Sunday, February 18, 2007

While you're waiting

Over the last few months I have posted an enormous amount of valuable information to this blog. However my focus has now moved on - so there will be no more posts here.

I am however regularly blogging elsewhere:

Advcie and tips for ambitious professionals

Accountant jokes and fun

TaxBuzz - tax insights and commentary

Sunday, February 11, 2007

Do you get on well with your accountant?

We all gel with different people. There are no rights or wrongs, we are just all different.

One reason why far too many people think that their accountant is just merely 'okay' is because there is no real relationship.

Few people interview prospective accountants in the same way as they would staff. But, almost regardless of the service you want, you will want to make sure that you like your accountant.

You need to be clear what is important to you and what you want them to do i.e. do you want them to visit or will you go to them? do you want them to do your bookkeeping or just your accounts? do you just want them to complete your tax return? Have you a preference for gender or age?

I will shortly be producing a guide to interviewing your new accountant.

In the meantime, maybe it's worth thinking about how you could improve the relationship with your accountant. Maybe just going for a drink together, or having a meal together would help - as long as they don't want to charge you for this. On the other hand, do remember that accountants, like solicitors, really value their time. Look at it from his/her perspective. Are you a growing business? Will the investment of time in building a relationship with you be worth it to the accountant? If they can see longer term potential in you maybe they will be happy to invest the time.

(I wonder if the origin of 'gel' is an abbreviation of "get on well"?)

Wednesday, December 27, 2006

Qualified or unqualified?

Most people are unaware that the word ‘accountant’ can be used to describe a range of different people. It’s not like ‘dentist’ which always means someone who is qualified to check your teeth.

Anyone can call themselves an accountant or bookkeeper even if they have no professional qualifications. But if any laws are broken, it will be you, not your accountant, who pays the penalty.

If you are serious about making money in your business the chances are that you will want to engage a professionally qualified accountant. That means someone who has passed tough exams and belongs to one of the professional accounting or tax institutes. This will also ensure that your accountant has to abide by a strict code of professional ethics which should mean they are more reliable and that they carry professional indemnity insurance to compensate you if things go wrong. Finally, if it all goes wrong you will be able to complain to the professional institute if you don’t get the service that was promised.

The most common qualifications and designatory letters that are likely to be relevant are:

Chartered Accountant - ACA or FCA – Member or Fellow of the ICAEW (Institute of Chartered Accountants in England & Wales).

Chartered Accountant - CA – Member of ICAS (Institute of Chartered Accountants in Scotland)

Chartered Certified Accountant - ACCA or FCCA – Member or Fellow of the ACCA (Association of Chartered Certified Accountants)

Chartered Management Accountant – ACMA or FCMA – Member of CIMA (Chartered Institute of Management Accountants)

Chartered Tax Advisor - CTA or ATII – Member of the Chartered Institute of Taxation

Less relevant qualifications because they imply a more junior level of experience include:

AAT – Member of the Association of Accounting Technicians

ATT – Member of the Association of Tax Technicians

It’s invariably safer to rely on professional advice than the ‘advice’ of a friend who’s always bragging as to how he’s got one over on the taxman. Using a professional adviser gives you a degree of credibility. The taxman knows the adviser is not going to be “cooking the books” and so you should be at less risk of tax enquiries and investigations. Having said that the taxman (HMRC) is changing the way it works and asking questions by reference to a range of factors so having a professional adviser will not be enough to ensure the taxman leaves you alone.

Thursday, December 21, 2006

Does your business need a company?

Lots of people describe their ‘business’ as a ‘company’ even though the two words do not mean the same thing.

This is not the place to explain all of the differences or the obligations that you take on if you form a limited company. Too many people make a quick choice because they have heard that one approach or another will mean they will pay less tax on their profits. That doesn’t mean it’s the right choice for them. Are there any non-tax reasons why you may need to operate your business through a company? It depends on a number of factors and your accountant should be able to help you decide. Certainly a company will generally find it easier to raise finance and your bank may also prefer it because of the greater regulation that applies to companies.

For the moment let me just stress that many people find it difficult to grasp the idea that their company is a distinct legal entity. If you set up a company you need to remember that the company bank account and other assets are not yours so you cannot just take money out of the company’s bank account when you feel like it.

