Many small businesses or startups think accountants are a luxury. The cost of an accountant can be the single biggest administrative bill a small business receives each year, so it’s easy to understand why some people see it as expensive.
In fact, despite the ongoing cost of an accountant, they can create a lot of value for your business – and it’s often tax deductible.
How does an accountant work out its fees?
Setting a price for services is a difficult thing, and you’ll find that, while there may be a general threshold, you’ll discover fees at the extreme ends, too. When looking at the cost of an accountant, remember that a cheap accountant might not have the qualifications to do the work correctly, but they might also just be starting out themselves and looking to build a business. Likewise, an expensive big corporate firm may do a stellar job of your accounts, but you may never be able to get a hold of them when you need advice.
The cost of an accountant is not all that matters when it comes to these things; service levels and inclusions/exclusions should also be taken into account.
That said, the cost of an accountant generally takes into account the following:
● Time: Checking and preparing a set of accounts or a tax return is incredibly time-consuming, and there is no shortcut.
● Formatting: There is a very specific way HMRC needs to receive accounts, and your accountant needs to ensure they follow this to the letter. One slip and you’re the one who’ll be fined!
● Cost of running their business: Bigger firms will charge more; that’s just to be expected. They have bigger offices, more staff and larger overheads.
● Experience: This always comes at a price, as does specialism. The higher fee is offset by the knowledge you’re getting.
● Industry averages: There will always be an industry average, regardless of the extreme ends. Many firms won’t want to stray too far from this, regardless of the above.
What is the cost of an accountant?
It depends on the service you’re after, of course, but most accountants offer services as a monthly fee. The cost of an accountant's monthly fee ensures coverage for all of your statutory accounting needs plus any general advisory or other services, whilst also making sure that you are not impacted from a cash flow perspective. A startup accountant should be conscious of this - it goes without say that all successful small businesses and startups have to be very disciplined with their spending, and so they should ensure they research the cost of an accountant balanced against their accounting needs and cash flow.
Remember, the cost of an accountant may not cover things like payroll and bookkeeping; charges for these are incredibly variable and will depend on the size of your workforce, the number of payslips, the need for real-time reporting, and so on. Many startup accountants and small business accountants advise their clients to use accounting software to assist with these issues – and this, of course, can help reduce to the cost of an accountant.
Limited companies have more complicated accounting needs, and those needs grow in complexity as the size of the company grows. It goes without saying that the bigger and more complex your business is, the more the cost of an accountant increases.
What does the cost of an accountant include?
With PROfiltr you decide what services you would like an accountant to assist with, but in general startups and small businesses should use an accountant to assist with the following:
● Annual accounts and corporation tax returns: prepared and filed in accordance with the very strict HMRC and Companies House needs.
● Self-assessment tax returns: preparing your personal tax return and ensuring it’s handed in on time and in the right format. Directors of companies are required to prepare personal tax returns.
● Monthly and annual payroll returns: Real-time reporting has added complexity to payroll, so check whether your accountant can handle this for you.
● Quarterly VAT returns: If your business is above the VAT threshold of £85,000 (at the time this article was produced), you’ll need to register for VAT and prepare quarterly returns. In many instances it may be beneficial to register your business for VAT even when the business’ turnover is below the threshold.
● General advice: your accountant will often be on hand to give advice and answer questions outside of reporting season. This can be invaluable when issues arise or when you’re planning your next big move.
In addition to this, your accountant works as your “tax agent”, which means HMRC will go to them with any questions before they come to you. This is included as both part of an accountant’s service and the cost of an accountant; they take the admin away from you so you can focus on growing your business.
Remember: check what’s out of scope!
It might be that the cost of an accountant includes all the preparation and filing, but not the cost of the cloud accounting software they recommend you use. Or, it might not include advice or even registering you for VAT when the time comes.
PROfiltr aims to eliminate the need for you to haggle. Our accountants will provide you with quotes before you decide whether or not you would like to be introduced to them making the process as transparent as possible. In the unlikely event of anything being unclear, it’s important to have a discussion about their fees and your expectations.
Finally, remember, many of the costs of an accountant are tax deductible, and despite being an outlay, the money they can save you on tax and other charges means they’ll often pay for themselves.