Accountants provide small businesses with a range of services, including book-keeping, preparing financial statements, calculating tax and advice on minimising tax and other costs.
Your accountant is likely to be your most trusted business adviser, so it is worth taking the trouble to make the right decision when choosing which accountant or accountancy practice to use. In the long run, it could save your business a lot of time, effort and money and if you’re paying an accountant, you should receive a first class service, no matter how small or established your business is.
This guide explains the services offered by accountants, what to look for when choosing an accountant and how to find and appoint one. It provides information on monitoring and assessing the service you receive and gives an indication of likely costs.
What services does an accountant offer?
A business plan is a starting point for a business and the owner of any business will use this to establish and grow. Many business owners find figures difficult or just plain boring and trying to do them yourself could prove far costlier than paying an accountant to do it for you.
From a tax perspective, the business is also properly administered, which gives piece of mind and frees the owner to do other things.
There are several aspects of your business that an accountant can help with:
- Start-up advice: an accountant can advise on the best legal status for your business such as sole trader, partnership, limited company, limited liability partnership (LLP), community interest company (CIC) and can help with other legal and taxation issues.
- Book-keeping: an accountant can offer a bookkeeping service. Even if you take care of your day-to-day book-keeping yourself, an accountant can help by advising on which records you should keep and what format to use (such as manual or computerised). Most businesses now use a cloud accounting software solution such as Xero or QuickBooks which an accountant can help you set up properly.
- Value Added Tax (VAT): if you do your own bookkeeping and are VAT-registered, you will need to prepare VAT returns. An accountant can advise on the best scheme for your business and outline the VAT rules you need to be aware of.
- Preparing annual accounts: most small businesses use an accountant to produce key annual financial statements, such as the profit and loss account and balance sheet. Limited companies and LLPs have to file accounts with Companies House and accountants can help with this too.
- Preparing tax returns: accountants are typically able to advise on tax rules, regulations, exceptions and case law that apply to your business sector. A good accountant can often advise on achieving tax savings. In addition, an accountant should be able to provide advice on presenting your case to HMRC in the event of an investigation or dispute.
- Business advice/management accounting: once your business is up and running, an accountant can set up systems to monitor performance and budgets, and improve efficiency. They can provide specialist advice on financial planning and potential investments.
Where can you find an accountant?
It is worthwhile looking for and, if possible, choosing an accountant before starting your business. Ask your friends and business contacts for recommendations. Your solicitor, local enterprise agency or bank manager may also be able to give you advice. You can find information in the directory of accountants held The Institute of Chartered Accountants in England and Wales (icaew.com)
Before you choose an accountant
- Check the accountant is suitably qualified and belongs to an approved accountancy body. Look for the letters ACA or FCA after a chartered accountant’s name. These qualifications mean the accountant has passed numerous examinations in order to qualify and has several years’ practical experience. Using an unqualified accountant might seem cheaper, but could cost you money in the long run if the quality of work or advice you receive is poor. Members of leading accountancy bodies must also ensure their technical knowledge is kept up to date by attending regular courses and seminars, as well as following a programme of continuing professional development (CPD) throughout their careers. They must also hold professional indemnity insurance with an approved insurer and at a level determines by their professional body.
- It is crucial that your accountant understands the sort of business you are in – for example, if you have a mail order business ensure your accountant has experience of that sector. It is also worth making sure your accountant has experience of working with small business clients.
- We recommend contacting three accountancy firms before making your decision, have a look at their websites and organise a face-to-face meeting with them. You need to find a person who not only has the appropriate qualifications and experience, but whom you trust and feel comfortable talking to. They should be able to prove their suitability knowing that their services will match your requirements and expectations.
- Most accountancy firms will hold an initial meeting for free unless specific advice is given at that meeting. Check in advance whether your first consultation will be free. Always be clear about how much you will have to pay including any additional charges.
Do I need an accountant when setting up a business?
For basic sole trader businesses, probably not, although you might pay an accountant to do your tax and VAT returns. Many accountants will even give you free basic start up advice, if you agree to them doing your accounts.
Once you have the finance in place, there needs to be some control to ensure the growth of your business is handled in the right way. Many of your concerns will be financial – adequate working capital, good stock control, invoicing and so on – and an experienced accountant’s advice can prove invaluable in such matters.
You can set up your own limited company without an accountant, although the bigger, more complex or high-growth the venture, the more advisable it is to seek professional tax advice right from the word go. You might regret it if you don’t.
How do I brief an accountant?
