Choosing an Accountant

Like many professional advisers, accountants are often seen as a 'necessary evil'. But a good accountant should add value to your business through:

Saving time.
An accountant will complete the required tax and accounting returns for you, relieving you from form filling and saving you the need to read the reams of guidance that often accompany them.

Reducing risk.
Engaging an accountant will reduce the risk of non-compliance with tax and accounting requirements, saving potential penalties and interest.

Reducing tax.
An accountant should ensure that you pay the smallest legitimate amount of tax, through making full use of allowances and efficient structuring of your business.

Increasing profitability.
The provision of regular management accounts and key performance indicators can help identify problem areas and opportunities for improvement.

Increasing credibility.
Financial plans and accounts prepared by an accountant are seen as more reliable, and should help when applying for business credit or bank financing.

Providing advice.
Your accountant may have knowledge of the local economy, and even your specific business sector, as well as useful local contacts (perhaps with banks, solicitors and local trade associations). They will also be able to offer an independent opinion on your business plans, and answer ad-hoc questions as they arise.

If you're a small business, 'no' is the simple answer. You can undertake your own bookkeeping, prepare your own accounts and file your own tax returns. It'll take some time, some research, and maybe a little training, but it's not impossible.

Choosing an accountant might save a lot of reading...
Photograph by the author

Opinions vary as to whether a particular value can be put on the size of a business that would benefit from an accountant, with some accountants suggesting any business with a turnover (sales) in excess of £15,000 a year should engage an accountant. It's really not that simple though, and depends more on the size and complexity of the business. Remember that seeking advice from an accountant when you start your business should mean it's structured in the most efficient way from the outset. And you can always start with a low level of support from an accountant, and increase it as your business grows.

As your business develops, there are thresholds beyond which limited companies and limited liability partnerships must file audited accounts. This will require the appointment of an independent auditor (an accountant licenced to undertake audit) and almost certainly an accountant to help prepare the records for the audit. The current thresholds are a turnover of £6.5 million net of value added tax (VAT), total net assets of £3.26 million and an average number of employees of 50. Below these thresholds there are certain circumstances where an audit is still required, for example where 10% of the members of the company request it, or where the business is engaged in financial services activity.

It's the 21st century, surely everything can be done online? It's true that your accountant no longer needs to be local: email, online accounting systems and Skype can cater for most requirements, and an increasing number of accountancy practices only offer services through these media. And it might be your preference too, or it might be convenient if you live in a remote area.

But you do miss out on some opportunities to assess your potential accountant if you adopt the online only approach. A visit to your accountant's office can reveal whether it looks professional and organised. And a good accountant should be prepared to meet you at your office, or at home, at a time to suit you. Despite the usefulness of Skype, you may feel the relationship would be stronger if you are able to sit across a desk from your accountant and look them in the eye for real.

It might be slightly alarming to know that use of the word 'accountant'' is not regulated - anyone can set themselves up in business and call themselves an accountant. And there are a plethora of potential letters after accountants' names. Choosing an accountant regulated by a professional body should result in the best level of service for you, and the greatest protection if things go wrong.

Luca Pacioli: 'the father of double entry bookkeeping'
Image credit: Wikimedia Commons

Generally, the most respected professional accountancy bodies in the UK are those incorporated by Royal Charter, and which accordingly use 'Chartered' in their name:

Institute of Chartered Accountants in England and Wales (designatory letters ACA or FCA)
Institute of Chartered Accountants of Scotland (designatory letters CA)
Institute of Chartered Accountants in Ireland (designatory letters ACA or FCA)
Association of Chartered Certified Accountants (designatory letters ACCA or FCCA)
Chartered Institute of Management Accountants (designatory letters CGMA, ACMA or FCMA)
Chartered Institute of Public Finance and Accountancy (designatory letters CPFA)

There are other professional accountancy bodies in the UK, but only the Association of International Accountants (designatory letters AAIA or FAIA) offers an equivalent level of qualification to the chartered bodies.

