Dealing With Your Professional Advisers
Peter Taylor is a Fellow of the Institute of Chartered Accountants and has many years' practical experience of advising small businesses, particularly in taxation and auditing. He lives: nr Stoke on Trent, Staffs, UK.
There are several professional people, and potential allies, that you will need to consult when running your business. These might include:
- your accountant
- your bank manager
- your solicitor
- your insurance broker.
DEALING WITH YOUR ACCOUNTANT
Before you start in business it is well worth finding an accountant to advise you. They will normally:
- prepare, and if necessary audit, your annual accounts
- agree your tax liabilities with the Inland Revenue.
They will also be able to help you with:
- advice on the purchase or sale of your business
- advice on how to keep the books
- arrangements for business finance
- writing up the statutory books for a limited company (if applicable)
- investment advice
- many other kinds of independent financial advice.
Although we looked at the preparation of annual accounts earlier in this book, in practice few small businesses actually do this themselves. Instead they keep the books of prime entry (cash book, day book, etc.) and pass them to their accountant at the end of the year so that he or she can prepare the accounts for them.
Choosing an accountant
When choosing an accountant the following points should be considered:
- 1.Choose a firm of the right sort of size for your business. If your business is small with only a few staff then a local accountancy practice may be best. It will undoubtedly have plenty of experience of dealing with businesses just like yours and appreciate local trading conditions. On the other hand if your business is large, or if you need advice on specialist areas (e.g. the taxation implications of setting up a subsidiary company in Alaska) then it is probably better to consult one of the larger national firms.
- 2.If you choose a small firm, it’s best to find one whose partners belong to one of the main recognised bodies (e.g. The Institute of Chartered Accountants in England and Wales or the Chartered Association of Certified Accountants). They’ll have the following letters after their names:
FCA Fellow of the Institute of Chartered Accountants ACA Associate member of the Institute of Chartered Accountants CA Member of the Institute of Chartered Accountants of Scotland FCCA Fellow of the Association of Chartered Certified Accountants ACCA Associate Member of the Association of Chartered Certified Accountants - 3.Listen to the advice of other local traders (particularly in the same line of business). They have had practical experience of dealing with an accountant and can base any recommendations on personal knowledge.
- 4.Finally, the personal factor. Choose an accountant you can really talk and discuss your problems with. Your association may last many years and you need someone you feel ‘right’ with in the good times and the bad.
Be open with your accountant
Your accountant will prepare your annual accounts and advise you on your financial affairs. But they can only do so if you give them all the facts. If they ask you questions about your finance, it’s because they needs the details to help and advise you. They’re not just being nosey!
Sometimes, for example when dealing with your tax, they might ask questions that seem rather searching and even seem to question your honesty. But it’s far better that they ask the questions rather than the Inland Revenue! The accountant can then give an explanation to the Inspector of Taxes about something that might otherwise arouse suspicions and perhaps give rise to detailed enquiries.
How does an accountant fix their fees?
Most accountants charge according to the amount of time taken to deal with your affairs. Many use a sophisticated time recording system to keep track of the time they spend on each client’s affairs; for example, office work, meetings and telephone calls. Different members of the accountant’s staff will be charged out at different rates depending on their technical ability. A junior clerk will obviously be charged out at much less per hour than a partner. The accountant will use the most suitable grade of staff to look after the different aspects of your work.
Clearly, if you present your records to the accountant in a neat and tidy condition they can keep their fee to a minimum. But if they had to spend many expensive hours sorting out a ‘messy’ set of records, their fee will certainly reflect the extra work.
Do make sure that your work on writing up the records will in fact help your accountant. Some traders spend hours writing up records, but since they are not in the right form for their accountant much of the time is completely wasted. Discuss your records with your accountant early on, so that you can agree the best way of doing things.
Briefing your accountant
Soon after the year end let your accountant have all your accounting records. Do make sure that your records are complete at both the beginning and end of the year. Often bank statements will cover a period that spans the year end. If so the accountant will need the statement twice, i.e. for the previous year and the next year.
It will also help your accountant (and save fees) if you provide them with the following as at the year end:
- details of your stock valuation
- details of debtors (money owed to you)
- details of creditors (money owed by you).
It is also useful to your accountant for you to note any unusual matters concerning the business that have occurred during the year. All these matters will help your accountant prepare your annual accounts (and thereby save you money)!
DEALING WITH YOUR BANK MANAGER
Almost every business needs a bank account to carry on its trade. You will want to pay your suppliers by cheque, and need some way of clearing cheques that you get from customers for sales.
The high street banks offer much the same services, although from time to time they bring out new accounts or services, giving them an edge (until their rivals copy the idea).
As with choosing an accountant, find a bank that you can work with. Often this depends, at least to some extent, on the local branch manager. If you get on well with them your financial path should be that much smoother.
Arranging bank borrowing
Sooner or later most small businesses need extra loan finance and in most cases the best place to get it is their own bank. Knowing how to put your case to the bank manager can prove to be a major hurdle and by not putting forward a well-argued case you will hamper your chances of success. The bank manager can only decide about the loan on the information that they are given. If this is too little or incorrect they’ll have little option but to say ‘no’.
Remember, the bank manager does not want to say ‘no’. Banks make their profits by lending money and if all propositions were turned down they would make no profit! On the other hand a bank must be satisfied that it’s a good lending proposition, and that they will get their money back.
