Four common problems for accountants

I recently came across the following list of problems experienced by many Accountancy firms in the USA.

My research suggests that many firms in the UK experience the same problems:

1 Too many of their clients are only contacted once or twice a year.
2 They are not proactive in providing business and financial advice to all of their clients.
3 They have no real point of differentiation with prospects [ie: they aren't really any different to the firms they compete with]
4 They rely on a key rainmaker who is coming up for retirement - and they have no succession plan in place.

DIY

When you first start a business various forms need to be completed and registrations put in place.

If you have the time and are prepared to give it a go, there is no need to pay an accountant to complete the forms or the registrations on your behalf. Most accountants will be willing to do it for you, but at a price. How much? This will depend upon the type of accountant you approach and where in the country you are. Fees in London and the south east tend to be higher than elsewhere in the country.

Forms/registrations include:
Self employed - The newly self employed must register as such with HMRC (the 'new' name for the Inland Revenue) within 3 months. YOU can do this quite simply over the phone by calling: 08459 15 45 15. If your annual earnings will be above £4,465 (and I hope they will be!) you will be responsible for paying weekly National Insurance Contributions of £2.10. When you register HMRC will send you a standing order form so that you can authorise your bank to make monthly payments instead of paying weekly.

VAT - It will usually be worth taking advice from a suitably qualified accountant before deciding when to register for VAT and what type of VAT scheme is most appropriate to your business. Should you register before your turnover reaches the registration threshold? Would the 'flat rate' scheme be beneficial? What about annual accounting?

New company - If you have taken advice and are certain that you want to form a limited company, you can do this on the forms available from Companies House website.

Fixed fees

I was recently discussing fixed fees with a forward thinking accountancy firm.

I asked them how 'fixed' were the fixed fees that they advertise? They confirmed that once they give a fixed fee quote that they will never seek to bill more than that.

All of which is what I was hoping they would say. But I then asked the crunch question. What happens if the fee is insufficient to cover all of the time charges that are recorded on your time sheets? They admitted that some partners are better at accepting a 'write-off' than others. They recognise there is an internal training issue ere, and they are trying hard to deal with it.

The point is this: most (if not all) larger firms of accountants require all of their staff, managers and partners to record on time sheets how much time they spend on each client.

The time spent on each client's affairs is then converted into a figure of 'work in progress' (WIP), using different hourly rates for each member of staff, managers and partners.

If the aggregate WIP is greater than the fee that can be billed, someone normally wants to know why, and often tries to ensure that a bigger bill is sent to the client. This is particularly true when fees have not been agreed in advance

Where the excess WIP is written off and not billed to the client, the consequences for client service are not positive. The firm may effectively discourage anybody working for that client to spend less time looking after them in the future than they have done in the past. The objective being to have a lower 'write-off' of WIP next time round.

Thus the level of client service falls and the level of the client's satisfaction with the accountant's service also falls. Within a short period of time the client is bad mouthing the accountant and looking to move elsewhere. Shame!

Estimated fee ranges

The traditional way for an accountant to set his/her charges is by reference to the amount of time he/she spends on your affairs.

Many clients however would prefer to be told at the outset what the fee will be and for their accountant to limit the fee to this amount regardless of what comes up during the year. And there are a large number of accountants that will do this for their more straightforward clients.

I still remember a conversation I had with an accountant called Peter nearly 20 years ago. He told me that he typically had the following conversation with new clients where he couldn't be sure what the fees would be at the outset. This is what I remember him telling me:

Once I have checked what work is likely to be involved I then offer a free quote within a range. All too often, however, the range is pretty wide. For example, £2,000 to £10,000. I acknowledge with a client that the range is very broad and explain why I cannot be more precise at this stage.

I ask for payments on account, equal to the lowest figure in the range, and I explain that one of three things will happen when I issue my fee note at the end of the year. Let's assume it's for £5,000.