You will need to decide whether you want an accountant who just skirts around these issues and undertakes to sort out everything for you. Or would you prefer an accountant who tries to help you understand the issues and lets you decide whether you will be able to cope with the administration – even with your accountant’s expert help? And what will it all cost? How do the extra charges for running a limited company compare with the tax savings you hope to achieve? Do YOU think it’s worth it? Many people do. Equally many people don’t get to find out that they have a choice and that the hoped for tax savings get swallowed up by additional accountancy fees.

Ultimately you need to determine
whether or not you should launch your business as a limited company, as a sole trader or as a partnership. Ask your accountant to help you understand the options but do not accept their advice until you understand whether or not it is right for you.

Thursday, October 26, 2006

A useful tip

Ask your accountant to tell you what information and papers you need to supply to keep your fees down. The less organised your paperwork the more you will pay for your accountant to sift through it to produce your accountants and calculate your tax bills. If you need help creating a simple system to manage your paperwork, so that neither you or your accountant need waste time sorting through things, ask your accountant or bookkeeper to give you some guidance.

Tuesday, October 24, 2006

Beauty parading prospective accountants

I was chatting with a lady last night who told me that she was looking for new accountants for her £4.5m turnover company.

She asked my advice. Here's some of what I told her.

All of the firms you have asked to quote will, I am sure, obtain a copy of your accounts, possibly from Companies House, so will know what your current audit fees are. If you have supplied your detailed/full accounts the tendering firms will also have an idea of who much you’re paying over and above the audit fees for ‘professional’ or ‘accountancy’ services.

I suggest you consider exactly what services you will require from your new accountants and what level of support/input you would like.

In my talks to business owners and to local and National business groups I address a number of the key issues that are all too commonly overlooked by successful companies when appointing a new firm of accountants. Often the business owners themselves don’t know the right questions to ask – and of course these will differ depending upon the circumstances and the personalities involved.

I assume that your FD or some other accountancy trained person will also be on your side of the table during the beauty parades. Many founders/MDs find this an invaluable aid in helping them to see through hollow promises and to help clarify the final choice. Equally there is much that the tendering firms can do before the beauty parade to show how serious and professional they are (or not) as the case may be. Too often a good salesman (and yes, some accountants are good salesman) can swing the appointment despite, what a trained professional can identify as, an absence of sufficient backup and support.

Another thing you should be ready for is to consider what other benefits you could get from your new accountants and that you have not had to date. Additionally to keep an eye to the future; what else might you need from your accountants if the business continues growing as it has in the last year or two – or if times are not so good?

I have sat on both sides of the table in such situations and am well versed in what can go wrong. Specifically, some years ago I was asked to sit on the panel facing a number of firms who were pitching to be appointed as accountants. We were effectively forced to pick the least worst as we couldn’t afford to devote any more time to the process.

I sat on the same panel again earlier this year and we didn’t want to make the same mistake again. I helped ensure that the pre-tender briefing was more focused, the panel agreed the key issues and we discussed our views on a timely basis. We were unanimous in our choice this time and subsequent experience has only been positive. Sadly though we probably lost out on four years worth of potentially valuable advice and input.

I hope this is helpful. If you’d like some more formal, expert, independent input on the tendering/appointment process please let me know.

Tuesday, September 19, 2006

On a related subject

I was approached today by someone who has concerns about the way their accountant has behaved recently. I won't go into details here but it certainly sounded as though my friend had grounds for complaint.

Now let me be clear - There are always two sides to a situation like the one that was described to me. There my be extenuating circumstances. What was said/done may have been misunderstood. I know all that - although the surrounding details and the specific allegations in this case are pretty damning even if only partly true.

My advice was to try to resolve matters directly with the accountant. If this is unsuccessful and my friend wants to take things further I indicated that a complaint could be made to the relevant professional body. We checked and the individual concerned is a member of the Institute of Chartered Accountants in England & Wales. In such cases complaints can be made to the Professional Conduct Directorate if the professional and ethical standards of an Institute member does not meet the reasonable expectations of the public. The Institute website contains good advice as to how complaints can be made including copies of relevant forms and advice as to how diffciulties can best be resolved.