5 Questions for your prospective accountant

I recently had the pleasure of writing for a guest blog spot on Wendy Tomlinson’s Morning Business Chat Blog page, the topic was ‘5 Questions to ask when choosing and accountant’. I know how daunting making that first visit to an accountant can be, perhaps these questions can help you to relax a bit and feel a bit forearmed in that initial meeting; so I decided to share the information here on my own blog as well.

If you are wondering:

  1. Where do I begin with the bookkeeping and accounting that needs to be done?
  2. Do I have the time?
  3. Do I have sufficient knowledge to deal with the ins and outs of Companies House and HMRC?

If you answer no to any of these, then the time is right for you to hire an accountant to help you through what can sometimes be considered murky waters and an ever changing tide of rules and regulations.

Who do you appoint, how do you choose, there is so many and all those letters and qualifications, what do they really mean? Well, here are my ‘Top 5 Questions to ask’ and why you need to ask them:

So here they are in a graphic:

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1. Are you regulated by an accountancy body?

Unlike in other professions, the anyone can call themselves an accountant, they don’t need to have any qualifications or have undertaken any formal training. Although many in the profession want to see this changed, as yet there is still no regulation on the word accountant. This of course makes finding a truly qualified and appropriate accountant a little more difficult to the uninitiated.

As a qualified accountant, the member is required to take part in continuing professional development courses to stay on top of the changes and regulations in the world of tax and accounts. This ensures that you are given the most up to date and best advice possible.

A qualified accountant will be regulated by a professional body such as the ACA, ACCA, IFA, & CIMA, there are others but these are some of the main ones. If a qualified professional is practicing as an accountant to the public then each practice will have a practicing certificate. Don’t be afraid to ask about qualifications and practicing certificates.

Alternatively, you can search the professional body’s database of professionals to confirm qualifications etc. ACCA, ACA, IFA, CIMA

2. Can you provide references from existing clients?

Many people choose their accountant based upon recommendation from someone they know, therefore references are really important. Don’t be afraid to ask for them. You may simply decide to check out their testimonials on the website or social media sites or you may decide you want to speak to a client directly.

3. Who will be my point of contact?

This will of course depend upon they type of practice you are dealing with; with a small sole trader you will be looked after directly by the owner of the business as there this no one else. Any larger practice and you will may be allocated a client manager.

A client manager will be your day to day point of contact, they may or may not be qualified and may or may not be experienced in your particular business sector. There may also be subordinates allocated to physically carry out the majority of the work such as bookkeeping etc.

Make sure you find out who will be dealing with your account, it is important that you are able to effectively communicate with them.

4. What experience to you have working with business in my industry?

We all know that experience counts for a lot. Each type of business has its own issues when it comes to accounting, treatment of income, when to recognise it and understanding how the business itself works, the flow of information and the significance of the processes.

There may be particular tax allowable items or ways of accounting for income or expenditure that is unique to your industry, in which case experience of dealing with your industry could be key to ensuring you represent the accounts correctly and pay the correct tax to HMRC.

5. What services do you offer and what are your fees?

To many, this will be the most important question.

Although most accountancy practices offer very similar services it is still worthwhile to check that they offer all of the services you require now and those that you think you may require in the future. This could be anything from simply preparing year end accounts and tax returns to bookkeeping, management accounts, forecasting or budgets, payroll services, CIS returns and VAT returns (to name but a few).

How will you be invoiced for the services? You may be expected to pay at the time of the service being performed either on a fixed rate or an hourly rate. Are you happy with this type of agreement, you may end up with a surprisingly high bill if you agree to an hourly rate rather than a fixed fee. Can you afford to pay your fees in a lump sum at the end of the year?

Many accountants now offer a fixed price agreement whereby fees are agreed in advance with the cost spread over a 12-month period of time thereby spreading the impact of the fees over the year, making it easier for you to budget for your accountancy costs. These agreements are often expected to be paid either by standing order or direct debit each month. Be aware however of the cost of ad hoc questions that you may ask your accountant, are there any of these included with the fixed fee or will you be billed on a time basis (anything from 6 minute chunks of time up to 15 minute chunks normally).

