Wednesday 23rd October, 2019

Choosing the right accountant – Example
Choosing the right accountant – Example

Choosing the right accountant – Example

The best way to explain how different accountants work is through this example

Once upon a time there were three accountants – Black, White and Red – who all dealt with the accounting and tax affairs of a business similar to Red’s client – XYZ Ltd which was owned by a husband and wife and had an annual turnover of £200k.

Let us see how each accountant dealt with the basic annual accounting and tax compliance work for their client:

Accountant Black
Everything he did was last minute and rushed. He was difficult to get hold of – he rarely returned phone calls or e-mails. But Black was a very nice person and easy to talk to.

The business year end for XYZ Ltd was 30th April. Mr A & his wife who owned XYZ did their own bookkeeping and were well organised, so they let Black have their accounting books and records by 3rd July.

As Black was busy and disorganised he only began work on the Accounts in early January, when he realised there were a few bank statements missing. Black rang Mrs A to request these and reminded her that the filing deadline was at the end of January so he needed them immediately. Whilst inconvenient, Mrs A found the missing statements and sent them to Black the same day.

In the meantime Black had moved on to work on the Accounts for another client who also had a pending deadline.

In mid-January, Black again started work on XYZ’s Accounts. He tried to focus on these, but between phone call chasers and other emergencies, he did not draft the Accounts until 19th January, at which point he rang Mrs A with a long list of queries. Mrs A explained that she would do her best, but she was on holiday in Spain, and would not be back home until 26th January. Again, he reminded Mrs A that he needed all the queries resolving as the filing deadline was on 31st January, and if the Accounts were not filed by then the Company would be responsible for late filing penalties.

A concerned Mrs A spoke with her husband and tried to answer some of the questions, but some queries could not be resolved until they got Home.

They arrived home late on Sunday after a 2 hour flight delay and their young children coming down with stomach upsets. As the kids were unwell, Mrs A did not get back into work until the Wednesday morning when Black rang her to chase the answers to the queries.

Both Mr and Mrs A gave priority to gathering the information needed, although they really wanted to spend the time catching up with the administration and chasing up several enquiries for new business. They sent all the answers to Black that day.

On Friday there was a phone call from Black to say he had drafted the Accounts and could he meet with Mr & Mrs A to sign them off. A meeting was arranged for the following week as the deadline had been missed.

During the meeting Mr and Mrs A queried a few figures and asked if it was possible to consider treating certain things in the Accounts differently, or other ways to reduce the company tax bill as it was higher than they expected. Black said he has not got time to look into these. Reluctantly Mr and Mrs A signed off the Accounts. They were worried how they would find the funds to pay the tax bill and were surprised to be told it was now late and accruing daily interest as it should have been paid on 1st February – fortunately Mrs A had received a small inheritance recently so they could lend that to the Company.

A few days later they received a letter from Companies House advising them that the company had incurred a late filing penalty as the Accounts were filed late.

The following week, Mrs A missed a phone call from Black but the voice message said it was urgent that he speak to her. She returned the call promptly but Black was unavailable when she rang. She left a message for Black to call her. Two hours later, when she had not heard back, an anxious Mrs A rang Black again. Once more he was unavailable. Mrs A called twice more that afternoon with the same result.

On Tuesday morning Black rang Mrs A to return her call, and apologised he had been busy yesterday dealing with a rush job to meet a deadline! Black told Mrs A that he was now trying to complete the personal Self Assessment Returns for her and her husband, but needed details of their salary from the Company, details of the dividends received on their small share portfolio, and interest details on their joint savings account. Mrs A explained these details were at home, so she would let him have them tomorrow. Black replied that was no problem as the Returns should have been filed by 31st January so were late anyway.

When Mr & Mrs A eventually met with Black at his office, he surprised them by telling them that they had a large personal tax bill as the dividends from XYZ and their other income made them higher rate taxpayers this year. As the explanation was sinking in, Mr A asked when the tax was payable, and Black said it was late and was accruing daily interest as it should have been paid by 31st January. Mr and Mrs A queried whether there was any tax planning or anything that could be done to reduce the tax. Black said there was no time to consider this.

A frustrated and worried Mr and Mrs A signed off their Tax Returns and went home wondering how they were going to pay the tax bills – Mr A suggested using the inheritance, but Mrs A reminded him this had already been used to pay the unexpected extra company tax bill.

Mr & Mrs A managed to beg, borrow, and steal enough from family and friends to be able to pay the tax bill that night, so were able to sleep peacefully….but frustrated at the outcomes.

Black was pleased he had managed to file the Accounts and Tax Returns for XYZ and Mr and Mrs A, and promptly sent them his invoice for the year. On receipt of the invoice Mrs A was surprised to see the cost was higher than last year – when she queried it, Black explained he had more work to do this year! Black also asked for prompt payment which added to Mr and Mrs A’s cashflow pressures!

