Engaging an Accountant

The term “accountant” is not a legally defined or protected one.  Therefore, while you have to be qualified to call yourself a “doctor”, you don’t have to be a qualified accountant to use “accountant”.

In the UK and Ireland, there are six major professional accountancy bodies, whose members have “chartered status.”

Full membership of any of those six accountancy bodies means that the person has passed a number of examinations.  Additionally, they will have completed several years of practical experience in order to obtain their qualification.  The practical experience will have had to satisfy a number of areas and levels of responsibility.

In addition, a qualified accountant in practice (as opposed to being an employee) would normally also need a “practicing certificate” from their professional body.  Among other things, this ensures that they have the proper experience and they continuously update their knowledge (continuing professional development or CPD).  They also must have professional indemnity insurance, there is a complaints procedure (and ultimately, clients can complain to the accountant’s professional body) and they are supervised for anti-money laundering compliance.

You can check if someone is a qualified accountant by looking them up with their professional body.  All the chartered bodies publish a list of members who hold a practicing certificate.

Why Have An Accountant?

Reasons to have an accountant:

1. Doing the accounts takes you away from your real business
2. An accountant could do the job quicker and more accurately
3. An accountant could save you money in the form of tax-savings as well as sometimes finding other areas for savings and efficiencies.
4. Professionally produced year end accounts will be taken more seriously by banks and other lenders
5. Your accountant can help you get the most out of your business
6. Recommending the right VAT scheme (if registration is appropriate – and sometimes it is, even if you are trading below the VAT threshold)
7. There are penalties for getting things wrong (and ignorance is no defence)

Choosing Your Accountant

Things to do when choosing your accountant:

1. Speak to your prospective accountant on the phone first and then, if you are still happy, set up an initial meeting – which should be free of charge.
2. Ensure that they are professionally qualified and are current members of a professional body (Chartered Accountant (ICAEW/ICAS/ICAI), Chartered Management Accountant (CIMA), Chartered Certified Accountant (ACCA) for a fully qualified accountant.  Or AAT or CAT for an accounting technician).
3. Get some personal recommendations.  However, do make sure that you trust the judgement of the person making the recommendation and they have an understanding of your business requirements.
4. Always make sure for yourself that the accountant offers the service that you require.
5. Conversely, accountants offer many services (from tax to company secretarial services), check that you require what they offer.  There is no point in paying for something you don’t want.
6. Ask you accountant about their experience.
7. Try and find out how accessible your accountant is.  How quickly do they respond to telephone and email messages?  Is it easy to speak to them directly?  If you are tied up with your own business during office hours, ask your accountant if they offer an out of hours service.
8. Find  out about their fee structure: whether they will offer a fixed fee and/or an hourly rate.  If it is an hourly rate, get an estimate of the time required to complete the work.
9. Check if you are going to be charged for speaking to your accountant on the phone and for any letters they might send to you.
10. If approaching a firm of accountants, find out who will actually carry out the work.  On many occasions, it will be an accounting technician or clerk who carries out much of the work rather than the partner.  Make sure that you are billed accordingly.
11. Most importantly, make sure that you get on with your accountant.  You need to be able to talk comfortably with them.  If a junior will be carrying out work, make sure you speak to them, too.
12. Finally, if you are not getting on with your accountant, for whatever reason, do not be afraid to make a change.

When Is Cheap Not Cheap?

Sometimes, it easy to get pulled in by cheap fees, particularly if the headline figure is very low.

• Make sure you are comparing “like with like.”  If you are a limited company, with sizeable transaction numbers, then obviously, your fees will not be as low as a sole-trader who raises one or two invoices a month.
• What looks like a low monthly fee, can actually still be a sizeable annual fee, when multiplied by 12.
• Make sure you adhere to all the conditions in order to achieve the cheapest fees (eg, use the required software, keep your bookkeeping up to date, do your own bank reconciliations, adhere to the deadlines).
• Expect additional fees for bookkeeping (and provide the information within the given timescales).
• Expect additional fees if your business or personal affairs are more complex. Be prepared to do without the face-to-face contact
• Check for professional qualifications.  Anyone can call themselves an accountant, even the man down the pub.  Every accountant has heard of horror stories of accountants disappearing into the sunset (sometimes taking a clients records with them). Generally, a qualified accountant can bring some extra reassurance (by way of – additional knowledge and experience, mandatory professional standards, mandatory complaints procedure – ultimately to a professional body, PII)

A Note about Fixed Fees

It’s now very common to see accountants (& bookkeepers) offering fixed fees, as opposed to hourly rates.  Indeed, Figurate Ltd offers fixed fees too, as clients like to have the reassurance that the final bill will be the exact figure they’ve told.  Fixed fees do eliminate the “surprise invoice”.  However, quoting fixed fees often involves making a best estimate of the work and there’s normally a small allowance in case the work is more complex or takes longer than expected.  But sometimes, hourly rates can work out a little cheaper than a fixed fee.

Scope of Work and Letters of Engagement

When you engage an accountant, you will normally agree the scope of work that the accountant will cover.

You will normally receive and have to sign a copy of the accountant’s letter of engagement which specifies the scope of work, the fees and other details. All qualified accountants with a chartered body (ICAEW, ACCA, CIMA, ICAS) insist that their members provide a letter of engagement. Be wary of anyone who does not provide you with a letter of engagement.

With that said, even with a letter of engagement, you, the taxpayer (and director, if you have a limited company) is ultimately responsible for filing the required documents.

Switching Accountants

It is actually quite easy to switch accountants. Once a new accountant is appointed and authority is given for records to be shared or transferred, the new accountant will usually manage the process. However, in an ideal world, your accountant should be a valued and reliable advisor and it is worth making sure that you have appointed someone you trust and can work with.