Many accountants offering services to the public are members of the Association of Accounting Technicians (designatory letters MAAT or FMAAT), which offers a lower level of qualification than that of the chartered bodies.

Members of any of these bodies must hold a 'practising certificate' before offering services to the public, demonstrating an extra level of regulation, which requires them to:

1) Hold professional indemnity insurance, to cover liabilities in the case of material mistakes or negligence.

2) Have a continuity agreement, to ensure that the practice continues to function and provide essential services to clients if senior partners or directors are unable to work.

3) Issue each client with an engagement letter (explained further below).

4) Have a formal complaints procedure in place.

5) Undertake continuing professional development, to ensure their skills and knowledge remain current.

6) Comply with anti- money laundering regulations.

And if you're not sure what the letters after an accountant's name mean ask them, or look the letters up online.

Size isn't everything. A small accountancy practice may be better suited to the needs of a small business - you're more likely to have personal contact with a qualified accountant, for instance. Consider the following questions when assessing a potential accountant:

When starting your business a small accountancy practice may provide a more personal service
Photograph by the author

(a) Do they have experience of dealing with clients of a similar size, and in similar business sectors?

(b) If it's a small practice, what access do they have to sources of specialist advice when needed?

(c) Will day to day contact be with the accountant themselves, or a junior?

(d) What are the response times for queries?

(e) Will the practice be proactive in reminding you of due dates for returns and payments?

(f) Are references available from other clients?

(g) Has the practice been subject to any tax investigations in the last year?

(h) Are any additional services offered, for instance links with banks, insurance brokers and independent financial advisers, and is tax investigation insurance offered?

And, as much as anything, it's about how you feel - do you think you could build a good business relationship with this person?

If an accountant really wants your business you should expect an initial consultation of between 30 - 60 minutes free of charge. This will help the accountant establish your requirements, and consider what the appropriate fee should be, as well as give you chance to decide whether this is the accountant for you.

Accounting services may include regular management information
Image by the author

Most accountants offer a fixed monthly fee, which spreads the cost and avoids nasty surprises at the end of the year. Make sure you know exactly what is and isn't included; a fixed monthly fee should also include the cost of providing some ad-hoc advice.

Accountants work in a highly competitive market, and prices and levels of service inevitably vary wildly. As a rough guide for small businesses, expect to pay anything from £40 - £100 per month if you are a sole trader, and £100 - £200 per month if you operate through a limited company. Anything less than these minimum rates, and the service provided will be very tightly defined - make sure you know exactly what you are paying for! Be aware that most business to business prices are quoted excluding VAT; make sure you take any VAT into account when considering prices - if you are not VAT registered you will not be able to reclaim the VAT.

The following are some of the factors that accountants will assess when setting their fees:

• The turnover (sales)


• The volume of transactions (both sales and purchases)


• The level and volume of any stock held


• Whether the business is primarily cash or credit based


• The number of employees, directors or partners


• Whether the payroll is weekly or monthly


• How the records are kept (and whether you undertake any bookkeeping yourself)


• The legal form of the business (sole trader, partnership or limited company)


• Whether the business is registered for VAT


• Whether contractors are employed under the Construction Industry Scheme


• Whether management accounts, tax forecasts and ad-hoc advice are required

Once you've chosen an accountant, details of the terms, conditions and fees should be provided to you in the form of an engagement letter. You should take the time to read this carefully, since it will explain what is and isn't included in the agreed fees. The letter will set out not only your accountant's obligations to you, but also your obligations to your accountant.

See the 'Getting The Most From Your Accountant' lens to find out more about your obligations, and how to get the best from your accountant.

While the tax terminology, statutory thresholds and monetary values in this lens are specific to the UK, the underlying considerations are applicable to wherever you are choosing an accountant.

The author is a Chartered Management Accountant, with 15 years post-qualifying experience in industry, practice and the public sector.