How to choose an accountant for your small business
Picking the right accountant is a vital business decision, so you’ll need to arm yourself with the right assessment questions. Charlotte Simmonds hears the experts’ views on what these should be:
Choosing the right accountant is one of the most important decisions a small business can make. A good one can save you time and help your business grow; a bad one could cost you much needed money. Yet with thousands to choose from, it can be a daunting call to make. So when it comes to selecting and working with an accountant, what are the questions every small business owner should ask so as to make the most informed choice?
Why should I hire you?
Hiring an accountant can be “even more important” than taking on a member of staff, says Clive Lewis, head of enterprise at The Institute of Chartered Accountants in England and Wales (ICAEW). “If you get the wrong person, you can miss out on things you should know,” he explains, “and that can be very costly.”
Charlotte Chung, senior policy advisor at the Association of Chartered Certified Accountants (ACCA), says the key thing to query during the hiring process is how the accountant will add financial value to your company. “Look for someone who can act as a business partner. You want them to demonstrate the skills and knowledge of supporting a small business.”
Therefore, take your time with research. Both Chung and Lewis advise meeting with a least three candidates before making a final choice. There are a few fundamental questions that must be asked during these meetings.
“First, what are their qualifications, and are they regulated by a professional body?” says Lewis. “An ICAEW member, for instance, will have professional indemnity insurance, meaning any losses to your business due to bad advice will be covered.”
He also recommends speaking to others in your sector to get second opinions about their reputation. Chung recommends asking the accountant to share testimonials from customers, or better yet, if you can meet a current client.
“Having the right questions ready boils down to doing your homework,” summarises Lewis. “Make sure you don’t go into that first meeting cold, otherwise you’re only going to get their PR pitch.”
Could my money work harder?
James Richardson is a company director at Metric, an accountancy firm specialising in start-ups. He says most people believe an accountant will just be looking after annual accounts and tax compliance. However, “that’s only a small portion of what a good accountant can – and should – be doing for you.”
“They can help you raise capital by finding grants, government funding pots, and tax relief schemes,” he explains. “They can help you sell shares in the business, crowdfund or find angel investment. People tend to say, can you balance my books? What they should be asking is: what am I entitled to that I don’t know about?”
The money an accountant can save your business must naturally be weighed against the costs of employing them. Richardson says the question he often hears – “why should I pay you to do this?” – is therefore a valid one. “Start-ups are cost conscious, so ask what you can do yourself. For example, I would point people toward online bookkeeping software such as Xero and Clear Books.”
Clive Lewis says there’s “no need to be polite” when it comes to asking about an accountant’s fees. “You must ask, how much will this cost?” he says. “Also ask, when will you bill me? Some charge annually, monthly or hourly. Talk money up front, otherwise you’ll be in for a shock once you’ve committed.”
Are we a good match?
The right accountant will have more than just prestige – it’s important they understand small business needs, and are able to offer relevant insight.
“Small businesses can be naïve about their requirements,” says Lewis, citing research by Experian that recently found 59% of start-up directors are running a company for the first time. “That’s why it’s so important to ask an accountant if they work with small businesses, or have expertise in your sector,” says Lewis. “I’d also go with a firm that’s a similar size to you. That way, they understand your challenges, and their prices are likely to suit you.”
Charlotte Chung agrees. “Ask what other companies they have advised in your sector,” she says. “Similarly, have they advised companies at the same life-stage as you? What services could they imagine providing to you over time? Here, you’re testing for their breadth of expertise and ability to think of your businesses evolving needs.”
Accountants offer differing levels of engagement, so make sure to establish how often you’ll be in contact, and whether you’ll correspond by email or telephone, advises Lewis. Less contact often means less costs, but can make it difficult to ask questions or spot issues.
At a larger firm, the person you initially meet or speak to on the phone might not be the person actually handling the work, he also reminds. “Ask who will be dealing with your account on a day-to-day basis. You’ve got to be satisfied that you’re not being palmed off to the office junior; that the person in charge of your case understands your business.”
Are things working out?
Once you’ve chosen an accountant, measuring their performance is an ongoing process. Chung says a great way to do this is to hold monthly meetings where you can ask for their view on the business and its finances. “If their view is close to yours, that’s a good sign,” she says. “But you do still want to see a degree of challenge and initiative – if you only hear what you expect, that’s not a good sign.”
Assessing performance is also about watching whether your accountant asks the right questions of you, too. Lewis says a good accountant will be “pro-active”, ringing you up at least every three months to see how the business is progressing. “They should be asking if you have any issues, questions or concerns to discuss. If they’re not doing that then they’re not really adding much value.”
Richardson also believes a healthy relationship is defined by ongoing conversation and information sharing, which ultimately leads to trust. “The way to get the most out of your accountant is to engage in dialogue,” he says. “Ask questions, but also be forthcoming. The more you share about your business, the more you will get out of the relationship.”