What is the role of an accountant?

What is the role of an accountant?

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With accountants moving away from pure tax compliance towards being a trusted business adviser or even virtual FD, what is the remit of the modern accountant?

Following a discussion I had with some contacts about the role of the accountant in the sphere of auto enrolment, I thought I’d open it up to AccountingWEB community on a more general level.

Do accountants have a general ‘duty of care’ when it comes to clients and their businesses?

Can you give any examples of where you’ve been asked to step out of your ordinary remit?

Replies (23)

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By Maslins
18th Sep 2014 16:51

Accountants aren't business consultants

It does concern me when some accountants talk as if they're expert business advisers, helping to improve profit/whatever.

Sure, if a client asks me my opinion on something business related, I'll give it.  Our clients are micro businesses so don't have a separate solicitor, marketing adviser, finance director etc...but I certainly steer clear of marketing ourselves based upon it.

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By mrme89
18th Sep 2014 16:58

@Maslins

So you produce a set of accounts and notice that profits have declined considerably since the previous accounts. You then establish the reason for the reduced profits – you wouldn’t give any advice at all on how to improve profits?

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Replying to The Accountant:
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By andy.partridge
18th Sep 2014 17:09

Some accountants

mrme89 wrote:
You then establish the reason for the reduced profits – you wouldn’t give any advice at all on how to improve profits?

Some accountants simply aren't qualified to give that advice. It's alien to them beyond the mathematics of 'you need to sell more' and 'you need to increase your margin'. 

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Replying to The Accountant:
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By Maslins
19th Sep 2014 09:21

I wouldn't if not asked for.

mrme89 wrote:

So you produce a set of accounts and notice that profits have declined considerably since the previous accounts. You then establish the reason for the reduced profits – you wouldn’t give any advice at all on how to improve profits?

I personally (just my humble opinion) think it's arrogant to tell a business owner what you think they should do to increase their profit if they don't ask.

We could give very general, patronising advice like "try to increase sales whilst keeping costs low".  I certainly think our clients would be insulted by us saying that.

Or, we could get onto dangerous ground of saying things like "you should change from supplier A to supplier B to save a bit", or "you should sack client X".  I'm not one to get all legal on these things, but if you're doing things like that, I'd check with your PI insurers that you'd be covered for non tax/accounting advice if it turned out badly and the client decided to take things further.

If they ask my opinion (which sometimes they do, which is flattering), I'll give it, but I'll be very careful of overstepping the line from "my humble opinion would be this" to "I'm a business expert and you should do this".

What pains me most is the one man band accountant who's been struggling along for a decade just about making ends meet, telling people how to make more profit.

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By Portia Nina Levin
18th Sep 2014 17:02

No, no, no

All that accountants are supposed to do is gather up as much old rope as they can find, and then sell it at the highest possible price, whilst undercutting any competition. This is what I have gleaned from AWeb.

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David Winch
By David Winch
18th Sep 2014 17:10

Where to get business advice?

You pose an interesting question.  It is sometimes said that a solicitor may become his client's "man of business" (a phrase used in a leading legal judgment in the House of Lords) giving not only legal advice but also general business advice.

At one time many businessmen (& women) reputedly regarded their bank manager as a good source of general business advice.  Whether that is the case nowadays when bank branch managers who knew their local business community well are no more, I cannot say.

But there may well be an opportunity for local accountants to advise their clients on a broad range of issues.

The potential problems include (i) whether the accountant has the relevant knowledge & experience, (ii) whether the client will be willing to pay for this service, and (iii) possible professional indemnity insurance issues if the accountant accepts responsibility for non-accountancy advice & finds himself sued.

I would suggest the trend has been to focus on niche areas rather than to broaden the spread of advice offered - but others may disagree!

David

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By johngroganjga
18th Sep 2014 17:56

I don't think anything has changed in the considerable number of years I can remember.   So I don't recognise the "moving away from tax compliance" that the question pre-supposes.

Even supposing tax compliance is the be-all and end-all of what accountants do anyway, which in very many cases it isn't (but that's another story).

No we don't have a duty of care to advise clients how to run their businesses.  Many clients would feel you were insulting their intelligence if you tried to.

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By User deleted
18th Sep 2014 18:23

Principal- agent relationship

The relationship between a non-auditor accountant and the client is that of a principal and agent. The principal is obliged to comply (statutory account, tax returns etc) with certain laws which he outsources to an accountant. The accountant agrees to do the work in accordance with certain terms. The terms are mostly dictated by his professional body so that the accountant operates within certain boundaries.

However, the story is different if you're an advisor. Yet, the liability could be limited by how the engagement document is worded  - court of appeal Mehjoo v Harben Barker

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By King_Maker
18th Sep 2014 19:07

I even had to listen to one of my client's marital problems. :(

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By cparker87
18th Sep 2014 19:34

Don't see a problem
We see a lot of businesses. Many of us run businesses. Many of us employ, deal with payroll and related issues. We're equipped with analytical skills to help us perceive, understand, protect against and mitigate business risk.

