Good advisers can make a huge difference to a business. From the start, they can ensure that a new business is set up in the right way, with effective financial systems, the right contracts and an understanding of the key legal issues.
You should choose advisers who understand your kind of business and will value you as a client. To get the most out of them you should take an active approach, identifying the issues you need them to address and managing the relationship.
1. Decide which accountancy services you need
You may want advice on starting a new business
- An accountant can help you decide the most appropriate form for your business - sole trader, partnership (or limited-liability partnership) or company.
- You might also need help setting it up. For example, forming a new limited company, negotiating a shareholders’ agreement with any business partners or registering with HM Revenue & Customs.
- You might want help preparing or reviewing your business plan.
- If you are buying an existing business, you will need help investigating its financial position and negotiating the purchase.
You may want help with business funding
- This may include recommendations on the financing of your business through overdrafts, loans, leasing, hire purchase, factoring, crowdfunding, venture capital (including business angels) or grants.
- An accountant may be able to introduce you to suitable sources of finance and help you present your investment opportunity to them.
Decide what help you need with bookkeeping and information management
- The government is gradually rolling out its Making Tax Digital program. VAT returns must now be filed using an approved app. An accountant can advise you how to set up your bookkeeping systems so they comply with MTD requirements.
- The accountant can also help you set up management information systems, providing up-to-date information that helps you run your business.
Identify what accounts you need to produce
- Your business will need to produce annual accounts for the tax inspector. Your accountant can prepare a profit and loss account and a balance sheet if required. Smaller businesses may be able to prepare their accounts themselves if they choose.
- You are legally required to produce accounts containing specified financial information laid out in a particular way. Larger businesses are also required to have their accounts audited.
- You might want to produce audited accounts in any case. For example, if other shareholders in the business require these.
Establish what tax services you need
- Most companies use their accountant to handle corporation tax. Many sole traders and partnerships take advice on their income tax returns. Unless you are an expert yourself, or have very simple financial affairs, advice is almost always worthwhile.
- A good accountant can provide advice on tax planning, helping you reduce your tax bill or defer tax payments.
- You might want help with other taxes. For example, you might need to register for VAT and complete MTD-compliant VAT returns. If you have employees, you will need to operate PAYE to handle income tax deductions and National Insurance contributions.
Consider whether you want advice on your personal finances
- For example, your accountant could help you with personal income tax planning, advice on ways to minimise inheritance tax and so on.
All companies must comply with the Companies Act
- Handling the paperwork for this is usually best left to a specialist, such as an accountant or solicitor.
2. Find potential accountants
Ask contacts for recommendations
- Ask business contacts if they would recommend their own accountant.
- Ask your bank if they can recommend local accountants.
- If you already have an adviser (such as a solicitor) they might be able to recommend someone.
- Ask business support organisations such as your trade association, chamber of commerce or Enterprise Agency.
Look for local members of the accountancy bodies
Search online or contact:
- ACCA (the Association of Chartered Certified Accountants, 0141 582 2000);
- ICAEW (the Institute of Chartered Accountants in England and Wales, 01908 248 250);
- ICAS (the Institute of Chartered Accountants of Scotland, 0131 347 0100);
- CIMA (the Chartered Institute of Management Accountants, 020 8849 2251).
Assess whether the accountant is likely to suit you
- Ask business contacts what they have used their accountant for, what their accountant’s strong and weak points are, and how much they were charged.
- Ask how large the accountancy firm is. Smaller, local firms are usually used to working with smaller businesses, charge less than larger firms and are more likely to value your custom.
- Published information sources will not be able to offer the same details, but might at least indicate what an accountant’s areas of expertise are.
Check that the accountant is properly qualified
- A qualified accountant will normally be a member of one of the accountancy bodies and entitled to use the appropriate letters after their name. A Fellow is more experienced than an Associate.
- If in doubt, check with the accountancy body they claim to belong to.
- Unqualified advisers are likely to provide a lower quality of service and are legally prohibited from providing certain services (eg auditing accounts).
3. Select the right accountant
Arrange an initial meeting
- Arrange meetings with at least three firms. You will learn what to look for and will be in a better position to negotiate fees.
- Confirm in advance that the initial meeting will be free of charge.
Brief them on your business
- Explain your business and how fast you expect to grow.
- Give them a copy of your business plan or explain key information, such as product information, existing financial statements and forecasts, and a description of any bookkeeping and management information systems you currently use.
- Set out the areas in which you think you need advice. Be prepared to listen to their suggestions for other issues you need to consider.
