Bookkeeping and Tax Compliance Project Feasibility - Essay Example

Bookkeeping and Tax Compliance Project Feasibility Student’s Name Institutional Affiliation Bookkeeping and Tax Compliance Project Feasibility For the last eight years, just after graduating from UNE with a Bachelors in Business, I have been working with Smith and Associates which is an accounting firm located in a big regional town. Having worked up hard to rise through the ranks and enrolling for the second time for my MBA at UNE, I have been thinking about my prospected future career plans and I have come up with two choices. one, I could buy a share at Smith and Associates or in another accounting firm, or set up a business that provides bookkeeping and tax compliance services to small and medium businesses that are in my town and its surrounding areas. After an observation, I have noted that only few accounting firms provide these services and majority prefer instead to offer the high-end services like auditing and superannuation. Through an assessment of the three options, I have chosen not to buy a share but instead start up a business that provides the services of booking and tax compliance. The following is thus an assessment of the market, product, and the technical feasibilities of this idea. Bookkeeping and tax compliance services are a neglected area in the accounting industry. The majority of the existing firms have moved from the two practices to engage more in services like auditing, financial planning, superannuation, as well as information and communications technology. However, bookkeeping and tax compliance services are of paramount importance to small and medium-sized businesses. In typical scenarios, bookkeeping may be perceived as time wastage in accounting, but it is a crucial factor that has the potential to grow or break a business. On the other hand, tax compliance by small businesses allows a stable flow of predictable revenues to financial development goals. Therefore, if the firms can be helped to maintain their records as well as determine the amount of taxes they are supposed to remit, then they can be able to plan their finances for future growth. The bookkeeping and tax compliance business will operate in the accounting industry where the current trends have shifted to services such as auditing, information and communication, financial planning and superannuation. Also, with the existing fee pressures and rising costs such as staff labor, and the lack of qualified accounting staff in the accounting industry, firms will be forced to examine critically the kind of services they offer (Russ, 2015). In addition, their concentration in the industry and their placing in the market in comparison to their consulting and technical resources as well as competition is an area that they will need to examine. Therefore, the industry niche, as well as service segment and profit centers, will be subjected to more pressure for satisfying results with continued competition (Wallman, 1996). Also, firms will proceed to merge with consulting and advisory organizations that fit with their general services to offer integrated solution services to the market (Russ, 2015). As a result, bookkeeping and tax compliance services will be forgotten thereby creating a feasible niche as the firms move to new ventures. The key driving forces that have significant impacts on the performance of accounting industry are one, the increase in economic openness by small and medium sized businesses. Two, increase in privatization of companies, the continuous increased in economic development in the country as well as desire to engage in international trade by small businesses (Alia & Branson, 2011). Also, a stable government in the country and democracy has a significant influence on the accounting industry (Watts & Zimmerman, 1978). The target market for this business are the small and medium-sized firms that have an established foundation and the potential to grow. The estimated size measure of the segments is about 1500 small and medium enterprises in the town. The section rate of growth is seen to be growing steadily and is increasing at the rate of about 5 percent annually. The small and medium businesses constitute about 15 percent proportion of the general business market. As the main customers, their primary need is to be able to keep track of their financial operation records as well as have a proper understanding of how the tax system operates together with tax remittance procedure (Scott & Bruce, 1987). Therefore, these customers are in need of proper bookkeeping and tax payment services. Thus, their buying motives are to be able to keep track of their financial records and operations as well as be able to predict their revenues through a constant flow after tax deductions (Brink, Cant, & Ligthelm, 2003). The usage of these services will be medium since many small business people have a negative attitude towards tax remittance while the rest do not see the need for bookkeeping since their activities are small (Maseko & Manyani, 2011). However, with increased awareness creation, the number is likely to rise with time. The estimate of the size of the existing small and medium business in the market is at 800 (Kilkenny, Nalbarte, & Besser, 1999). As a result, this proportion represents a 53 percent potential adoption of the bookkeeping and tax remittance services. Factors that are likely to affect the demand for the company services are; the situation of the economy in the country. As an external factor, market fluctuation as a result of issues such as politics and currencies devaluation may cause the demand for bookkeeping services to decline. The other factor is finance. The solvency of financial lending institutions who are the primary sources of loans directly affects small and medium-sized enterprises (Ray, 2016). Therefore, issues such as interest rates, credit, and loan availability to these business owners have the potential to affect the demand for the bookkeeping services. Also, the law is another factor that could affect the bookkeeping business (Ray, 2016). Increased taxes may demoralize the business owners and as a result, see the need not to hire consultants to help them with remittance tax issues. On the other hand, the same system if reduced could leave more revenues to the business and thus the need for them to have professional advice on how to keep records and tax remittance calculation so as to be able to determine the likely future revenues. With these factors at play, the estimated annual growth for the bookkeeping business and tax remittance services will be 14 percent in three years' time. Competition The primary competitors in the accounting industry who are likely to pose a threat to the bookkeeping business are the current advent of technology that has formulated internet-based programs that simplify the bookkeeping processes to their users (Tia, 2016). As a result, the existence of this service may remove the need for small businesses to seek out the help of a specialized bookkeeping or tax remittance