I'm in the process of setting up a new Private Limited company (Ltd) and am considering how to arrange our accounting/book-keeping cost-effectively, without compromising on access to financial forecasting information or compliance with Companies House/HMR&C's requirements.
Our current company arrangements are IMO far too complex: Public Limited registration (historical reasons!), an accountant paid £79+VAT/month just for annual accounts (!), annual £650+VAT audit and a bookkeeper maintaining Sage accounts, VAT returns, etc. We're now fed up with the financial overheads and red tape and wish to move to a much simpler arrangement.
Some small Ltd company owners I've spoken to manage their affairs in a simple sole-trader like fashion: they submit paper invoices/receipts etc to an accountant at the end of the year, who prepares their accounts for ~£200-£400. We want to move in this direction, but without a) compromising the ability to monitor cash-flow, and b) missing out on tax planning advice.
An approach that would seem to offer this would be to:
* Switch to Ltd - a no-brainer, now that we target SME clients over larger companies.
* Download statements from our bank electronically (we don't use cash) into a straight-forward finances application (even a spreadsheet or simple bookkeeping program would suffice!), for cash-flow tracking, budgeting and forecasting purposes.
* Register for Flat Rate VAT scheme (VAT bill = fixed % of turnover inc VAT, e.g., 11% depending on industry) and opt for an annual VAT return.
* Hire an accountant at year-end to prepare the flat-rate VAT return and accounts (small company, audit-exempt) for CH/HMR&C for a one-off annual fee. The accountant's workload would be greatly reduced by having all transactions already recorded and categorised electronically (could provide as CSV or similar), so would presumably be around £200-£300 including personal tax return?
* Consult the accountant for occasional tax/VAT planning advice (as part of the accounts agreement?)
* We manually handle the other "bits n' bobs", such as annual return and quarterly PAYE for directors' pay (or agree a basic fee for the accountant to handle).
My question is whether there would be any "gotchas" with this approach that would prevent it being workable? I know we wouldn't have "proper" accounts showing the state of the company (P&L, balance sheet, etc) until after each year end. However, so long as this wouldn't create compliance problems, I personally don't find that these offer much practical day-to-day financial management benefits over simple cash-flow accounting.
Your feedback and suggestions would be most appreciated.
Many thanks,
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Ben Johnson
Technical Director, Neogic PLC
http://www.neogic.com
Ben Johnson
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Replies (5)
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Unrealistic!
You expect an accountant to do your company's year end accounts, abbreviated accounts, corporation tax return, VAT returns, directors personal tax returns and give you occasional tax/VAT planning advice for £200-£300 each year??
Well unless I win the lottery and decide to operate as a charity there's no way I'd do all that for anything less than £600 - and I reckon you'd be getting it cheap even then.
Basic approach is sound ...
and personally I just love clients who give me a spreadsheet provided there are not significant debtors / creditors to worry about. Your principle that the more you do the less you pay for accountancy is also valid. In terms of the fee (and you give no idea of the scale of your business) it does look a bit optomistic! I consider myself to be very cost effective compared with the general market place but I would be looking at a minimum of £500.00 for this bundle and that would cover no more than modest trading activity and very accurate spreadsheets. Lets say your t/o is £100k ... well £750.00 minimum from me I'm afraid. High street accountants will charge double this probably and if they have a nice office then treble it!
PS not looking for the business by the way .. just helping set your expectations.
Thank you for feedback
Thank you for the suggestions so far - please keep them coming.
I apologise if the example pricing was unrealistic! There are some very keenly priced fixed cost offerings online (e.g., TWD Accountants, taxbuddies.com - £499pa inc statutory + personal tax, or Britannia Crest, £456pa), but I appreciate that this ballpark may limit the quality of the advice and service we receive.
If we revise our expectation to around £500pa, presumably this is feasible for annual accounts/VAT preparation (from categorised electronic transaction data, est. t/o < £50k, no cash, low volume) by a chartered accountant? Feel free to get in contact if you could provide this ([email protected]), or if you can recommend someone locally (Cheltenham, Gloucestershire).
Returning to this original question: aside from the noted drawbacks in terms of lack of balance sheet/P&L until after year end, can anyone see potential problems with the proposed annual VAT/accounts filing approach (only basic cash-based accounts would be kept week-to-week)?
Many thanks all,
--
Ben Johnson
Technical Director, Neogic PLC
http://www.neogic.com
.
Hi Ben,
I have to agree with the previous comments; a more realistic starting point would be a fee of £750 depending on turnover/number of transactions etc.
Not sure who has given you such a low fee expectation, but you really do get what you pay for, pay peanuts and all that.
Arrange meetings with a few accountants and interview them, show them what you will do and ask for a quote that includes adhoc basic planning advice then see which you feel most comfortable with.