I would like to help you find the right accountant for your business, particularly if you are a young, start-up business.
I Can Help Because I Am A Poacher Turned Gamekeeper
I trained and qualified as a chartered accountant in the early nineteen eighties with Neville Russell (now Mazars) in Birmingham, UK. It was and still is a Top 20 national accountancy firm although Mazars are bigger in Europe.
In 1985 I moved into a finance role in industry and in 1995 I started my own business consultancy firm. In that time I've experienced a lot of accountancy firms accountants ranging from 3 of the Big 4 to smaller local firms as the client or representing my client.
I offer a part time Finance Director service through my website and have experienced qualified accountants around the country keen to provide proactive financial management advice.
In this guide I share what I've learnt so that you can find the accountant you need.
How You Will Benefit From Finding A Good Accountant
It's very easy to think that all accountants are the same.
It is easy to think that one accountant is as good or as bad as the others. The service is dominated by the need to comply with laws, rules and accounting standards and qualified accountants are regulated by the professional Institutes and Associations.
That would be a mistake.
There can be a vast difference between people's technical skills and their commitment to client care and service.
- Your accountant will recommend accounting and book-keeping software so that you can record your transaction in an orderly fashion. Some even give free accounting software as a way of attracting new businesses although that shouldn't be your main reason for choosing an accountant.
A good accountant will guide you in how to set up your accounting system so that it gives you the information you want and provides the information they need to prepare your accounts and tax returns.
Other accountants will leave you to make your own mistakes and charge you a fortune at the end of the year to correct it. If you get your book-keeping right at the start, the job is relatively simple but if you get your records in a mess, it can become a very expensive nightmare.
- A good accountant will help you create a reporting system that accurately reports your transactions and gives you a good indication of your performance in the business.
With the benefit of accurate results you can then focus your attention on the areas that need improvement.
Other accountants will leave you to set up your own reports, despite the fact that you probably know very little about Profit & Loss accounts, balance sheets, cash flow forecasts.
- A good accountant will explain the limitations of the easily available information so that you don't make decisions on false information. Based on this the accountant will help you to decide whether monthly or quarterly accounts (prepared or reviewed by them) are necessary for you to control your business.
Other accountants will let you continue to use bad information.
- A good accountant will explain the tax rules and regulations to you so that you don't unwittingly fall into a trap or overlook a key step or deadline when dealing with your employee taxes, your VAT (sales tax) and your corporation tax.
A good accountant will remind you of the tax deadlines in good time for you to meet them.
Other accountants won't keep you updated about deadlines so when the crunch comes, you may be late in producing critical tax returns and subject to fines.
- A good accountant will explain how you can reduce your tax bills legally and legitimately by taking advantage of any allowances and allowed expenses.
Other accountants will let you pay to much tax, or even worse give you bad advice that leads to tax arrears and penalties.
- A good accountant will be able to recommend a part time book-keeping service or may provide a book-keeping and payroll service themselves. This is a great help to any small business or start-up because your time is probably better spent looking for customers.
Other accountants won't care that your book-keeping is in a mess. It just means more money for them at the end of the year.
- A good accountant will encourage you to write a business plan so that you think about how your business is going to compete and develop in the future. If required the accountant can prepare the financial forecasts (based on your assumptions) and help you to negotiate a bank loan or overdraft.
Other accountants will see your business as your responsibility and just react when you ask for a service.
- A good accountant will be able to help you in other areas of the business or will know a good business coach, consultant or adviser who can help.
Other accountants are not interested in helping you to develop your business and won't give referrals, even when it is clear that you need help.
Where To Look For An Accountant
- Ask someone you know and trust to see if they can recommend an accountant. While their needs and personality will be different from yours, it is a good start.
- Look on the Internet and do a search on accountants + your local area. Check on the firm size (the number of offices is usually a good guide). The general rule is, the bigger the firm, the more expensive the service.
Does the website create the right impression? Is it professional but with personality?
- Many accountants still advertise in Yellow Pages or Yell.com, either under their own name and under their professional association.
