Generally, the services you can go to an accountant for will fall under two distinct types. Both types are important, dealing with the two key aspects of running a business and your accounts.
These services fall under the headings of ‘compliance’ and ‘advisory’. One looks back at what has already gone and how you understand and report that. The other looks forward to what your business could be in the short- and long-term.
Let’s look at how both of them can apply to your business here.
Compliance
These are the tasks that you can’t get away from. The things you have to do to ensure your business meets all statutory, regulatory and legal financial obligations set by the government: self-assessment, VAT returns, payroll transactions, real-time payroll processing, annual accounts, corporation tax, filing with Companies House and more.
Taken all together, this is all a lot of work. And preparing all the necessary documentation and submissions can be a stressful experience, especially if you’re not sure if you’ve submitted the right information or supporting evidence. Doubly so if you’ve saved it all up for a long night or weekend.
But each task in itself is manageable, even if you have to get knee-deep in the details. And there are now accounting platforms and software to make creating and submitting your accounts to HMRC a lot easier.
But the point remains: as your business grows and becomes more complex, it is likely to cost you less – in terms of time and money saved, as well as your stress levels – to work with a qualified accountant on these compliance areas of your business.
Making accounting smooth and straightforward
Modern approaches to accounting have revolutionised how businesses and their accountants can prepare annual (or more regular) accounts.
Software like Xero can be instrumental in collating and coordinating all your transactions, invoices and documentation. And with apps available for receipt capture, budgeting or cashflow management that can plug directly into your accounting software (all of which you can use from your phone or tablet), you soon find that you have a convenient, reliable accounting eco-system literally at your fingertips that can help take care of filing and recording wherever you happen to be.
As long as you have a Wi-Fi or mobile signal, both you and your accountant can connect to, monitor and manage your accounting and day-to-day financial tasks from whatever device you have to hand.
Understanding the rules of engagement
There are two obvious benefits to using the services of a professional accountant, especially when it comes to compliance tasks.
The first is, as they’re dealing with the tax system and the people that run it on a daily basis, they know the ‘rules of engagement’ with HMRC. Aside from knowing what exactly the government needs to see (or doesn’t) at each point in the process and understanding what every term means, they know what flexibilities there might be in the system should any unfortunate issues occur.
If you will struggle to meet a payment deadline, have trouble affording the tax due or may not have all the necessary documentation to hand, you may think legal procedures and heavy fines will follow. But an experienced accountant will know how to broach this with HMRC and find a suitable solution without you suffering overly-punitive measures.
The second benefit is they know how to manage the flow of money through your business in order to give you the best tax position on any transaction. This can be important to those who might not be aware of what categories of payments are deductible for tax purposes, or what allowances are available for payments or receipts. The larger your business, the more useful this knowledge will be.
Because compliance-based services are usually concrete, single-function items, they are typically commoditised by accountants, franchised or independent. This means you pay a set fee for a set service and that’s it.
However, you might want to look beyond simply keeping your business compliant. Let’s move on to the other type of services an accountant can offer…
Advisory
This can be where a professional accountant can really come into their own and use their skills as your business consultant, not just the person who looks after the books.
Where compliance work looks back over your business, confirming what’s happened and reporting on it correctly, advisory work looks forward. It’s about helping you understand what your numbers mean for the decisions still in front of you, and giving you the confidence to make them.
The basics: keeping an eye on the numbers
For most clients, advisory work usually starts with management accounts – reviewing your position and the variance to the budget you set, and the variance to the forecasts from previous assumptions. Rather than waiting for year-end accounts to find out how the business has actually performed, you get a current, accurate picture of where things stand while there’s still time to act on it.
Some clients require budget or cashflow management on a regular basis. Each week, we can look at things like:
- Have overdue debts been chased, and is your credit control doing its job?
- Are invoices going out – and being paid – on time, so cash isn’t tied up longer than it needs to be?
- Is turnover tracking where you expected it to be this month, and if not, why not?
- Is inventory, or work in progress, moving the way it should?
Checks like these, done regularly, tend to catch problems early: a customer who’s stopped paying on time, a supplier cost that’s quietly crept up, a quiet month that turns out to be more than just seasonal. Spotting these things in week three is far more useful than spotting them in a set of accounts six months later.
Advice built around your business
What we’ve just mentioned is really just scratching the surface. The real strength of an advisory service is in topic-specific advice it allows us to give, and the ability to answer the kind of questions that don’t have standard answers. Because every business, and every owner, is different.
Clients might come to us considering decisions such as:
- Whether to expand into a new type of work, a new market, or a new part of their field
- Whether to take on new premises, invest in equipment, or make their first hire
- Whether it’s the right time to change legal structure, for example moving from a sole trader to a limited company
- Whether an opportunity in front of them is worth exploring, and how it fits with the rest of their finances – not just the business’s, but their personal position too
In each case, we would explain what the decision might mean to you from a tax position and also from a cash position, so you’re working with the full picture rather than a partial one. That might mean modelling out what a new hire does to monthly cashflow over the next twelve months, or setting out the tax implications of two different ways of structuring a deal, side by side, so the trade-offs are obvious rather than buried in the small print.
How personalised is your service?
It’s important to point out that we cannot and do not offer advice on whether an opportunity fits with a client’s financial tolerance or risk profile. It’s not for us to take a view or make a judgement on those factors. Our role is to simply tell clients the facts – something to the effect of: “If you do ‘X’, then it will have this impact on your cashflow and assets.”
Advisory also covers planning – how you can operate more productively or more efficiently in your systems and processes. That could mean reviewing how work moves through your business, tightening up how you record and track jobs, or simply making sure the software you use is actually saving you time rather than creating extra admin.
This kind of advice can never be commoditised and sold as a package. It has to be built around the business in front of us, because no two clients will have the same challenges, or be starting from the same position.
And it comes at a price point that won’t be right for everyone. If you’re running a simple, stable business and you just want to meet your obligations to HMRC and Companies House without fuss, then a compliance-only service may well be all you need for now. Advisory services earn their keep as things get more complex – when you’re growing, taking on staff, considering new offerings or simply need more than an annual conversation about the numbers.
The most important ingredient: relatability
What’s important to bear in mind is we (us and our clients) are both small businesses. We can relate to each other. We understand our clients and their concerns because we’re living the same experience day to day, from managing cashflow to juggling deadlines to making sure the right people are in the right roles.
We’re not a large firm, which means we can use ways of working that are affordable, agile and that scale with you, rather than a one-size-fits-all service built for businesses many times your size. If you were recruiting staff, you’d make sure they were a good personality fit as well as a skills fit, and working with us is no different.
We also want to put ourselves in the best possible position when it comes to tax, payroll and dealing with HMRC. Which means we have the right perspective to do the same for you, whichever type of service is the right one for your business right now.
So, if you want to talk over which accountant services would be right for you, just drop us a line. We’ll be happy to talk it over.
