Gordon Hrnjak Rae

www.ghr.com.au

Executive Summary

Gordon Hrnjak & Rae provides accounting, taxation and financial planning services to small businesses and individuals.

An online system was initiated in 1997 and driven by the rapid uptake of e-commerce among industry peers.  It was also envisaged as a vehicle for both revenue generation and expense reduction.  A brochure style website was created to inform visitors of the company's service offering.  The website also contains interactive features, such as real-time share prices, account information and subscription to an online newsletter.

The other main feature of the e-commerce strategy was the use of an electronic lodgement system.  Consistent with the Government's plans to make online services more readily available, selected forms can now be downloaded and lodged with regulatory bodies such as the Australian Securities and Investment Commission (ASIC) and the Australian Taxation Office (ATO).  This has brought many benefits to the company, including increased staff productivity and reduction in time spent on administrative tasks.  For clients, electronic lodgement facilitates faster turnaround of tax assessments and returns.

With an initial investment of $59,980, an operating benefit of $320,805 was made in the first year.  Additional revenue of $445,000 was generated from e-commerce resulting in a $200,000 gross profit.  Cost savings totalling $155,000 in 2001 were related to staff time saved as a result of increased business efficiency. 

Although the company is satisfied with the current online system, plans have been made to further enhance operating efficiency.  These include the provision of live share price feeds to save staff time in responding to clients' requests regarding share prices.

The business

Gordon Hrnjak & Rae provides accounting, taxation and financial planning services. The company was established in 1971 and mainly targets small companies and individuals (40 years plus).

Gordon Hrnjak & Rae are based in Mona Vale, NSW and currently employs 12 full time staff.

Getting Started

Director, Brian Hrnjak, initiated an e-commerce strategy in 1997 to support rapid growth of the company's client base.  E-commerce was seen as a solution for both revenue generation and cost savings.  Rapid uptake of online initiatives by industry peers placed pressure on the business to undertake similar developments to remain competitive.

Brian conducted research into determining what online capabilities would meet the needs of the business by comparing the e-commerce strategies of competitors.  A web developer was engaged to build the website.  Other technical issues were managed by an Application Service Provider (ASP).

The website is hosted on a separate server and information on the web page, such as industry news items and share market information, is updated by real-time feeds.  Other brochure-style content about the company's service offering is updated annually by internal staff.  The website is marketed in all company advertising material and search engines.

E-Government

As part of the Government Online campaign, Government agencies have been encouraged to increase their online presence in terms of interactive services and information dissemination to the public.  Technology is intended to form the basis for creating a more integrated and accessible regulatory system.  Consistent with this objective, several regulatory bodies such as ASIC and the ATO have developed lodgement systems by which certain forms can be downloaded and lodged electronically.

The online facility has brought many benefits to Gordon Hrnjak and Rae.  The faster processing time facilitated by electronic lodgements provides clients with earlier receipt of assessments and returns.  Accounting staff productivity is improved as time spent otherwise administering the process can be allocated to chargeable work.

Current E-Commerce Strategy

One of the primary objectives of using e-commerce is to reduce costs by streamlining business processes.  Interaction between the company and regulatory bodies such as ASIC and the ATO is conducted electronically. Tax returns and ASIC forms are lodged electronically while prospectuses and company secretarial documents are downloaded from the relevant websites.  Gordon Hrnjak & Rae believe that the Internet is the most effective gateway to the Government.  Online retrieval and submission of documents to government agencies via Broadband Asymmetric Digital Subscriber Line (ADSL) provides the company with improved staff productivity, time savings and enhanced staff accuracy.

The Internet is also used as a research tool for staff.  Government websites can be accessed for information on reforms, developments in legislation and case rulings.  Staff overseeing investment portfolios for clients can view real-time developments in client's financial position.  Internet research can be carried out on fund managers and equities while investment transactions on behalf of clients can also be executed online.

The website is primarily used to market the Gordon Hrnjak & Rae business.  Potential clients are provided with detailed information as to the accounting, taxation and financial planning service lines.  The website also acts as a financial resource centre where clients can access real-time share prices, financial market news and checklists for preparing financial plans and tax returns.  In addition, clients can access a password-protected account through which their investment portfolios can be viewed and monitored.  Instructions can be emailed to financial advisors.

Staff also have access to an extranet in which company information, training manuals and client details can be obtained.  The network is accessible offsite and is particularly useful for staff working interstate or from home.

Substantial security initiatives have been deployed to protect the investment made in online systems.  A firewall has been installed for both the intranet and extranet to ensure that only legitimate Internet traffic is being processed.  The server is password-protected as are each of the office computer terminals.  Anti-virus software has been installed and patches are downloaded on a real-time basis.

The company has installed Broadband Internet via an ADSL connection.

Revenue and Costs

* Note: Capital Expenditure is amortised over a four-year period

Financial Analysis

With an initial investment of $59,980, an operating benefit of $320,805 was made in the first year.  Revenue generated from e-commerce was $445,000, which contributed $200,000 to gross profit.  This revenue was derived from clients that used the company's services after visiting the website.

Cost savings totalled $155,000 in 2001.  All savings were related to staff time saved as a result of increased business efficiency.  Online management of banking and general administrative tasks have saved $44,000 and $75,000 respectively.  Similarly, use of electronic lodgement systems and email correspondence has saved staff time otherwise spent in travelling to and from client premises ($36,000).

Gordon Hrnjak and Rae invested $59,980 into initiating e-commerce over the past 5 years.  The most significant establishment costs have been allocated to network infrastructure including $10,000 for network boxes and cabling, $40,000 for a server and tapes, and $5,000 for a network consultant to assist in smooth implementation.  Setting up the website involved web development costs ($1,800) and registration of a domain name ($180).  Time spent by Brian in assessing competitor initiatives against the businesses own needs amounted to $2,000.

Ongoing costs totalled $34,195 in 2001.  The majority of ongoing costs were associated with maintaining the website, including Internet Service Provider fees ($3,500), web site hosting fees ($1,200) and external consultant time to update website content ($2,000).  Rental of the ADSL line amounted to $1,000.  In addition, $14,995 was allocated to the amortisation of capital expenditure over a four year period.

Non-financial Benefits

Clients have responded positively to the online system and the subsequent improvement in service delivery times.  In particular, electronic lodgement of tax returns to the ATO has facilitated faster processing of assessments and refunds. 

Use of email communication, the electronic lodgement system and access to Broadband Internet has assisted staff in managing the increasing volume of client work.  Streamlining of processes such as form lodgements has allowed staff to spend less time on administrative tasks and direct more hours towards client work.  Staff also use Broadband Internet to monitor client investment portfolios and conduct money market research.  The high speed connectivity of Broadband Internet assists staff in quickly executing online transactions in response to client portfolio developments. 

Furthermore, the greater information carrying capacity of Broadband Internet ensures that money market research and downloading of documents is a fast and reliable process.

Challenges

Gordon Hrnjak and Rae encountered some difficulty in convincing clients that electronic materials were not inferior to hardcopy.  The company also encountered some reliability issues with the Internet Service Provider.  Although the cost and benefit assessment of various online systems was a challenging process, the considerable benefits achieved have made implementation worthwhile. 

Future

Although the company is satisfied with the current online system, plans have been made for greater system refinement.  These include more integration between internal systems to reduce the duplication of data.  For example, the company is considering live share price feeds to save staff time in accessing share prices online.

Brian's advice to other businesses considering an e-commerce implementation is to thoroughly research the products available on the market.  He believes that e-commerce is the way of the future and implementation is crucial for business survival.