The first possibility is that the client will say to me, Peter, I can't believe it. Only £5,000 for all the work you've done over the year. It's not enough. I think I should pay the full £10,000 that you quoted at the beginning of the year.

Peter told me that that doesn't happen very often, but that it had happened to him, on occasion.

The second possibility, which is the most common apparently, is that the client will say, Peter, that's a fair fee for all the work you've done. I'm very grateful.

The third possibility, which is very rare, said Peter, is that the client will complain that the fee, of say £5,000 is too high. When that happens, Peter told me, he allows the client to explain why he thinks it's too high and they then agree on a fee that the client is happy to pay. And Peter guarantees to the client that he will accept that payment in full settlement. However, it also means that he will not be doing any further work for the client!

I don't know how many accountants operate on this basis, which was first explained to me about 20 years ago. It was very rare then and I doubt it's very common even now. But it is fair.

I suspect that these days few clients would accept an estimated fee range as wide as £2,000 to £10,000. But if that's the sort of arrangement you would like to have then you have nothing to lose and could ask your accountant if he/she will indulge you.

How can you tell whether or not your accountant is any good?

Here is a potentially controversial, but highly effective method.

It's almost obvious but only once someone who really understands these things has explained it.

Quite simply, if you do not feel confident, that your accountant is good, then he or she has failed that test. A good accountant will ensure that you know that you're getting good advice, good value for money and good service.

If you are one of the many people who just think their accountant is ‘okay’, then you are missing out as you could benefit from dealing with a better accountant.

Previous blogs have contained a variety of tips that you can use to help change things. There will be more such tips in future blogs too.

Another five tips

1. Tell your accountant as soon as possible of changes or problems in your business and circumstances etc. This will avoid the accountant wasting time on things that may no longer be relevant; they will want paying for the work regardless.
2. Ensure your accountant tells you what information they will require before they start work and then make sure it’s available.
3. Get a commitment from your accountant to produce your tax return within a specified period of you supplying all relevant information.
4. Ask for rough projections of your tax bill and for these to be kept uptodate.
5. Is your accountant able to advise on tax efficient investments or will you need to pay an IFA too? Some promoters of tax incentivised investments are biased so you want to ensure you get independent advice from someone who really understands the related tax issues and risks. What you don’t want to do is pay twice for such advice.

Booklets in the pipeline

Accountants aren't all awful - What type of accountant do you have and what is he/she qualified to do? Also covers where and how you can complain if your accountant is awful!

Do you NEED to pay for your own Limited company? - You might be better off as a sole trader, a freelancer, a partnership or an LLP. A simple guide to help you choose what's right for you and your business.

Key tax advice topics for the self-employed - A checklist to help you identify the relevant questions to ask your accountant and save tax.

Key tax advice topics for small business owners - A checklist to help you identify the relevant questions to ask your accountant and save tax.

What could a good accountant do for you that yours isn't doing at the moment? - A short objective guide to the full range of services and areas of advice you could be getting.

How to ensure your next accountant is the right one for you - A unique guide to 'interviewing' potential accountants so that you can choose the right one for you.

Is your accountant one of the good, the bad, or the ugly?

Are you paying too much and getting too little?

This unique, objective and entertaining talk by top accountant and speaker, Mark Lee FCA, will open to your eyes to what you can really expect from your accountant.

This talk is ideal for anyone who runs their own business and isn't absolutely sure that they are getting full value for money from the fees they pay their accountant.

Whether you have yet to appoint your first accountant or you have been in business for some time you will pick up dozens of commercial tips and loads of practical advice to ensure that your accountant works for you and doesn't charge more than he or she is worth.

Mark will astonish you as he reveals the services and support you can expect from a good accountant without paying the earth. He will disclose the secrets you need to know about how accountants work and how you can avoid wasting your money. Mark no longer provides accountancy or tax advice so his views are totally objective as he is not representing any specific firm.