At the first meeting, describe your business and discuss whether the accountant can offer the specific services you need. Describe your current arrangements for keeping records and ask whether the firm could make improvements. Take a copy of your business plan and explain what services you require, for example business advice, financial reporting, tax or auditing work. In addition, if you do not have a business plan yet, but want to seek finance, an accountant may be able to help you draft your plan.
Ask to speak to existing clients of the firm before you sign up. If the firm refuses to provide details of these clients, it could be a sign of poor practice or unsatisfied clients. And allow accountants to pitch to you, as it’s not just about what you want, but also what they are prepared to offer.
Your contract with your accountant
When you appoint an accountant they will issue you with a letter of engagement. This is the contract between you and your accountant and should set out:
- The accountant’s responsibilities.
- Your responsibilities.
- The fees and payment details.
- Terms and conditions of service.
Find out who will be looking after your business and whether this will be a partner or a junior member of staff. Also, request an estimate of how long it is likely to take them to prepare your accounts and establish who to speak to in their absence. You should also ask what additional services the accountancy firm provides, such as advice on future tax planning.
You could also find out whether their services include sending regular bulletins to remind you about important deadlines or to update you on changes to the law.
How do I get the best out of my relationship with the accountant?
Ensure you keep in regular contact with your accountant to allow the relationship to grow and so each party can keep the other informed about any issues that arise. If you value their opinion then act on their advice. Don’t bargain them down too hard on price, you may get a deal, but you’ll never be top of their priority list.
Most accountants now use secure encrypted online portals to store your account, tax returns and other documents so that you can easily access them. Ask whether they provide this service and whether it is included in their fees.
When your accountant asks for something, provide it quickly. If you want to keep the fees down, do what you can to make their job easier. Make sure you keep adequate records and supply information to the accountant well in advance of deadlines. This should give you plenty of opportunity to discuss any tax implications and plan the future strategy of your business.
What does an accountant charge?
It is essential that you know your accountant’s charges, what the fees are based on and what services they include. Some have a fixed annual fee to complete accounts, business tax calculations and file documents, while others charge by the hour although this is becoming less common. Ask for a fixed annual fee to cover all the services you need. Fees may vary depending on the seniority of the person doing the work. If it is not a fixed annual fee, ask the firm for an estimate of what the annual fee will be and be prepared to challenge the final bill if it exceeds this.
Charges will vary according to your location, the size and complexity of your business and the size of the accountancy firm you have chosen. Fees are likely to start from around £100 per month the for preparation of management and annual accounts and tax computations if you are a sole trader and not registered for VAT.
Larger, more complex businesses that are registered for VAT should expect to pay at least £250 per month and often more. However, choosing a firm that charges the least can sometimes be false economy, instead, look for the one that adds value. For example, will photocopying and phone time be included in the cost or be extra?
How do I look for a new accountant?
Ensure your accountant gives your business proper attention on an ongoing basis. Your business may outgrow your accountant, or your accountant may outgrow you. In these cases, it may be necessary to look for a new accountant. Should you wish to appoint a new accountancy firm, you should end the agreement with your existing accountant before entering into a new one. Always set out a clear timetable for the transfer and make agreed payments to the accountant on time.
How you should I deal with disputes?
Accountants who break their professional codes of conduct are liable to disciplinary action by their professional body. Contact the relevant body for advice if you are unsure whether a complaint is appropriate. All qualified practising accountants must hold indemnity insurance that will protect their clients, in most circumstances, from loss caused by negligence on the part of the accountancy firm.
Am I getting a good deal?
To gauge their performance, look at what you are getting from them. At a basic level, are your accounts and tax returns prepared on time? Do they meet with you regularly either face to face or online, are you being billed as agreed and are your telephone calls and letters answered?
Take note of the advice they’ve given you. Have they come up with ideas you wouldn’t otherwise have thought of? And if not, is that because you haven’t liked the ideas, or because there haven’t been any?
Hints and tips
- Find an accountant before you start your business.
- Investigate your prospective accountant’s reputation.
- If you need help with more specialised areas such as audit, investment business or insolvency work, make sure the accountant is authorised to carry out this type of work.
- Establish who will be dealing with your business. Several people may work on your accounts and you need to feel comfortable with everyone you deal with.
- Remember to inform your accountant as soon as possible of developments in your business affecting your financial circumstances, including, for example, cash flow problems or changes to key personnel.
- Review your accountant’s charges annually.
- Before you sign up with an accountant, ask for a guarantee that charges won’t rise steeply after the first year.