I am not being dramatic when I say receiving bad or incorrect advice from The Accountant can ruin your business. Unfortunately, I have seen it happen. And no, despite the image, I am not talking about the Ben Affleck movie – I mean your accountant, your trusted advisor.
Getting bad advice or crucial details wrong, could cost you thousands causing the business to suffer and could, in extreme cases, put you out of business.
For example, picking the wrong VAT scheme could cause you huge problems. If you are a stock-based business and you are put on the flat rate scheme, you could be left unable to reclaim the VAT that you incur on your stock purchases. Or forgetting to register for tax or file tax returns will incur you huge fines. In extreme cases, HMRC will deny you the right to be VAT registered, effectively capping your turnover to below £85K.
The biggest issue in my mind though is none of these things. It’s when an accountant is not helping a client to:
a) keep proper books and records which help to produce management accounts and
b) not helping them understand those management accounts.
If you don’t have a monthly profit and loss for your business, then you cannot make informed financial decisions. How do you know what to invest in your business, if you don’t know how much money you are making?
A lack of management accounts is a top ten reason for business failure – what’s the point of doing all the hard work in pursuit of profit if you don’t know whether you are making a profit or how much you are making.
What do I mean by management accounts?
All I really mean is a profit and loss statement. A detailed report showing your Sales less your Costs and a bottom line profit.
Sounds daunting and difficult to achieve? Not the way we do it!
What we often find, when taking on new clients, is the old accountant has given no advice to the client on how to keep their accounting records and let the client use a spreadsheet to record their sales and costs or an old fashioned desktop based system. Then the client will be charged for completion of their VAT returns each quarter. This is standard and we see it all the time.
But our advice – and we have been helping clients do this for years – is to ditch the old ways of bookkeeping and start using Xero. Once you have made the decision to use Xero you need someone to help you understand how to use it.
We don’t allow our clients to use a spreadsheet because, for a similar amount of effort it takes to complete a spreadsheet, and comparable cost, you can enter your information directly into Xero. Xero then produces your VAT return and management accounts to give you the information you need.
How to spot a good accountant
If you have seen the movie you may be surprised it’s not an insane ability to analyse numbers at the cost of being able to relate to people, or the ability to hit a target with a sniper rifle at a mile out. Here is what you should be looking for…
- Make sure they are qualified either ACCA or ICAEW qualified. Anything less then I would question if they are suitable for your business.
- Do they have fixed fees? Open-ended time-based billing is reserved for solicitors and should be a thing of the past.
- Are they too cheap? A cheap accountant may sound like a good thing but anything cheap may not be up to the task. It’s a false economy – too cheap may mean not enough time spent on your affairs.
- Are they tech-savvy – do they use the latest cloud software? If not, you may end up paying for their inefficiencies.
- Do they have good reviews – check out our 5 star Google reviews to see what I mean – Read Our Review Here If your accountant is good, there will be reviews.
- Does your accountant respond when you ask a question – a good accountant will come back to you quickly with an answer to your queries.
- Are they local? There are plenty of virtual accountants, but we think a local accountant who you can meet without too much planning is beneficial.
- Is your accountant all about the numbers or do they see the bigger picture – a practical approach to business growth has always been our approach and our clients appreciate the feedback.
- What does your gut say? If you get a bad feeling about your accountant, then you are probably right.
- Does your accountant have room and capacity to grow with you – do they offer additional services or could take on additional work – if they are at 100% capacity or a one-man band you may quickly outgrow them.
I know, we would say this, but the right accountant is vital for a business. To use a motorsport analogy the right accountant is like the right team mechanic – you may have the car and all the bits you need to race but without someone to keep it on the track you won’t last long.
To find out more how we have helped local Kent businesses why not take a look at our case studies or testimonials.