- The Institute of Chartered Accountants Directory Of Firms is available on the Internet here. This allows you to search for an accountant based on location or speciality. Chartered accountants pay an advertising fee for an enhanced listing.
Questions to ask an accountant or tax adviser
I have shown you the difference between a good accountant and the rest.
The next task is to help you to find the good accountants.
While you are unlikely to have the ability to test their accounting and tax knowledge, there are questions that you can ask to make sure that you get the service that you want.
Your first meeting with a prospective accountant is usually free of charge. If anyone proposes charging, I would see this as an indication of the type of relationship they expect.
This is your chance to find out about their firm and how they can help you. For the accountant, it's a sales opportunity - their chance to convince you that they are the logical choice as your accountants.
- Is the accountant qualified? If so, what is the qualification?
Unlike solicitors or doctors, the term "accountant" isn't protected in UK law. Anybody, regardless of their knowledge, experience or training can set up in business as an accountant and some do.
Look for a firm of chartered accountants (FCA, ACA, CA), chartered certified accountants (FCCA, ACCA) or chartered management accountants (FCMA, ACMA).
The F stands for "fellow" and A means "associate" so a newly qualified accountant becomes an Associate and when they have a certain amount of practical experience they can apply to be upgraded to a Fellow.
The chartered bodies (it means that they have been given a Royal Charter to practice the profession) have very demanding entry qualifications in terms of exams and experience.
They also have strict ethical standards for the way the accountants act and deal with clients and require members to have continued professional development and professional indemnity insurance.
If you engage a firm of "chartered" accountants and you feel that the accountant has behaved unprofessionally, you can complain to their institute or association who will investigate. If found guilty, the accountant faces severe punishment - large fines, public censor in front of their peers and even expulsion if they have committed a serious offence.
- Does the accountant specialise in a particular type of client?
Some accountancy firms specialise in particular trades or industries while others specialise in a particular size of client (eg limited companies with £1 million turnover, self employed contractors.)
The smaller accountancy firms have many small clients. If you expect your business to grow quickly, check whether the accountant's services can grow with you?
If the firm has specialised in particular trades, does that fit your business? Is there an advantage in finding a firm that specialises in your industry or is that a disadvantage?
You may think it's a good thing for your accountant to specialise in your type of business or may prefer that your accountant didn't have longstanding relationships with your three biggest local competitors.
Confidentiality and conflicts of interest shouldn't be a concern. Your accountant will have a professional responsibility to you.
Ask about the other clients. If most of them are larger businesses who pay much bigger fees, ask how you can be sure that the accountant will be interested in your small business?
Have a look at their website and see if you gain the impression that they are targeting your size of business.
- How many clients does the firm have and how many does your particular partner have?
Traditionally accountancy firms have been partnerships and although some accountants now trade through limited companies. It is custom for the owners of the business to still be referred to as "partners".
Find out if you will be one of a hundred or one of a thousand clients?
Does it matter to you? Do you want or need personal attention from your accountant?
Do you want your accountancy firm partner to have a good knowledge of your business? You can't expect anyone to know 1,000 clients in detail.
To some people who believe in strong personal relationships, these questions matter greatly. Other people just want to know that their accountant will produce a good professional job at a competitive price.
- Who will be your main contact with the accountancy firm?
If the partner is not going to be the main focal point for your services, who will be?
Accountancy firms have a hierarchy - equity partners at the top, salaried partners, senior managers, managers, supervisors, senior accountants, semi-senior and junior accountants and clerks.
Do you like and trust the person who will be your regular contact? Are they qualified, experienced accountants, trainees or part qualified accountants who never made it passed the final exams?
- Is the firm a registered auditor?
Do you need an audit?
An audit is when the firm of accountants are required to express an opinion on the accounts to say that they have been properly prepared in accordance with the books and records and that the accounts present a true and fair view of the financial performance and position of the company.
The size range of companies that must have an audit has increased several times and most owner managed businesses no longer need to be audited.
Do you want an audit?