service. Also, the already established accounting corporations pose a competitive threat since they have the potential to expand the business and incorporate it in the many services that they offer (Tia, 2016). Also, the giant companies have the ability to provide incentives to the business customers which as a starter the proposed business may not be able to offer. Strategic Group Map Figure 1 High quality services Low Accessibility (Price) High High differentiation of services will be used to position the company against competitors by concentrating purely on bookkeeping and tax services (Porter, 2008). Highly qualified accountants will get hired with the aim of instilling confidence in our clients. As a result, the services offered by the company will be of high quality and in the long run, will pave the way to marketing the name of the enterprise. When quality services get offered, it will be easy for the company to sell to market the name of the company with the one thing that is known for, "high-quality bookkeeping and tax services." Consequently, this will help establish a loyal customer base that will assist the company to wither competition (Porter, On Competition, 2008). The other strategy will be to profile critically the market targeted and segment it through understanding the main challenges that it faces. The profiling will involve talking with both small and medium size businesses owners. Through the understanding of existing challenges, it will be easy for the company to deliver its value as it continues to monitor the activities of the competitors closely. Operations Plan The bookkeeping and tax service Company will get located at the center of a smaller town. This strategic positioning will enable the customers to access the company from all sides of the city and at a fair cost (Johnson, 2006). Also, being located in a smaller town will enable the company to have a more individualized relation with its customers thereby a high level of quality services. This personalization is an opportunity that may not be available if the business was to get set in a large city. Also, being set in a smaller town is appropriate since that is where a majority of the small and medium size businesses are located (Wennberg & Lindqvist, 2010). Therefore, moving closer to the customers will reduce the amount of competition that would be if the company was to get set in a big city center where there are large established corporations. However, despite the perceived advantages, locating the business in a smaller town has its disadvantages. One is the proximity of the smaller town to a large city in which some customers may opt to seek bookkeeping services from companies in the city and at a cheaper cost. The other disadvantage is the reduced business volume available in a small town (Stone, 1997). Compared to the city, a small town has fewer people and thus fewer firms. Last is the disadvantage of employee experience. Due to the little business volume, operations within the company may be limited and as a result less exposure of the employees to more technical experiences. The business premises for services will get leased for the first few years of operations. An estimate of the cost of the annual rent is at 3,600 dollars which translate to 300 dollars per month. The leasing method of acquisition will be best for at a start since there is no certainty of how the business will perform and thus cost effective to lease rather than buying (Miller & Upton, 1976). In service delivery, the company will have a direct contact with the clients and thus no agents. Figure 2 Direct contact As for client file management system, the physical files will be locked up in a cabinet and arranged alphabetically for easy retrieval. Concerning the system, the company will use a credenza software due to its outlook that allows easy retrieval of information. Figure 3 Source, (Credenzasoft.com, 2016) The facilities that will be required for operations are; i. Books of accounts – bought at 50 dollars. ii. Forms and files – bought and 210 dollars for the first few clients. iii. Five computers – purchased at 750 dollars. iv. File cabinets – bought at 150 dollars. v. Five calculators – bought at 75 dollars. vi. Seven desks – purchased at 175 dollars. To maintain the facilities, each employee will be accountable for the services they use and any damage as a result of negligence will require them to meet the cost. Supply of materials such as files and papers will be outsourced from a bookshop. The criteria that will be used to select the contractor will be through analyzing the quality of their products as well as their prices. The one with the best quality products will get chosen and the contract agreement drafted to reflect the cost and quality of services offered (Holt, Olomolaiye, & Harris, 1994). The contractor should agree to supply quality files at a cost of 3 dollars each. The primary resources that will get used are records and papers which will be provided by the contracted bookshop. In inventory control, a fixed order quantity management method will be utilized. The company will make use of non-team accountants to take care of the client's needs during the seasonal changes (Walley, et al., 2006). The strategy will get achieved by screening the most competitive independent individuals that could help in such scenarios. Another will be through managing the daily as well as weekly variation of the demand. On the other hand, the likely legal and regulatory issues that will get associated with the business are those of registration of the firm before the commencement of operations (Radaev, 2002). The other is acquiring the license to operate, and privacy acts since the company will be dealing with confidential information of customers' businesses. Idea Feasibility From the above information, it is evident that the idea is highly feasible. The target market is large enough to keep the company in operations, and as more awareness is created concerning the importance of bookkeeping, more companies will seek the services. Also, the service of bookkeeping and tax is feasible since many accounting firms have neglected the area thereby creating less competition. On the other hand, its technical feasibility does not pose any challenge since the premises for operation will be leased and thus, less cost will be involved thereby leaving more capital to acquire the other necessary facilities. Also, as a qualified accountant, I will work to see that the company runs as intended to provide our customers will the highest value of service. References Alia, M., & Branson, J. (2011). The effect of environmental factors on accounting diversity - A literature review. Available at SSRN 1780479. Brink, A., Cant, M., & Ligthelm, A. (2003). Problems experienced by small businesses in South Africa. In 16th Annual Conference of Small Enterprise Association of Australia and New Zealand, Vol 28, 1-20. Credenzasoft.com. (2016, April 22nd). Credenza Basic Features: Manage Files / Projects / Clients. 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