,7 clients per month – let’s round it up to 134 for the sake of an argument. 134 clients!

Ok, 134 clients for one accountant is crazy. So, let’s assume half of them are inactive and do not require monthly accounting. We end up at 67 clients per accountant. This is getting more realistic now, but still a very high number. Imagine submitting declarations for 67 clients on before 20th each month – providing full attention and care for each one. It’s not only impossible, but it makes your accountant prone to simple mistakes. Mistakes, which can turn out to be costly.

At Comistar, we believe in focusing on fewer clients and concentrating on providing higher value than just declarations. Meaning, we help clients to actually understand the numbers in their business, how they are doing, create comparisons with previous periods, and in general help to make sense of the numbers in their business. If you can’t understand numbers in your business, you’re pretty much aimless. There’s so much more than the service provider can do besides just submitting the declarations.

One of the simplest things we advise our clients to do is to open two or three accounts in the bank. Ideally, one that you can’t touch for a certain period of time. One account is for everyday transactions, one account is for taxes (VAT etc), so you wouldn’t have a false understanding of how much capital you have on your account on any given moment, and one if for profit. The profit account is extremely important, as entrepreneurs often hustle hard, pay salaries to everyone else, but never get any rewards or make a profit. So we advise our clients to pay themselves first. It can be just 5% of each incoming sum or even 2% of each incoming sum – but always something goes to the profit account. If you feel that you need that money on your transactional account to make ends meet, then it forces you to work harder. But you have to reward your efforts as an entrepreneur.

So, what do you think is the purpose of your accountant? Just simple declarations, or something more?

Comistar provides business, legal and tax support for e-residency companies. Our core focus is on Fintech licensing, e-commerce companies, blockchain industry and affiliate marketers. We’ve been operating for over 5 years and have helped more than 300 companies to get started in Estonia.