If you are an ambitious entrepreneur with big plans for your company you may want to have an audit from the start. It will help you to sell your business in a few years time.
It could even influence your choice of firms. It will be more expensive but a big name standing behind your results could make a big difference to the value of the sales proceeds you receive.
If you decide that you want to have your accounts audited, you must find a registered auditor.
Because of the onerous conditions and the fact that the majority of the smaller businesses opt-out of the audit, many small firms of accountants are not registered.
- How much and on what basis will the accountant charge their fees?
Money matters but perhaps not in the way you think.
For a basic compliance based service (accounts preparation, tax return, an audit if required) you want to be confident that you have been quoted a fair price that represents good value and you can compare fee quotes.
But it's different for business, financial and tax advice.
You have a cost and benefit ratio to weigh up.
Do you want to pay £1,000 for advice that saves you £2,000 or would you rather pay £1,500 for advice that creates a gain of £5,000.
It doesn't make sense to go for the cheapest business adviser in just the same way that you wouldn't choose the cut-price heart surgeon. Quality counts and it's results that matter.
How does the accountant set the fees?
There are two common methods - by the hour or a fixed fee for a defined service.
The advantage of the fixed fee is that you will know how much you have to budget to pay and you'll be told what you will get in return. This may include a helpline for basic queries and problems but there will be conditions.
The accountant will expect that you have maintained a clean, well documented set of books and you may be expected to do things at a certain time of the year.
The tax deadlines mean that January is an extremely hectic month for many accountants because many people leave things to the last minute. Check whether there is any discount available if you agree to get your accounts completed for a different part of the year.
You may also be asked to pay by direct debit or standing order during the year. Depending on the exact services you buy, much of the work may be done after the year end.
Beware of fees that sound too good to be true. A fixed fee is for a defined service so watch out for all those little extras that get added to the bill.
Check what their policy is for these extra cost services. You should be told in advance that if anything will cost more. That way you can decide whether you want to still to go ahead.
- Can you talk to several of their existing clients?
It is a good idea to ask to speak to several similar sized clients. If you are a new business, you could perhaps ask to speak to a client who started two years ago. You can then learn first hand what the experience has been like and how the accountant helped that client to set-up and run their business.
- Do the accountancy firm have partners who specialise in particular areas?
Some accountants are known as "general practitioners" - they provide advice on accounting issues, taxation, auditing, raising finance and general business advice.
Other firms have specialist partners and departments for specialist areas.
There may be a tax partner who will advise on tax planning strategies.
There may be an audit partner who deals with the larger clients and is the technical accounting expert.
There may be a corporate finance partner who specialises in raising finance, acquisitions and disposals.
There may be a business growth partner who provides business consultancy services.
There may be an IT partner who specialises in helping firms select, implement and get the best out of your investment in new technologies.
Which is better? It depends on what you need.
My business coaching firm has the same issue - do you want a general business coach who sees the whole business or a marketing consultant and an operations consultant and an HR consultant to work on the separate parts?
With specialists you will gain access to a deeper level of knowledge and experience but inevitably it complicates the relationships.
If you talk to a general practice partner about a particular issue, that person will be thinking about the accounting issues, the tax issues and the business issues all at the same time and can give you a balanced opinion.
If you go to an accountancy firm with specialists you may have to talk to three different people to get the same advice. You do tap into deeper levels of knowledge and get advice that you couldn't expect a general practice accountant to know. Specialists are often more expensive.
- How can their services grow with your business?
Consider how quickly you want your business to grow over the next five years. I usually find that the best guide to size and complexity is the number of employees rather than turnover.
A very small business will usually just have their accounts prepared once per year for the taxman and if a company, for the shareholders and Companies House. When you have a small business you should still have regular measures in place - orders, sales invoiced, cash in the bank, cash flow and potentially many other measures.
A big business will have formal management accounts prepared every month - profit & loss account, balance sheet, cash flow, turnover and margin analysis by customer and products, efficiency and cost measures and may even update its forecast each month.
