If you’ve ever had doubts about the value of accounting or about the deal you have with your business accountant, then this is the article for you. It’s a crash course on what you can (and should) expect at different price points. We’ll also clear up many common and widely believed misconceptions.
Do you know what to expect from your accountant? Let’s examine what their duties are and what they should be doing for your business. This will help you determine whether you’re getting a good deal or simply a second-rate service.
Accounting has changed in the modern world of software and apps, so we’ll also take a look at what that means for the current market for accountants.
What should you be getting out of your accountant? Are you really getting as good a deal as you think?
The Purpose of An Accountant
What’s their purpose? The obvious answer is keeping track of your accounts, but we want to go more in-depth than that.
‘Accounting’ essentially means to account for transactions, in real terms, this means to ensure that a transaction has been accounted for or ‘treated correctly’. This translates as having this transaction reflected in the right place (an account in your accounting system) at the right time (in the period in which it should be recognised). There are many services which an accountant can provide, such as data analysis, strategic planning, book-keeping, payroll, and budgeting, but that doesn’t mean you can expect these in standard accounting packages. Your accountant is probably not doing these things unless you have specifically asked them to, and are paying them for their time. Wanting more means paying more for it.
Myth Busting
Appointing an accountant does not absolve the owner or the directors of responsibility for the business’s finances. Many SME’s have directors who fundamentally misunderstand this point – it’s just not the accountant’s job. The responsibility ultimately still lies with the directors of a business.
Accountants are not legally liable for your business accounts. Many business owners are under the false assumption that if an accountant ‘signs off’ on the company accounts, then they are liable for legal blame and accountability. This is not the case.
The Companies Act (2006) does indeed state that the annual accounts should be approved and signed – by a director of the company, not an accountant. The accountant may be liable for advice they have given you or calculations they have made, but not errors that may have been made by you or your book-keeper during the year; once you have approved the accounts, they are your responsibility.
A Great Deal? Or Just a Cheap One?
Often when people claim they have a great deal from their accountant, they soon find their accountant isn’t carrying out services that others offer at a higher price. As is often the case, you get what you pay for. If you’re primarily focused on getting a cheap service, then you’re probably missing out on comprehensive diagnostic services that will help you in the long run in exchange for saving a bit of money in the short term.
Accountants are not a regulatory requirement expense until your business reaches the threshold where you’re no longer a small business and need an annual audit, before this, an accountant is not . An important thing to note is that business owners shouldn’t see accountants as some necessary cost they begrudgingly have to pay for as cheaply as possible. A good accountant should be able to help you grow and thrive.
It’s important to remember that just because it’s cheap doesn’t mean it’s good value.
The Market for Accountants
The rise of cloud-based accounting software has driven the price of accounting services way down and has made the market much more competitive. Paying £100-150 per month is likely to buy you very little time and attention from a qualified and experienced accountant, especially considering what an accountant at that level can earn.
So they won’t dedicate enough time to do in-depth monthly reporting or support with creating a budget because they aren’t being paid enough to dedicate enough time and attention to it. You won’t get anything extra outside of year-end accounts and calculation of your tax liabilities; that’s it.
And there’s a very simple reason many businesses do pay their accountants more for these services: you get what you pay for. A good accountant, providing the appropriate services for your business, can be instrumental in driving your business forwards and generate considerably more in profit than they cost
The Problem with Modern Accounting
Gone are the days of dropping off a stack of invoices with your accountant so they can create a set of accounts. Nowadays, with modern software, businesses can do much more themselves and at the end of the year, update the software and tell the accountant to log in, download the required data, and then file the accounts.
This arrangement is dysfunctional because the business owner has access to the systems needed to manage their accounts but doesn’t have the necessary knowledge to do so effectively. And the accountant now depends on them and their staff to provide an accurate set of data for them to use at the end of the year to create a full set of accounts. The problem here is that this approach defeats the point of the annual accounts, as neither party is in a position to accurately verify the financial position of the business
Read more about Understanding the Role of Management Accounting for Profitable Growth
Accounting for Strategic Growth
Hopefully, you’ve come away with a firm understanding of the concepts we’ve covered today but if you’d like to read about it in more detail then we have a book available. Written by Adrian Goodman, it expands on what’s been covered here and connects it to broader financial control as well, giving you a more complete and well-rounded understanding, better equipping you to face financial challenges.
Now you can move forward into the future, cleared of misconceptions and more aware of the world of accounting, its importance and its nuances.
The main takeaway is that there are many ways an accountant can benefit your business, but if you employ them for bookkeeping services alone, you will only be scratching the surface of what they can do for you.
And that as business owners, you are ultimately responsible for the business’s finances. An accountant is there to help, organise, and advise, but ultimately, the business (and responsibility) belongs to you.
Here at PPX Consulting, we take a strategic approach to accounting, helping businesses build a finance infrastructure to drive profitable growth. Get in touch with us to learn more about our holistic accounting services.
Adrian Goodman is the founder of PPX Consulting and has written a book to help SMEs get to grips with business finance. Buy Achieving Profitable Growth on Amazon.