Whether you operate as a sole trader, partnership, or company, it is likely that you will need an accountant to help prepare your end of year accounts, tax returns and financial statements. Whilst the accounting industry is regulated by several different bodies, this is no guarantee that all accountants will be suitable for your business. As with many industries the accounting profession has some excellent, informed, disciplined individuals, but it also has some more colourful practitioners.
You could of course try to complete your own accounts. However, as a business start up it may be argued that your time and efforts would be better spent focusing on making business a success.
So if looking for a new accountant, how do you find the right one?
Recommendations or referrals from people in business and friends can be very useful. But before you jump straight into bed with an accountant that has been recommended there are two sides to this argument that need to be considered.
On one hand you may be assured by someone’s ringing endorsement of their accountant. In business you enter into many relationships with suppliers and clients. Your accountant gets to know you a little better. They will most likely learn about your business and they will have access to your company’s turnover, profit or loss figures, and all the financial secrets that you would not tell your friends. You need to be able to trust them and a recommendation can make you feel more comfortable with your choice.
On the other hand what if things go wrong? If you choose to use a friend’s accountant or even use a friend as your accountant, then at least consider the following points.
What if you disagree with accounting practices or the fee?
What if you decide to move to another accountant in the future?
What if they make a mistake or give you bad advice?
Will any of these points affect your relationship with the person that made the recommendation? Worse still what if you are using a friend to prepare your accounts, how do you discuss problems without causing offence?
Selecting an accountant on recommendation alone is risky.
Anyone can claim to be an accountant (scary but true). You could set up your own business and start selling your accountancy services tomorrow. So how do you know who to trust with your accounts?
Whilst there are many good accountants that operate without qualifications, regulation, or membership to recognised accounting bodies. There are also some that will not be suitable for your business. Taking a gamble with an unqualified accountant is taking a gamble with your own money. There are many regulatory bodies that work with accountants but if you are in any doubt look for a Chartered or Chartered Certified Accountancy practice.
Accountants can only become Chartered or Chartered Certified by passing very rigorous examinations. These are set by-
Institute of Chartered Accountants in England and Wales (ICAEW)
The Institute of Chartered Accountants of Scotland (ICAS)
The Association of Chartered Certified Accountants (ACCA)
Chartered Institute of Management Accountants (CIMA)
You can check an accountant’s membership of these organisations and their qualifications directly with the relevant organisation.
To maintain Chartered status an accountant must complete an agreed number of hours training each year. This is referred to as continuing professional development. Chartered accountants have to complete this training to make sure their skills and knowledge are current.
As a start up it is unlikely that your business will need to be audited. However, if your company does need to be audited you will also need to chose a firm of accountants that are registered auditors.
Is the location of your accountant important to you?
Most people have access to the internet almost 24/7 these days. There are numerous online accounting businesses and accounting solutions. You can even get bookkeeping assistance online.
Alternatively you may prefer to actually meet your accountant. This may impact your decision or at least reduce your short list. You may make contact with a very helpful accountant via recommendation, networking or forum, but they may be several miles away from you. A one hour trip once a year may be OK, but a three hour round trip once every couple of months may get a bit tedious.
A locally based accountant may also visit your business. Not all accountants are glued to their desks. They can help you set up your accounting software on your PC. They can visit your office/home, load on the relevant software and set up your company details. They can also update your company accounts at the end of the year, post journals, and reconcile any outstanding issues. This may be difficult if they live miles away or they only provide online support.
Size of accounting firm
The actual size of the accountants business may not be your first consideration but it may influence your decision. For most start ups a smaller local accounting business is often more suitable than a large national accountant that deals with large corporations. However, you will still need to decide on the type of accountant that you want to work with.
A small accounting business with a sole owner is likely to be cheaper than the accounting firm in centre of town with the stunning office and large car park. Selecting a sole trading accountant has several benefits not least the potential cash savings. You may develop a more personal relationship with the individual as you always have a single point of contact to help with simple questions or to prepare your full trading company accounts. The accountant may take more interest in your business. You are less likely to feel like just ‘another client’ and you may appreciate their input and suggestions regarding best practice for your business.
