How to choose your accountant

Do you really need an accountant?

If your business is small and you have less than £15k turnover pa and are organised, willing to research various business guides and the HMRC website to keep up with tax, VAT, payroll, NIC legislation … then the answer is likely to be No.

If you are not organised, then either get organised or get an accountant, as at the very least they can save you the various HMRC penalties and interest that is charged for late registration, late submission of tax returns and late payments of tax.

How much should you pay?

As a guideline price (to use when comparing your quotes) the preparation of sole trader accounts, tax return, liaison with HMRC and ongoing business support can cost from £425 with HRBS (depending upon the complexities of your affairs).

If you are quoted much below this, then it may be that either unqualified/inexperienced staff are doing the work or it is outsourced to countries such as India. If you are OK with this, then you can take advantage of very low fees. If on the other hand you are quoted substantially over this, get a second quote as you may well be over charged or your accountant’s inhouse fee structure is inflexible or just plain expensive!

An accountant can help you and your business.

An accountant can also (provided you give them the information) make sure that you register for VAT when appropriate, do not pay illegal dividends (limited companies only), pay tax on time, file the necessary HMRC returns on time , claim tax deductible expenses, schedule purchases of equipment to maximise tax deductibility etc.

If you are setting up a new limited company, invest in 1 or 2 hours of an accountant’s time before it is formed to make sure it is done properly e.g. with the right split of shareholding (i.e. ownership), and HMRC forms such as CT41G are submitted on time (£100 fine if late). Companies can be formed online from £35 + VAT so £50-£100 extra to make sure it starts off on the right footing is a good investment. Your accountant should be able to help you form your company (as a guideline at HRBS we charge from £85 + VAT which includes Companies House formation fees).
Choosing your accountant.

At HRBS we take on new clients every week. This is a mix of brand new businesses, transfers from other accountants and those using an accountant for the first time.

Accountancy is similar to many services. When discussing my ethos with new clients, bank managers etc I use the analogy that is relevant to most of us i.e. car servicing/repair. You can get your car (aka business) serviced at a high street franchised dealer with a nice, spacious, well furnished showroom (which you are paying for via inflated charges) and smile through clenched teeth when you settle the bill. Alternatively, you can choose a smaller, specialist garage who you know understands your car (aka business), remembers what they did at the last service (you don’t want to have to pay their hourly rate for them to re-read your file and refresh their memory), has a pragmatic approach on how much to spend on its upkeep, agrees a fixed price with you before they do any work, and more importantly, you trust what they say/do.

I am pleased to say that HRBS fits into the category of specialist garage.

For example, in common with many successful businesses, HRBS is based outside of a city centre. In our case we are near the Yorkshire market town of Penistone and with office rents a fraction of many city centre practices we am able to pass on the substantial cost savings to my clients. If you choose to use a high street, city/town centre firm then bear in mind that part of your fee will be going towards the office and its upkeep.

I would suggest the first part of the process would be to get fee quotes and general business strategy advice (you will have to provide copies of your accounts/projections, details of your business, your business aims and also personal income for this to be done effectively). Click here for a free, no obligation fixed fee quotation.

Questions to ask your accountant.

If I were choosing an accountant I would expect a minimum of recommendations of remuneration/dividend structure (for limited companies) and for all businesses: offers of regular business review, suggestions for streamlining your business processes, increasing profitability, added value services (that are relevant to you and not just lots of newsletters which they subscribe to and email on!), ongoing business support, ability to file returns online etc. A menu of prices would be useful so that you can choose what level of service to purchase and add as your business expands (e.g. VAT returns, book-keeping, payroll etc) .

Choose an accountant who can file HMRC returns online.

For example if you require payroll and your accountant can file the 2008/2009 returns online you will receive £75 as a tax free incentive which goes some way towards settling your accountant’s fees for running the PAYE scheme. If you are a sole director/employee then the PAYE scheme can be run so that you pay minimal NIC, accountancy fees and get the tax free incentive (for example HRBS charges £120 for a full year’s Payroll and year end returns (p35, p14, p60) for one director).