My research shows me that when companies get to around fifty employees, they will recruit their own qualified full time accountant as the Finance Director or Financial Controller. Sometimes I see firms with as many as 100 employees without a qualified accountant but it is rare.
When you are small it's clear what you need. When your business is big it's again clear. The problem comes when your business is in the middle.
I see three stages that companies go through before they are in a position to recruit their own qualified accountant.
Book-keeper with quarterly accounts
The business generates a lot of transactions and it needs to recruit somebody to keep the books and that job moves from part time to full time as the business grows.
As the business grows in size it also grows in complexity - more customers, more products - and perhaps it now has a small overdraft or loan from the bank.
It's probably been agreed that quarterly accounts are prepared and sent to the bank and the directors have a quarterly formal board or management meeting to review the accounts.
Your accountancy firm is usually ideal to prepare the quarterly accounts which are usually a slimmed down version of your annual accounts. These are finished by the end of the following month. If possible try to get more analysis on where the action is - in your sales and margins - rather than long lists of overhead costs that are easy to control.
Ask your accountant to come to the board meeting (they don't need to attend it all) and explain the accounts and highlight any issues.
Alternatively ask for a written report that explains any issues or warning signs. You don't want a spreadsheet full of hard to understand numbers emailed to you with no guidance, explanation or advice.
Does the accountant have a policy of teaching your book-keeper to prepare these accounts? Modern technology has made it simpler and with some training a good book-keeper should be able to produce you something meaningful unless your business is particularly complicated.
The accountant can still be involved in the review of the accounts and the explanations and advice that arises from the accounts.
The move to monthly accounts
As your business gets bigger, the need for up-to-date financial control increases and you will need monthly management accounts.
This is particularly true if trade levels are very variable or seasonal.
Again your book-keeper and accountant may be a good way to produce monthly accounts.
These should become more detailed and explain the variation in profits. The results should probably be compared to a budget or forecast that was prepared at the end of last year.
This is the start of the formal "control" process - how did you do compared to how you expected to perform and most importantly if there is under-performance, what can be done to close the gap?
It is essential that the time period to prepare these accounts is reduced. Within one month is OK for quarterly accounts but the standard guide for monthly accounts is within ten working days. Big companies can get it down to two days.
The faster you get the information, the quicker you can start putting things right and the sooner you can see if the actions that you've taken are working.
This is a really important point. Accounts prepared in five days give you 15 working days to take action before the end of the month and another 5 days wait to see if there is any improvement. There should be because the action plan will have covered up to 75% of the month.
If you don't get the accounts until the end of working day 15, you've now only got 5 days to take action, a 15 day wait to see if what you've done works and an improvement period that at most is only 25% of the month. That will make it much more difficult to see what is going really happening.
If there's little change from the previous month, did the problem get worse before now starting to get better? Perhaps the action plan isn't working? Perhaps random fluctuations (and there are random fluctuations in any business) are causing a false signal?
You can see why big companies push their finance teams to get the numbers out quickly. It makes the business much more responsive to problems and opportunities.
Part Time Finance Director
Before you recruit a permanent qualified accountant, I'd recommend that you try the part-time solution.
Your firm of accountants may offer a service under this name but generally I've found that it fits into the monthly accounts service explained above.
There are a number of companies offering part time Finance Director services (including my own - see the register of part time Finance Directors) but the emphasis changes from reporting the past to influencing the future.
It's a key difference.
Too many businesses receive monthly accounts because their banks insist on them but the businesses themselves get little value out of the monthly figures.
That's because the financial control loop isn't effective. If the accounts show that there is a problem, there needs to be action in the future to correct it.
A part time FD will focus on understanding the business model - how it generates profit and cash - and encourage you to set short term targets and goals. The main tool is the forecast - how is the business likely to perform and what can be done to make it better.
This part time finance director service is particularly important if the business is growing quickly, particularly complicated or losing money.
- How easy it is to change accountants if you find that the service isn't up to standard?
There's a myth that switching accountants is difficult.