Mark is a lively and enthusiastic presenter. Over the course of his career he has collated dozens and dozens of examples of what the better accountants do for their clients; he shares many of these during his exciting and unusual talk. You will also find many of them at: http://bookmarklee.blogspot.com/
Whether you think your present accountant is 'okay' or you are unsure what you are entitled to expect from your accountant this session is for you. At the end of the talk Mark will highlight 3 key questions you will want to ask your accountant in order to get more benefit from their services than you ever thought possible.

Mark Lee FCA is a past Chairman of the Chartered Accountants' Tax Faculty, a professional speaker and a member of The Magic Circle. He is a respected and authoritative voice within the accountancy profession and has worked in a variety of large and small firms over the course of his 30 year career in the profession.

Mark has a passion for enhancing accountants' skills and the services that they provide to their small business clients. Over the last ten years he has advised thousands of accountants on client service and related matters. He now operates as a professional speaker and an independent consultant to professional firms.

Five more simple tips

1. Know your alternatives - you shouldn't need to pay for your accountant to learn new things when you need help doing something that your accountant hasn't done before. It will often be cheaper and more cost-effective to engage a specialist who already has the necessary knowledge and experience.
2. If you need a bookkeeper (temp or perm) get one instead of paying accountancy firm rates for simple bookkeeping.
3. Ensure your accountant tells you what information they will require before they start work and then make sure it's available for them.
4. Get a commitment from your accountant to produce your tax return within a specified period of you supplying all relevant information.
5. Ask your accountant to tell you what issues they specialise in - some are better at arranging third party investments than in giving tax advice.

Five simple tips

1. Refuse to pay by the hour or for minimum units of time. If your accountant hasn't yet moved into the 21st century and only charges by reference to the time they spend rather than the value they provide, find one who has!

2. Don't let them to do things you can do yourself - if you have the time and inclination.

3. Ask them what you can do to reduce the time they spend producing your accounts, auditing your accounts, producing your tax returns and how much they will reduce your fees if you do those things properly.

4. Get a written assurance that they will sit down with you at least once a year at no additional charge to see what else they could do for you.

5. Do not pay standard hourly charging rates regardless of the work done. Most accountants set the rate for the person not for the work, so if an accountant does some photocopying they could well charge at the same rate as when giving you valuable advice.

Who sacks who?

The best accountants don't have clients who regularly moan about their fees. No accountant wants their clients to moan about fees, so where this happens time after time, there are only two real possibilities:

• either the accountant is overcharging for the work they are doing, in which case the clients should sack them and find a new accountant; or

• the client is unwilling to pay a fair fee for good work in which case the accountant should sack the client.

Many accountants are too scared to sack clients generally but the better accountants will sack their worst clients over a period of time. Successful accountants tend not to worry about losing a client who is not really contributing to the firm’s success due to the time and cashflow issues that arise whenever there are constant complaints about fees.

Mind the gap

If you have yet to find an accountant, or you want to find a new accountant, there are plenty of resources on the net, to enable you to do so.

What is less easy, however, is to find out what you can really expect from your accountant. Indeed all too many people would describe their accountant as being "okay" but without any real enthusiasm. And certainly not such that they would be like to recommend their accountant to anyone else.

My intention is to fill this gap. To provide tips, tools and information so that business people, sole traders and the self employed are better placed to get better service from their accountants.

Different people will want different things from their accountant, of course. Some people genuinely only want their accountant to fill in the forms and do the paperwork that they cannot do themselves. And they want to pay the minimum fee possible for this "service". Other people could complete the forms themselves, but don't have the time to do so. And again, fees may well be the main issue when comparing different accountants for them as well.

There are also many people who have no real understanding as to what additional advice and services they can expect from their accountant. As nobody has ever told them. Not even their accountant!

Analogies

An accountant is like a dentist - you don't know how good he/she is until it's too late.