Do you really need a local accountant?

You may also consider whether your accountant needs to be local. Do you really need to have a regular face to face meeting? Do you value having a local accountant over the distant, competent/specialist, cost effective accountant?

In over 20 years in practice, I find that unless I am acting as the “in house accountant” preparing payroll and management accounts for local companies, a client face to face meeting is not required. Correspondence is via email/fax. Queries/advice are usually emailed and read/answered at each other’s convenience which is more efficient than leaving messages for each other to call back and also the questions/answers are more focussed.

Do you have to take time off work to deal with your accountant?

Choose an accountant who is available “out of hours” either by telephone or email. An accountant who is available via email can give a more considered answer to your question and provide links to useful resources. There are very few queries which need an instant response.

Changing your accountant.

As a general note to anyone who is thinking of changing their accountant, I would suggest that it is done a few months before the end of the tax year (5 April 2009) so that any tax planning measures can be put in place. For those sole director/shareholders of limited companies who are considering changing their accountant (or getting their first accountant), they need to start the process in December/January so that any dividend planning can be done well before March to take advantage of their basic rate band (see article here.)

As a result of your research you may find that your current accountant is either reasonably priced and/or giving acceptable advice/service. Alternatively you may find an accountant who has their finger on the pulse and better suited to servicing your business. As you know accountancy fees are tax deductible in the year/period to which they relate (not when they are paid). For example your accountant should be including their fee (as an accrual [ sorry jargon alert ] ) for the 2007/08 accounts in those accounts so that you get the tax deduction 12 months earlier, rather than the accounting year in which you paid the bill.

Contacting your accountant.

Depending on your accountant’s approach to email, you are likely to get better value from your accountant by emailing your query and getting a written response, rather than exchanging niceties over the phone which, unless you have a fixed fee arrangement, you would be paying for under the traditional/old fashioned hourly charging basis of many practices. So I would suggest getting a fixed fee which includes ad-hoc support.

What you can do to maximise the relationship.

Your relationship with your accountant depends mostly on the information that you give them. If you have a fixed fee arrangement (recommended) make sure that you keep in touch with them so that problems don’t arise and they have to charge extra in trying to resolve them if your books/records do not reach the agreed standard.

Keep proper books and records.

The records are your business records and therefore it is in your interest to maintain proper accounting records (and a legal requirement for company directors). Every business needs to have an accounting system so that at any time it is able to extract information that will show how the business is doing i.e. profit and loss account and balance sheet. At HRBS we provide such software for free (for example, we provide a selection of an Excel based solution and winweb online solutions FOC) or can supply Quickbooks software at a discounted price as we are Authorised Professional Advisors . We also offer a sophisticated online solution with includes payroll and online VAT return filing. Click here for a free 28 day trial.

The accounting system should be able to provide the following information:

Balance sheet (i.e. a snapshot of assets and liabilities at a particular date [usually the business year end])
* Assets owned by the business (e.g. equipment,vehicles, stock)
* Cash/Bank balances
* Monies due from debtors
* Amounts earned but not invoiced (e.g. commissions)
* Monies payable to creditors
* Monies invested in stock
* Drawings (for unincorporated businesses)
Profit & Loss account (i.e. details of sales and costs over the period [usually accounting year])

* The business’ income
* Costs of goods purchased for resale
* Direct costs (eg domains/hosting/PPC costs)
* Payments for wages and salaries of staff
* Business operating expenses

It is recommended that an suitably experienced accountant is involved when setting up your accounting system. I have seen Christmas gifts being entered as Goodwill in the accounts, monies introduced by the proprietor/director as sales etc.

To recap, under current tax law an accountant is not a legal requirement but after reading the above and in your own experience of running a business, you may consider that some external expertise may be helpful if at the very least you bounce your business ideas off someone each month/quarter.

Click here for a free, no obligation fixed fee quotation.