ok so I’ve decided to write this article due to my own experience of dealing with accountants and the stories I have heard from other business owners.

The purpose is to create an awareness of what problems you could potentially experience in your own business and use this knowledge to avoid them,  hopefully saving you time, money, and stress!

It is also worth saying as with all professions there are good and bad but as a business owner when you are paying high rates for the services of accountants, solicitors, or other “professionals” you expect a certain standard or at the very least comfort in the knowledge that they know what they are talking about.

I’m also aware that my experience and that of others mentioned may not be the norm and like with all industries there are good and bad.

Ok so first of all within the UK when you start in business you can simply register as self-employed or set up a limited company, there are other business models but these two are the most common.

Now I’m not going to go into the pros and cons of either, but just to say registering as self-employed is the easiest of the two and you don’t need to use the services of an accountant, you simply fill in a self-assessment form at the end of the year.

Self-assessment is fairly straightforward forward you calculate your profit or loss, submit your form, and are then sent a bill accordingly. If however, you set up a limited company you have to employ the service of an accountant to prepare and sign off your annual accounts.

Top Tip!- At this point it is worth mentioning that you could potentially employ the services of a bookkeeper, who is less qualified than an accountant to prepare your accounts and then get an accountant to simply sign the accounts off… this is a much cheaper option but you need to find an accountant who will agree to it, not all will agree as they cant charge you as much, but it will definitely save you money so worth asking around.

Ok so when I first started in business I was self-employed for several years and went down the self-assessment route however when the business grew and I gained a large contract I had to set up a limited company for various reasons and employ the services of an accountant, and my first experience of dealing with accountants was not that great-

I think it’s fair to say that when you employ the services of anyone you expect a certain level of helpfulness or friendliness.

The accountants I first met with (they were a partnership) didn’t come across as very welcoming and almost slightly condescending. They seemed to be giving the impression as if they were going to be doing me some sort of favour, and not the fact that I would be bringing business to them.

During the conversation they were also talking as if they would become some sort of partner or financial director within the business and be involved in financial decisions,  it all seemed a bit peculiar really, and made me feel quite uncomfortable so I made my excuses and left.

After this meeting, I spoke to a few other accountancy firms on the phone but didn’t get a great feeling and I was eventually recommended to a local accountant through a friend of a friend, this accountant seemed far more welcoming and helpful so I took him on board as my accountant.

The first meeting went well and he told me what I needed to send to him etc. and it all seemed quite straightforward. One thing however which he did do before we started was to make sure I signed a disclaimer. 

it was a contract to say that if I lost any money for any advice or lack of advice, I  couldn’t sue him, he said the disclaimer was standard and had to be signed before he started work, it seemed reasonable so I signed the form.

Now at this time, the business had been pretty much part-time until securing the new contract which immediately took it over the VAT threshold.

The VAT threshold in the UK is currently £85,000 which basically means until you reach a turnover of £85,000 you don’t have to register. This was something I hadn’t had to deal with previously and one of my reasons for securing an accountant.

Anyway let’s get back to this story, I was busy with this new contract and I sent the required figures to the accountant so he could prepare the quarterly VAT statements- when the bill eventually arrived for the first payment however it was like a punch in the face.

For the amount of TAX and VAT I suddenly had to pay was far more than expected and -the amount of extra work and responsibility – didn’t start to seem worthwhile.

The payments were excessive and did piss me off considerably, It was so bad that I was beginning to wish that I hadn’t actually taken on the contract in the first place,  so when things started to quiet down and I had a bit of time I started to read up on VAT.

Accountant Nightmare I

Now one of the things about VAT is that once you start paying VAT you can also claim VAT back on purchases you have made- the government try and make it sound like they are doing you a favour, It is all a bit of nonsense really, VAT is just another form of tax so once you start paying you are going to be loosing out whatever.

However, some companies have more expenses and costs than others so effectively can claim more VAT back, which seemed to be unfair as In my business my costs and outgoings were minimal so I could claim hardly any VAT  back.

As I read more I came across a government scheme that seemed to be designed for companies like mine called a margin scheme (VAT Margin Scheme) which basically meant I could potentially pay a significantly reduced amount of VAT but couldn’t claim any VAT back, which seemed fine.

Now let’s not forget at this stage I came across this from my own research it hadn’t been mentioned by my accountant at any time and he was the expert with 4 years of accountancy training, so maybe I got it wrong?

I brought the conversation up with the accountant, and mentioned the scheme and he was instantly dismissive saying that it didn’t apply to my company and not to waste my time.

Well the savings would have been huge, saving £10,000 alone on the first bill so I did think it was worth applying, ignored his comments, and made the application

To my complete surprise when the application came back it had been accepted I was eligible for the scheme and I had instantly saved myself £10,000 

Now Remember that disclaimer the accountant made me sign this is quite important to remember because an accountant is only working on your behalf so if he or she makes any mistakes in submitting your accounts you pay for the mistake not them.

If they are late filling your accounts and you receive a penalty you pay the penalty, not the accountant.- and mistakes like this happen all of the time.

You can imagine my annoyance at the accountant because he hadn’t identified the scheme and when I suggested it he then dismissed it.

After resubmitting the paperwork  I read up on how to prepare my own VAT statements and sacked the accountant-  preparing the VAT statements was also fairly straightforward.

You may think that this is just a one-off and that I had an unlucky experience but through my experience of many years working with different businesses it’s not as uncommon as you would think!

Accountant Nightmare II 

Quite a few years ago I was working with a company who were doing extremely well, they were selling vans online and they had been one of the first to market so the business was very profitable. Millions of pounds in profit not just turnover-

At that time they had an accountant who had given them advice on payroll but this advice also turned out to be wrong, except that in this case it meant the company received an unexpected tax bill for over a million pounds that had not been accounted for and that had to be paid back.

As these experiences are not uncommon it is always worth getting a second or third opinion on financial matters even if you have a regular accountant- and don’t be afraid to do your own research especially when that research means it could potentially save you a lot of money.

I hope you found this article of value, Entrepreneur Solutions help business owners significantly increase their profit margins through our Business Coaching & Support.

Neil Mc