An accountant can be like a wine waiter - you don't want to admit how little you understand when he talks to you. But of course he/she should be more senstive to what you know, what you like and what you dislike.

Appointing an accountant is like gettting a Doctor. You must feel at ease with your accountant because they will guide your financial health.

The second talk

Just for the record - a future talk and possible booklet will focus on a related area:

What to look for when choosing an accountant for:

• your new one man business
• your new growing business

Titles - further ideas for talks and books

Get more from your accountant or get one who can do what you want.

Improve your business without your accountant

Improve your business without paying your accountant more

The 7 key questions you must ask an accountant before you hire

How to get more from your accountant

How to find the perfect accountant? The checklist.

Is your accountant doing this for you? If not, why

Accountancy services- the good, bad and ugly and how to tell the difference

Make your accountant work harder for you at no extra cost. Find out how.

Count me in...... making your accountant part of your business success

Absolutely awful accountants... and how to acquire/get rid of one

Make your accountant earn their keep

Get better advice from your accountant

Making your accountant more useful

The best questions to ask your accountant

Getting on with your Accountant

"Choosing the Right Accountant for you and your Business"

The talk title

My first idea was "How to get more value from your accountant" but when I asked around some people thought this meant I was going to give away tax secrets.

Here are a selection of alternatives that I have considered. Feel free to add to the list:

What you wish you'd known when you started in business
How to squeeze every drop of value out of your accountant
Getting the most out of your accountant
How to make your accountant work for you
What you need to know to get the most out of your accountant for less
Reduce your accountant's fees - what you need to know
No Accounting for Taste - an objective and fun guide to the serious subject of selecting and using an accountant
Get more help from your accountant but pay lower fees
How to choose the right accountant
How to choose and use an accountant
What you need to know about how accountants work if you want to avoid wasting your money
How to move from an ‘old style’ to a ‘new style’ relationship with your accountant
How to manage the move to new accountants
How your accountant can be more than just a golf partner
The ten worst things you can do if you want to reduce your accountancy fees
Helping your accountant to help you
" How to put the "o" back in your accountant "
or
"10 closely guarded secrets your accountant will take to his grave before telling you"
or
"The top 10 secrets your accountant doesnt want you to know"
or
"How to get blood from a stone: Accountants and value"
or
"A client's Guide to Full Fair Value Accounting of Accountant's services"
or
"The business owner's guide to fair value assessment of their accountant's advice"
or
"10 Ways to extract fair value from your accountant"
or
"How to get your accountant to under promise and over achieve, 100% of the time."
or
"How to get £1000 of value from your accountant for every £100 you spend"
or
"The Business Owner's workshop for maximising value from your accountant"
or
"How to get 100% customer satisfaction from your accountant, 100% of the time."

Black and White or shades of grey

"Our accountant is always black and white. He has no shade of grey"
Is this a good thing or a bad thing?
My accountancy background forces me to say "it depends"!

If you want your accountant to give you clear, unambiguous and definitive advice, it's probably a good thing if they just give you black/white answers - sometimes. In my experience, most people don't want wishy-washy advice. They don't want their accountant to sit on the fence. I was taught to always give my clients advice even if the arguments were finely balanced. It's what clients pay for.

The alternative view comes from those who want to have their options left open so that they can decide what choice to make themselves.

Let's assume, for instance, that you want to know if you can claim tax relief for the money that you might spend on a particular item. A 'black and white' accountant will give you a definitive answer - yes or no.

A 'shades of grey' accountant will probably ask more questions before giving you an answer. And his answer may be 'it depends'. Indeed it might well depend on whether your motivation for buying the item is genuinely business related or whether you are also likely to enjoy significant non-business use of it too.

Does your accountant know whether you want straight 'yes'/'no' answers or whether you would prefer him/her to check the context of your questions and then offer you good advice - which may involve leaving the final decision upto you?

And of course you might prefer a different approach in response to different questions.