- Provide a brief, written summary at the start of the meeting. If your business is unusual or complicated, consider providing this summary in advance.
Find out more about them
- Ask how many partners they have, what each one specialises in and what their total number of employees is.
- Ask how many clients they have, how many are of your size and how many are in your industry.
- Ask which individual would handle your work and what experience and training that individual has.
- Ask how quickly you will get a response when you need advice.
- Ask what services they think you need and why they would be an appropriate adviser for you.
- Get a rough idea of how they charge and how high their fees are (see Negotiate and control costs).
Assess how comfortable you would feel working with them
- Think about whether you found them approachable and easy to get on with. Make sure that you have met the individual who would be working with you.
- Ask yourself what you think they would offer your business. An accountant who helps you plan ahead is more valuable than one who just adds up numbers at the end of the year.
4. Decide what legal advice you need
Find a suitable solicitor
- You can approach this in the same way as finding an accountant.
- You can find a solicitor through the Law Society. A qualified solicitor must be a member of the Law Society.
Identify the key legal issues for your business
- You might already know many of the key regulations for your industry, or be able to get advice from your trade association or business support organisation.
- You might want to retain a solicitor to give you regular updates on legal changes that affect you.
You may want help with a particular task
For example, to:
- set up a new company or partnership, or to advise you on taking up a franchise;
- buy, sell or rent premises;
- collect debts;
- draw up a standard employment contract for your employees;
- draw up standard terms of trade, or a specific contract for a major piece of work;
- advise you on protecting your rights to new ideas and designs;
- act for you in a legal dispute, and if you have to go to court;
- help with personal issues, such as drawing up a will.
5. Negotiate and control costs
Establish how they charge for their services
- Advisers typically charge hourly fees, which can be anything from twice the hourly pay of the individual upwards. More senior advisers will charge higher rates, and tax partners are often the most expensive of all.
- You might be charged extra costs (such as travel expenses) separately. You will also be charged any costs the adviser incurs on your behalf. For example, if your lawyer pays for a local authority search for premises you are buying.
- In some circumstances you may be offered a flat fee for a service. For example, an accountant might quote a fixed fee for preparing your annual accounts, submitting your corporation tax return and providing an agreed amount of ‘free’ advice. This is usually the most economical option.
- Other charging schemes can include working on a ‘no win, no fee’ basis (some solicitors will undertake legal action for you on this basis) or charging a lower rate plus a success fee (for example, if you are negotiating to buy a company).
- Confirm what payment terms are offered.
Ask for estimates before agreeing any work
- Be wary of introductory rates for annual services (such as your accounts). These may increase sharply in the second year, when it will be more disruptive for you to change adviser.
Give clear instructions and agree service standards
- Agree timescales. Be aware that insisting on a short-term deadline may increase costs.
- Be prepared for partners to delegate work to less experienced (but cheaper) employees when appropriate - so long as the overall service standard is maintained.
Avoid using advisers unnecessarily
- Set up systems that make life easier for your advisers and so reduce your costs. For example, accounting and bookkeeping software reduces the work your accountant must do.
- Use advisers in a structured way, rather than phoning them whenever you have a question. You are likely to be charged for every contact.
- Prepare for meetings and provide a written briefing in advance when appropriate.
- Take advantage of free advice and subsidised training from your local business support organisation.
- Consider cheaper options, such as using a payroll agency to handle PAYE or hiring a part-time bookkeeper.
Monitor progress and costs
- Query bills you don’t agree with or believe to be unreasonable.
- If you do not agree with a bill for legal fees, you can ask for the bill to be assessed by a court.
- If you cannot resolve a complaint about poor service, you can complain to the adviser’s professional association.
6. Use your advisers effectively
Take advice early
- Find and consult advisers in advance.
- Encourage your advisers to be proactive, helping you anticipate and deal with potential problems rather than just reacting.
Make the best use of your advisers’ expertise
- Ask for their suggestions on how to improve your business. An adviser might be able to suggest ways you can improve your systems and your working relationship and highlight new developments and opportunities you should know about.
- Understand that small amounts of relatively expensive, expert advice are better value than a lot of inexpensive, poor quality advice.
Regularly review performance
- Compare the costs you are paying and the service you are getting with your original agreement and expectations.
- Compare notes with other businesses you know.
Understand your advisers’ limitations
- If your adviser does not have the right expertise, be prepared to use specialist advisers to handle particular issues. Ask your regular adviser for recommendations.