Accountant White
She was reasonably organised, but often work she did was last minute and rushed. She was sometimes difficult to get hold of – she sometimes returned phone calls or e-mails. But White was a very nice person and easy to talk to.

The business year end for XYZ Ltd was 30th April. Mr A & his wife who owned XYZ did their own bookkeeping and were well organised, so they let White have their accounting books and records by 3rd July.

As White was busy and disorganised she only began work on the Accounts in early January, when she realised there were a few bank statements missing. White rang Mrs A to request these and reminded her that the filing deadline was at the end of January so she needed them immediately. Whilst inconvenient, Mrs A found the missing statements and sent them to White the same day.

In the meantime White had moved on to work on the Accounts for another client who also had a pending deadline.

In mid-January, White again started work on XYZ’s Accounts. She tried to focus on these, but between phone call chasers and other emergencies, she did not draft the Accounts until 19th January, at which point she rang Mrs A with a long list of queries. Mrs A explained that she would do her best, but she was on holiday in Spain, and would not be back home until 26th January. Again, White reminded Mrs A that she needed all the queries resolving as the filing deadline was on 31st January, and if the Accounts were not filed by then the Company would be responsible for late filing penalties.

A concerned Mrs A spoke with her husband and tried to answer some of the questions, but some queries could not be resolved until they got Home.

They arrived home late on Sunday after a 2 hour flight delay and their young children coming down with stomach upsets. As the kids were unwell, Mrs A did not get back into work until the Wednesday morning when White rang her to chase the answers to the queries – once more reminding Mrs A that the filing deadline was imminent.

Both Mr and Mrs A gave priority to gathering the information needed, although they really wanted to spend the time catching up with the administration and chasing up several enquiries for new business. They sent all the answers to White that day.

On Monday there was a phone call from White to say she was had drafted the Accounts and could she meet with Mr & Mrs A a few days later to sign them off.

During the meeting Mr and Mrs A queried a few figures and asked if it was possible to consider treating certain things in the Accounts differently, or other ways to reduce the company tax bill as it was higher than they expected. White said she has not got time to look into these as …..that’s right, the filing deadline is looming! Reluctantly Mr and Mrs A signed off the Accounts. Whilst relieved they had met the filing deadline they were worried how they would find the funds to pay the tax bill on 1st February – fortunately Mrs A had received a small inheritance recently so they could lend that to the Company.

On the Monday morning, Mrs A missed a phone call from White but the voice message said it was urgent that she speak to her. She returned the call promptly but White was unavailable when she rang. She left a message for White to call her. Two hours later, when she had not heard back, an anxious Mrs A rang White again. Once more she was unavailable. Mrs A called twice more that afternoon with the same result.

On Tuesday morning White rang Mrs A to return her call, and apologised she had been busy yesterday dealing with a rush job to meet a deadline! White told Mrs A that she was now trying to complete the personal Self Assessment Returns for her and her husband, but needed details of their salary from the Company, details of the dividends received on their small share portfolio, and interest details on their joint savings account. Mrs A explained these details were at home, so she would let him have them tomorrow. White replied that the Returns had to be filed that night otherwise there will be a late filing penalty!

Mrs A dropped everything (which was very inconvenient) and raced home to look for the information. As she was organised she managed to find everything White had asked for, and returned to work. She rang White but she was unavailable. An hour later, White returned the call, and a relieved Mrs A was able to give her the information she needed.

White then said she would do her best to rush the completion of the Tax Returns, and could Mr and Mrs A both come up to her office that afternoon to sign and approve the Returns. As Mr and Mrs A were struggling to rearrange their plans at such short notice, White kindly agreed to see them at 6pm which was well after her normal office hours – but White had said she had Returns for other clients to file so she would be working late anyway!

When Mr & Mrs A met with White at her office, she surprised them by telling them that they had a large personal tax bill as the dividends from XYZ and their other income made them higher rate taxpayers this year. As the explanation was sinking in, Mr A asked when the tax was payable, and White said midnight that night! Mr and Mrs A queried whether there was any tax planning or anything that could be done to reduce the tax. White said there was no time to consider this as the filing deadline was tonight.

A frustrated and worried Mr and Mrs A signed off their Tax Returns and went home wondering how they were going to pay the tax bills – Mr A suggested using the inheritance, but Mrs A reminded him this had already been used to pay the unexpected extra company tax bill.

Mr & Mrs A managed to beg, borrow, and steal enough from family and friends to be able to pay the tax bill that night, so were able to sleep peacefully.

White was pleased she had managed to file on time the Accounts and Tax Returns for XYZ and Mr and Mrs A, and promptly sent them her invoice for the year. On receipt of the invoice Mrs A was surprised to see the cost was higher than last year – when she queried it, White explained she had more work to do this year! White also asked for prompt payment which added to Mr and Mrs A’s cashflow pressures!

Accountant Red
Everything he did was organised and well planned. He was very easy to get hold of – on the rare occasion he was not available, he always returned phone calls or e-mails. On top of that, Red was a very nice person and easy to talk to.