If the proposition is not financially sound the bank will not permit the borrowing. This may seem hard at first, but in practice it often kills a scheme at the outset that would in any case be doomed to failure. As well as protecting their own investment the bank may also be saving yours. Remember, they have lots of experience of small businesses; the failures as well as the successes.
Putting forward your case
When you put forward your case to the bank, make sure you provide the manager with the following:
- the reason why you require the loan
- the amount of the loan
- the anticipated period of the loan
- your proposals for repayment
- details of any assets you can put up as security for the loan.
If the manager is not familiar with your business (perhaps because you have only just moved to the bank) you should provide them with a brief typed review of the business and its history. You will be helping them to help you.
DEALING WITH YOUR SOLICITOR
From time to time you may need to consult a solicitor to deal with various business matters, for example:
- the purchase or sale of your business
- the purchase, sale or rental of property used by the business
- disputes between the business and its suppliers or customers, including debt collection
- the preparation of partnership or other legal agreements.
Many of the points about dealing with your accountant also apply to dealing with your solicitor. Remember they are working for you, and you will get the best from them if you give them all the necessary information. Bear in mind, too, that they charge for many of their services on a time basis, perhaps £50 to £150 an hour (probably more in London). Don’t be afraid to ask how much. Be clear in your own mind what you want them to do for you when you contact them; you can then give them clear, concise instructions about what is needed. This will save them time and you money.
USING AN INSURANCE BROKER
Most businesses need some sort of insurance to protect them when things go wrong. For example:
- fire at the business premises
- theft of goods or equipment
- product failure resulting in a claim from customers
- liability to employees (and the public) for injury at the business premises.
Remember, it could only take one disaster to put all your plans – and perhaps your whole business – at risk. Contact an independent insurance broker and discuss your needs with them. Ask them for competitive quotations and take out insurance accordingly. Many types of cover can often be brought together in one ‘business policy’ with savings in the total premiums.
Brokers who belong to the British Insurance Brokers Association (BIBA) have to meet certain requirements, and this acts as a safeguard to their clients.
Along with your other professional advisers your broker may also be able to help you on life assurance and pension plans.
LOOKING FOR EXTRA HELP
A book such as this one can only introduce the main accounting topics, and there will be times when you want further information.
Who you ask will depend upon what kind of information you need. The following list may help you:
General accountancy, finance and taxation matters
Your local accountant. If you don’t know one to contact, get in touch with one of the following professional bodies for a list of names:
Institute of Chartered Accountants in England and Wales |
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The Institute of Chartered Accountants of Scotland |
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Association of Chartered Certified Accountants |
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The Institute of Chartered Accountants in Ireland |
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The Association of Authorised Public Accountants |
Taxation queries
Try your local Inspector of Taxes (see the telephone directory). They are staffed by humans. They can supply sample forms and various useful booklets and notes. Or of course ask your accountant if you have one. Details are also available on the Inland Revenue web site: www.hmce.gov.uk.
VAT queries
Your local Customs & Excise VAT Office should be able to help (see under VAT in the telephone directory). Or of course ask your accountant if you have one. Alternatively you can get information from their web site: www.hmce.gov.uk.
National insurance queries
Contact your local Contributions Agency Office (see under Contributions Agency in the telephone directory). Or again ask your accountant if you have one.
Finance
The following may be able to help you. The high street banks – see under ‘Banks’ in Yellow Pages. For example, Barclays, Lloyds TSB, HSBC, NatWest and others.
Hire purchase – see under ‘Credit & Finance Companies’ in Yellow Pages.
Leasing – see under ‘Credit & Finance Companies’ in Yellow Pages.
Business start-up and consultancy
There may be many occasions in your business life (particularly when you are just starting) when you feel you could benefit from getting help and advice from someone. ‘The bloke in the pub’ is one source but the information that you get is likely to be far more reliable if it has come from an accountant or a professional adviser.
One such source is Business Link (also called Small Business Gateways in Scotland and Business Connects in Wales). Business Link is managed nationally by the Small Firms Service, which is a government agency dedicated to promoting small businesses. The service offers information and advice on many matters ranging from starting a business to employment law for your workers. They can also arrange consultancy visits to discuss marketing, obtaining grants and finance or even exporting to Europe.
In most cases the initial services are free and so Business Link makes a good reference point for small businesses to seek advice. Even if they cannot help you themselves then they will probably ‘know a man who can’!
They can be contacted on 0845 600 9006 (England): 0845 607 8787 (Scotland); and 0845 796 9798 (Wales).
And finally:
Remember the other books published by How To Books, including:
Cash Flows and Budgeting Made Easy (Peter Taylor)
Coping with Self Assessment (John Whiteley)
Financing a New Business (Phil Stone)
Mastering Book-Keeping (Peter Marshall)
Preparing a Winning Business Plan (Matthew Record)
Setting Up A Limited Company (Robert Browning)
Starting a Business From Home (Graham Jones)
Starting Your Own Business (Jim Green)
Taking up a Franchise (Matthew Record)
Understanding Financial Accounts (Phil Stone)
Your Own Business (Phil Stone)
Please send for a free copy of the latest catalogue for full details (see back cover for address).
SUMMARY
- Find an accountant to advise you on the financial aspects of your business.
- Build up a good relationship with your bankers. You don’t know when you might need their assistance.
- Consult a solicitor as and when necessary. If you use the same solicitor regularly they will come to know your business and its requirements which will help to keep fees to a minimum.
- Do arrange necessary insurance. Discuss your requirements with a broker.