It isn't because this is an area covered by the institutes' professional ethics. There are professional courtesies involved and your new accountant will write to your old accountant to arrange the handover.
- What can you do to reduce your accountant's fees?
Just about every client moans about how expensive their accountant is, so ask what you can do to reduce your costs.
The more information prepared by your staff that is neat and tidy, adds up and consistent with other information then the lower your fees.
But beware of promising perfect records and then sending in three cardboard boxes full of receipts in no particular order together with a cash book that has no similarity with the bank statements. You can expect a much bigger bill because even junior levels of professional time are more expensive than your staff.
If the accountant gives you one fee for the full service, ask for it to be broken down into the different elements. It's then much easier to compare different quotes and feel that you really are comparing apples with apples.
What you can't do really do is select different services form different accountants but you may decide that the monthly helpline charge for PAYE and VAT queries isn't needed when you can call HM Revenue & Customs yourself.
- What guarantees of service will they provide?
An accountancy firm is just as much a service as anything else so you must remember that they work for you.
What is their time commitment to producing your accounts and tax returns? I've emphasised above how important it is to get monthly accounts prepared quickly.
Will they commit to responding to a phone call message in a reasonable time period. A common complaint is that it is difficult to reach your accountant because they are always in meetings with other clients.
If it is a very small firm - a single practitioner with a few staff - ask what happens when the accountant is away on holiday and you need advice. Ask what would happen if they were to become ill and unable to work for a few weeks.
Questions To Ask Yourself About The Accountants You've Met
Remember you are the client and while seeing an accountant can be quite intimidating for some people, they are there to help you and you will pay for their services.
- Did they seem interested in your business?
Did the accountant make you feel that you had a fascinating business or concept?
Did the accountant visit you or offer to visit your premises to see what you do or are all the meetings in their offices?
- Did you feel that you could confide in the accountant?
To get the best out of the relationship, you need to be completely honest and open with your accountant. You can't get the best advice if the accountant has only been given half the facts.
But did you feel that you could talk openly or did you feel intimidated?
- Did the accountant give you valuable feedback and advice on your business during your first meeting?
Your first meeting is usually free but did you get any value out of the conversation? Did you feel that the accountant was openly sharing knowledge, thoughts and advice or was the person vague and non-committal because you aren't yet a client?
If the accountant gave you advice, did it make sense to you? Were issues explained using words that you could understand or was it confusing, technical jargon? Did you feel that you were both approaching your business in the same way?
Did the accountant challenge your thinking and make you consider issues that you hadn't thought about?
If the accountant held back from giving advice, can you be sure that they have the right skills and attitude to help you in the future?
- Did you have confident in their ability to give you the service you need?
If you managed to build a special rapport with one accountant who seemed to have the right answers then that is a good start.
As in any service business, it's about people first and the tasks second.
If you were impressed with somebody's ideas, their passion for your business, their commitment to client service and welfare then I think you've found your accountant.
They should send you a detailed engagement letter that explains what services you will get, how much it will cost and what you are both committing to do.
They will also ask you for proof of identity information. This doesn't mean that they don't believe you but Accountants are required under the money laundering regulations to confirm exactly who it is that they are acting for.
Accounting and tax are technical subjects but you need to make sure that you choose an accountant with the right level of client care and service that you need.
Too many small businesses fail and often their difficulties lie in one or two areas:
- They couldn't find enough customers to buy their products and services because their marketing didn't generate leads or they couldn't convert enough of the leads into customers.
- They lost control of their money. They couldn't see how they were performing, either because they didn't have any information or the information was misleading. They didn't recognise problems early when they were small and easy to correct. They didn't realise that they were about to run out of cash until it was too late - see my posting Eight Common Finance Mistakes That Could Cost You A Fortune.
If you are the owner of a small business with a great accountant, would you leave a recommendation for your accountant please.
If you are an accountant reading this, do you agree with what I've written? If not what have I missed or where am I wrong?
Finding the right accountant will be one of the best decisions you make. I have tried to give you the benefit of my 25 years of experience so that you make the right choice.