The business year end for XYZ Ltd was 30th April. Mr A & his wife who owned XYZ did their own bookkeeping and were well organised, so they let Red have their accounting books and records by 3rd July.

As Red was organised he had already met with Mr & Mrs A before the year end and suggested a few tax planning matters to help minimise the company tax bills.

When Red collected the paperwork from Mr and Mrs A he also reminded them that he needed the personal tax information necessary to complete their Tax Returns and asked for these to be sent to him.

Red also asked if there was any urgency for the Accounts as he would try to change his planned workflow and prioritise the work if needed. As there was no urgency, Red said he had scheduled the work, and expected the draft figures to be available within four working weeks.

Later that day when Red had reviewed the records received by him, he realised there were a few bank statements missing. Red rang Mrs A to request these and being organised, Mrs A found the missing statements and sent them to Red the next day.

Two weeks later, after completing the detailed work on the Accounts, Red rang Mrs A with a long list of queries. Mrs A explained that she was busy at the moment, and agreed to send the information later that week – Red said that was fine.

A week later, Red rang to say he had drafted the Accounts and could he meet with Mr & Mrs A to discuss them. Mrs A explained she and Mr A were having a surprise weekend away so could the meeting be delayed for a couple of weeks. Red said this was not a problem.

When Red managed to meet with Mr and Mrs A at their premises, he highlighted a few areas of tax planning that he had done as part of his work, and advised them of the expected company tax bill AND the personal tax bills. During the meeting when Mr and Mrs A queried a few figures and asked if it was possible to consider treating certain things in the Accounts differently, Red was able to spend time considering these and clarifying his treatment and assumptions to ensure they were correct.

Red agreed to amend the Accounts and update the Returns for the matters discussed, and on 8th August met with Mr & Mrs A to sign off and approve the Accounts, and the personal tax Returns. Red also confirmed the amounts of tax due to be payable by the Company on 1st February and by them personally on 31st January.

Whilst the company and personal tax bills were higher than they were previously used to paying, both Mr and Mrs A were satisfied that everything that could be done to reduce the amount as low as legally possible had been done, and were relieved to know they had almost 5 months to plan their cashflows and gather together the funds needed to pay the tax when due.

Later that year, when Mrs A received a small inheritance she was able to treat the family to a new car.
Red was pleased he had managed to prepare and file the Accounts and Tax Returns for XYZ and Mr and Mrs A well in advance of the filing deadline, and had given them peace of mind that their tax affairs were in order and minimised.

Red promptly sent them his invoice for the year. On receipt of the invoice there was no surprise for Mrs A as the amount had been agreed up front at the start of the work, and had already been paid via the fixed monthly payment. Mrs A felt she and Mr A had received great value for money for the service delivered.

Summary

Accountant Black has prepared the Accounts and Tax Returns and filed them with HMRC and Companies House – unfortunately despite putting his client under pressure for information and meetings, he missed the filing deadlines. His client is given a late filing penalty and has increased risk of a tax enquiry as HMRC consider the business owner to be lax with their affairs so are more likely to have made mistakes.

Both Accountants White and Red have complied with Companies House and HMRC regulations – Accounts and Tax Returns are completed and filed within the deadline.

However, Accountant White’s client was under pressure to provide information at short notice to meet the deadline; they only found out how much tax they had to pay when the Return was completed; and as the tax was payable date was imminent their client had a surprise and unexpected pressure on their cashflow; the unexpected increase in the accountants costs added to the pressure!

Accountant Red’s client was much more relaxed during the process; they knew the filing deadline was a long time away; they could plan their cashflow well in advance; they knew they had considered ways to pay the minimum tax; and had no worries about the accountant’s bill as it was already paid and at the amount agreed!
This is a simplistic example, but we hope you agree it highlights how the way the basic service provided can differ significantly between accountants.

If you like the sound of Accountant Red, you will not be surprised to hear that is how Red Dot deliver their service to their clients.

Which type of Accountant is the best fit for you?
If you are currently received White or Black levels of service then you are not receiving the service you deserve – so contact us for a free no obligation meeting.

Is it time to change your accountant?

By now you should be getting an idea how we work at Red Dot.

If you are still unsure if we are the right accountants for you, then why don’t you get in touch… we don’t bite!

As we do not want to waste your time, we will Initially speak over the phone to get a ‘feel for each other’ to see if we sound like we could work well together.

Assuming we both feel comfortable, we can then arrange to meet up for an informal chat over a cup of tea or coffee.

Our conversation and meeting will be totally FREE, confidential, and without any further obligation.

We are confident that you will get some benefit from our meeting irrespective of whether you appoint us or not.

As a minimum we expect you to get an independent view on your business performance and tax affairs, with suggestions on how you could improve these, plus as a special gift we will give you a free copy of our book.

CONTACT US NOW – you have nothing to lose