So, here is my parting shot….

Above all and probably most importantly, make sure that the person or firm you choose is someone that you can work with and have a good working relationship. There is an accountant out there for you, it just may take some time to find the right one.

Record Keeping – What you need to know – Part 3

Ok, I know it has been a long time since I posted the first 2 parts of this article on Record Keeping- What you need to know but I am here now and hope this helps some of you out with understanding what expenses are allowable for tax purposes.

Allowable Expenses

The final topic on record keeping I wanted to tackle was expenditure, what you can and cannot use against your tax. There are many misconceptions as to what expenses are allowable and which are not. Some of the common questions I get asked are below:

Travel expenses: Depends on the circumstances

  • Petrol Costs – Yes if not claiming mileage but must be restricted for the personal use element
  • Mileage – yes for business mileage only (ie to and from a meeting but not to and from the office)
  • Car Insurance – Yes if not claiming mileage but restricted for the personal use element.
  • Train/Bus Fares – Yes if travelling to a meeting, conference or other business purpose
  • Car repairs & Maintenance– Yes if not claiming mileage but restricted for the personal use element.
  • Meals when away on business
  • Parking/speeding fines – No as a general rule but there are some exceptions where it is for an employee and they are taxed appropriately

Entertaining:

  • Client Entertaining – No
  • Staff Entertaining – Yes to a small amount (£150 or less per head, be an annual party Xmas party, open to all employees) you may however need to report it on a P11D. Employees earning less that £8,500 pa do not need to be reported.

Use of Home as Office- see HMRC simplified expenses calculation

  • Gas & Electric – Yes if apportioned in an appropriate manner
  • Interest on your mortgage– Yes if apportioned in an appropriate manner
  • Cleaner– Yes if apportioned in an appropriate manner
  • Insurance– Yes if apportioned in an appropriate manner
  • Council tax– Yes if apportioned in an appropriate manner
  • Repairs– Yes if apportioned in an appropriate manner

Mobile Phone –  Yes for a business element or in entirety if used only for business purposes

Gifts – Generally No, however, small gifts that include advertising is normally allowed (ie USB stick or branded sweets etc)

Professional Subscriptions – Yes if it directly relates to your business

Your Car/Van

  • Purchase cost – depreciation/capital allowance for the year provided it is apportioned for personal usage if there is any
  • Interest on finance agreement – Yes if not claiming mileage but restricted for the personal use element.

Useful links:

HMRC Guidance: Private & Personal Expenditure Toolkit

HMRC Simplified Expenses Calculation

HMRC Guidance on Sole Trade business records

Record keeping – What you need to know – Part 2

Recording the books

If you read the first part of this blog, you should know how you are going to file everything which means you can now start thinking about how you are going to record everything. HMRC have not issued any guidance about how you should maintain your records. You have two choices here, you can use a simple spreadsheet or you can use bookkeeping software that is designed specifically for the purpose.

Often, for the small sole trader, using a simple spreadsheet is all that is required and many will find it easier and quicker to use, it is also cheaper than going out and paying for a desktop software package such as Sage or Quickbooks or the monthly subscription to cloud based software like Kashflow, Quickbooks or Xero to name a few. Most likely your accountant can give you guidance on setting up a spreadsheet that will work for both you and them. The same principal as before applies, keep it as simple as possible.

Recordkeeping – What you need to know – Part 1

What do you need to keep?

As a general rule of thumb, I tell all of my clients, keep ANY receipts that are business related, depending on your business that can include petrol, stamps, stationery, computer hardware and software, materials, professional fees or subscriptions you may have, mobile phone, I could go on and on. Don’t forget to print a receipt for the cost of even coming here or to any other networking event. You also need copies of all of your bank statements, credit card statements (if you use one for your business) and paypal account statements. (NB: when it comes to bank accounts etc, it is advisable to have a separate account for your business, HMRC like it and it will make your bookkeeping easier as well). Keep copies of all of your sales and any credits you may have issued.

My moto, if in doubt, hang on to it. If you have an accountant, then you could ask them if you need it or simply include it with the paperwork you send to them when it is time to do your accounts and they can help you to determine whether you need it or can claim it.