Choose and work with an accountant

Accountants can offer your business a range of services, from basic bookkeeping to specialist business advice.

You may employ an accountant to prepare financial statements for your end-of-year tax return or for other services, such as auditing. By law, your business accounts must be audited each year, although some small companies are exempt – eg where annual turnover is £6.5 million or lower and the business’ financial year began on or after 6 April 2008.

This guide will help you understand what your business might need from an accountant and how to find an accountant that is right for you.

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How an accountant can help your business

If you run a business, you’re legally required to:

• Keep certain records, including PAYE (Pay As You Earn) records if you have employees, and VAT records if you’re VAT registered. This will involve regular bookkeeping work.
• Submit an annual tax return to HM Revenue & Customs. This will involve the preparation of financial statements.
• Appoint an auditor to carry out an annual audit of your accounts, unless the company is exempt – see the page do you qualify for an audit exemption? in our guide on accounting and audit exemptions for small companies.

If you’re a limited company, you also have to file accounts with the Registrar of Companies – see our guide on filing accounts with Companies House: dates and checklist.

You could decide to do some of this work yourself – but many businesses prefer to employ an accountant for at least some of it. For example, you might not have the time or necessary skills available in-house to do all the accounting work yourself. There is also a legal requirement to employ a qualified accountant for certain tasks.

In addition to basic accounting functions, many accountants also offer other services, such as start-up business and management systems advice.

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Choosing an accountant

Before choosing an accountant, you should consider the size and complexity of your business – your business may be small, but if the systems and organisation are complex then you will need an adviser who is able to assist with more than basic bookkeeping. Or you might need someone who understands a particular type of business. You should also consider what other services your business may need from an accountant.

It’s best to start looking for an accountant well before you need to use one, to give yourself enough time to make an informed decision.

It is recommended that you look for someone who has professional accounting qualifications. Anyone can call themselves an accountant or bookkeeper even if they don’t have any professional qualifications. But if any laws are broken or if bad decisions are made, then you, not your adviser, will be liable.

It is also advisable to ensure that potential advisers have professional indemnity insurance. If there are any problems with the work the accountant has done, you could be able to claim for any financial loss suffered as a result of the accountant’s advice.

Accountancy is a complex area and there are many accountancy associations to choose from. Some offer specialist services such as bookkeeping or preparing draft accounts, while others can offer guidance on specific business issues. You may wish to seek advice or recommendations from business associates, your bank or lawyer, or from professional or trade associations – particularly if you’re looking for an accountant that specialises in your industry.

Once you have identified some potential candidates, you should draw up a shortlist of about six accountants you’d like to contact.

Choosing the right accountant for your business

You should speak directly to each accountant on your shortlist. Ideally, the relationship you have with your accountant will be long term, so it is important to consider their:

• Experience – eg do they have experience in your sector and of businesses of a similar size? Can they deal with your business’ specific needs?
• Costs and charges.
• Size and personnel – eg how many partners do they have and who would look after your business? Sometimes smaller accountancy practices suit smaller businesses.
• Efficiency – what response times do they work to?
• Additional services – can they offer specialist business advice or help beyond basic accountancy services?

You may decide that some of the accountants on your shortlist are not right for your business. However, if their experience and services match what you are looking for, the next step should be to arrange a visit with them to discuss your business needs in more detail. You should check whether you will be charged for this meeting.

For more information, see the page in this guide: checklist: ten things to ask your prospective accountant.

Once you have chosen an accountant, let them know that you have selected them and they will issue a letter of engagement. This letter will act as the contract between you and your accountant and should detail:

• your responsibilities
• the accountant’s responsibilities
• their fees and how they will be charged

Professional associations

Qualified accountants usually have the word ‘chartered‘ attached to their title, indicating that their body was incorporated by Royal Charter.

There are also business-facing chartered institutes and professional accountancy bodies and organisations that offer specific accounting and taxation services for businesses and individuals. For more information, see our page on professional associations, institutes and organisations for the accountancy sector- Opens in a new window.

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Checklist: ten things to ask your prospective accountant

Different accountants can help your business in different ways, so you should always think about what you are looking for before choosing an accountant. For example, you may only need basic bookkeeping, or you may want someone who can give you specialist business advice.

Once you have drawn up a shortlist of potential accountants who would be suitable, you should arrange to meet them to make sure they are the ideal choice for your business.

You should take your business plan and other useful information about your business to the meeting. A good accountant should want to know as much about you as you do about them.

They should also be happy to pass on names of clients for you to take up references.

To make sure you get the best value for money, there are things you should find out about any prospective accountant. You should:

• ask about their qualifications
• find out how many partners there are in the practice, and who will look after your business on a day-to-day basis
• make sure they are experienced in dealing with businesses of a similar size and at a similar stage of growth to yours, and how they could help you develop your business
• assess whether they understand your business sector and its needs
• ask about their estimated response times
• check if their service will be proactive – eg whether they will remind you when you need to submit accounts or send you updates on changes in tax law
• find out if they offer any additional services – eg inheritance planning or advice on information systems
• ask whether they offer any specialist services – eg in start-ups or stock-market listing
• what services they will charge for and how and when you will pay for them – you may be able to pay a fixed fee for the first 12 months
• the level of access you will be given to the data held about your business – you might need this data to update your business plan or for tender documents and you will also want easy access to it if you ever decide to change accountants

For more information, see the page in this guide on choosing an accountant.

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Managing the relationship with your accountant

To get the best out of your accountant you should arrange to have regular contact with them. You should always allow yourself plenty of time to discuss tax implications before the preparation of end-of-year accounts. Your accountant can also help you to manage and develop your business.

It is important to maintain a good relationship with your accountant. You should make sure that you always:

• Keep agreed records or deadlines.
• Inform your accountant of any changes to your business.
• Discuss major issues with your accountant – such as tax implications of amounts you take out as drawings, salary or dividend.
• Pay your accountant on time. If you don’t, your accountant has the right to withhold your figures and other business data until payment has been made, except for limited company accounts that must be filed with Companies House.

However, just like with any business relationship, there could be problems with your accountant. For example:

• they may be difficult to contact
• they could be failing to provide you with necessary information
• you could be receiving unexpected fee invoices
• you might need an accountant with different specialist skills and experience – eg if your business is expanding
• the service offered may not be as proactive as your business requires

Your accountant should be able to adapt as the needs of your business change. However, every three to five years, it is a good idea to review the relationship with your accountant. You should ask yourself:

• Am I still getting value for money?
• Is my accountant informative and easy to contact?
• Does my accountant still suit the needs of my business?

You may find that as your business changes, so do your requirements for an accountant.

Changing your accountant

If you choose to change your accountant, you should manage the process carefully. You should bear in mind that you must terminate the agreement with your existing accountant before you sign any agreement with a new one.

Before you do anything else check the terms and conditions that you have agreed with your accountant. You may find there is a notice period you must honour. The terms of the relationship with your accountant are set out in the letter of engagement issued to you.

You should then check that you have access to all the data relating to your business. You should make sure that these are transferred to your new accountant prior to the handover.

If you need to complain about your accountant

If for any reason you suspect your accountant of misconduct then you could raise this with them directly. If you are still not satisfied you can make a complaint to the professional body they are accredited with. However, the professional bodies will not help you get compensation for any funds lost as a result of the misconduct – to do this you will need to seek legal advice.

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