However, a sole trader accountant has several potential issues that need to be considered.
What do you do if they are on holiday, sick, in meetings, or suffering with a long term illness? You may regularly ask your accountant questions about your accounting software. Some people see their accountant once a year whilst others maintain regular contact. Who will answer your questions if they are not available?
Do you need your accountant to be your registered office service? Some accountants allow you to use their address as your company’s registered office. This means that they receive all of your official company correspondence, including tax notices and reminders. They are able to act on any notices as and when they arrive. If considering a sole trader accountant are they based at home? Will they allow you to use their address as your registered office address? If they do what if they move?
Specific business requirements may require special accounting knowledge. Whilst an individual operating on their own may have an excellent knowledge base, they may not provide all of the services that you need in the short, medium or even long term. Some accountants provide a full range of services including-
Accounts and Audit for companies
Accounts Software – installation, setup and support
Acquisitions and Disposals
Business Start Up Services
Cash Flow Forecasting
Company Secretarial Services and Registered Office Services
Corporate Tax Services
IT Support beyond your accounting needs
Payroll Bureau for individuals and companies
Raising Finance advice
On a personal level some accountants also provide the following for individuals outside of running a business
Financial Advice and Investment Advice
Inheritance Tax Planning
Self assessment/tax planning
For some businesses the fees will be the main consideration. The lowest price service may secure the provision of accounts for many years. For others a fair fee is acceptable and they expect to pay a reasonable charge for good service during the financial year. An often used phrase by starting-business.org,uk is that a good accountant should save you money. Their advice should reduce your tax bill and stop you making expensive errors in your accounts.
Fixed fees of variable fees.
There is no doubt that a fixed fee for preparing your accounts avoids any nasty surprises. You can budget for the charges and many accountants allow for monthly payments, spreading the fee evenly, instead of supplying one large bill once a year. We would advise caution with this approach. Whilst it may secure a good deal can you be assured of getting the best advice. If your accounts turn out to be more complicated than originally discussed do you expect the accountant to simply absorb the costs and make a loss? You should consider the possibility that a fixed charge may need to be renegotiated. Otherwise the accountant may not feel inclined to offer total support if they are making a loss by preparing your accounts.
You may argue that they agreed the fee, they should accept the consequence. Remember, they are there to support your business, offer advice on improving your business and to assist you in reducing your tax bill. Perhaps it will be your business dealing with the consequences of a cheap service whether you realise it or not.
A solution to the uncertainty may be to discuss fixed fees for certain services. For example filing the corporation tax return at HMRC, submitting accounts to Companies House, VAT registration, company formation, payroll. All of these could be determined in advance.
Meet the accountants
Having whittled your choice of accountants down to a few preferred options it would be advisable to meet them face to face. If you have chosen to use an online service or you are using an accountant that is not in your geographical area then a meeting may not be easy. However, we do recommend that you try to arrange a meeting with the person that will be responsible for preparing your accounts when ever possible.
Many accountants will offer a free consultation to discuss your business, your accounting needs, and to answer any questions that you may have. The meeting should be a two way exchange of information. The accountant should explain exactly how they can support your business and ask many questions about your business and what you expect from their services. It should not be a sales pitch and they should not hide their fees behind a ‘cloak of uncertainty’. You need to trust your accountant. If you leave the meeting with doubts or unanswered questions then you probably know if they are the accountant for you.
Do not underestimate the need to ‘get on’ with your accountant. A free meeting will provide an opportunity for you to judge the character and personality of the accountant. Whilst first impressions last, a 30 minute discussion should leave you with a more balanced view of your potential accountant.
Having considered all of the points on this website make sure that you are comfortable with your selected accountant. Do not be afraid to ask questions.
Ask them what qualifications they have
Discuss their experience and history
Find out what their skills are.
Find out if they have any knowledge or previous experience of your field of business.
Find out what connections they have that may be useful for your business.
Do they know the local banks, have contact with solicitors and legal advisors, and manage a portfolio of clients and suppliers that may benefit your business?
Ask if they see any obvious areas where they could help your business.