I'll blow your trumpets for you. Seems to me we are pretty well placed to be that '(wo)man of business' that David refers to.

I'm not sure there will be any other person outside of the business better placed to give an opinion or be a sounding board.

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Glenn Martin
By Glenn Martin
18th Sep 2014 20:08

I give as much business advice
As I do tax and accounts work. I have split my career 50/50 in practice and as a succeful FD in SME companies so feel well placed.

Many suppliers to my old company have come to me as clients as they saw the growth achieved in my time there so want some of it for themselves.

I much prefers who want to grow business and do deals than more lifestyle businesses which I struggle to get excited about.

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paddle steamer
By DJKL
18th Sep 2014 20:38

Tricky sometimes

My clients are all at the small business end of the scale, the market I have worked with most of my career. My practice is part time, I work for a Group of business entities in the property industry as a full time employment, accordingly my local knowledge of this sector is maybe wider than the average accountant covering multiple sectors.

I admit that when meeting clients and discussing their business accounts and completing their tax returns some of my input does stray into areas that are possibly not considered normal accountancy services;

Things like:

If they are an Edinburgh Landlord advising them of the local authority rules that require them to be registered as a landlord, and also possibly their HMO licencing requirements.

Business structure advice, and different legal entities for different activities could lead me to giving some input on small business rates relief (This can be more valuable than some other tax advantage that might accrue to a different structure with possible annual savings of up to £4,400 per year)

Input re recommending others I know in the property industry that may be of service re planning laws, marketing a property for sale, rent reviews etc.

Advising which bankers I know who may be able to assist with property funding and if need be arranging an introduction. (Less so these days as still a tricky market)

I may make comment at the level of credit card charges they pay as retailers and advise that I have seen other clients with similar volume on lower rates, though again less so these days as I do not see that much difference compared with say 10-15 years ago.

If I have noticed when doing the accounts that they are paying more for a service/ item than I would expect I may comment that they should look at the offering from XXX. 

With buildings insurance I have a fair idea of rates and whilst I would never in this instance name a provider I might give them the name of a broker.

There are probably quite a few more, the furthest I have probably strayed is possibly advising if I think they are not dealing with holiday pay entitlements correctly; I would not advise exactly more advise I think they may not be providing sufficient paid holidays and maybe they need to check they are on the right side of legislation.

My day job involves me in a lot of administration, HR issues, insurance issues and procurement issues , I probably these days spend 2 days a week on accountancy and tax and three days with the more general task of running the administrative side of a business.

The biggest danger I find is with friends and family where I may also have an accounting/ tax input, I also have to be careful where I act as a trustee in a personal/ family connection that I do not stray over the line regarding the operation of the trusts.

It can be a tricky line and to be honest on occasion I may have stepped over the scope of my role.

 

 

 

 

 

 

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By User deleted
18th Sep 2014 20:39

Practising accountants ...

... have a unique position in that they have the opportunity to see many businesses working at a very in depth level and can "compare and contrast" to see what works and what doesn't and what can transfer between clients.

Beyond compliance I want my clients to succeed as I want them to remain clients, and I want them to prosper so I can prosper too.

To that effect, if I see something one client is doing that another can benefit from I will of course discretely put it in my clients field of vision. That is how you generate goodwill and promote referrals. Not so strong as a life serving practice accountant on the management side and would not want to promote that as a paid service, apart from anything else I find it as boring as hell.

At the micro/trade end of the scale though there is not a great deal of scope other than basic tax planning though.

If accounting ever gets to be just providing management advice I'll be off to do something interesting, may be I can get a job watching paint dry!

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By Patter
18th Sep 2014 20:39

interesting ....so that's why I find the title 'accountant' too restrictive sometimes. I DO want to get involved with the business. Maybe it's in my nature or years of working as a Management Accountant, but I do end up taking on the role of an adhoc Company Accountant.

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Replying to lionofludesch:
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By cparker87
19th Sep 2014 00:20

Perfectly descriptive title

Patter wrote:
interesting ....so that's why I find the title 'accountant' too restrictive sometimes. I DO want to get involved with the business. Maybe it's in my nature or years of working as a Management Accountant, but I do end up taking on the role of an adhoc Company Accountant.

I think the term is a perfectly descriptive title. It is what we do.

Ii feel that clients genuinely feel that an accountant adds value not just through financial and tax compliance but general advice.

The example above re rates relief is perfect. If you have any retailers at present, are they claiming retail rate relief of £1k? It's not a tax we might ordinarily consider in completing compliance work but it is damned sure sensible and good advice. What if a client rents a business premises and does not use part of it? Would you suggest that because Companies House and HMRC don't care that you should not have a think about whether a reduction in rates may be due?

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blue sheep
By NH
19th Sep 2014 08:53

it depends on the client

For me it depends on the client and I get a feel for how much I should be involved.

Some will just want the Tax Return completing for the lowest possible price and grumble at having to pay you at all.  I do not feel too inclined to look beyond the cold numbers for them.

Others are willing to pay for monthly or quarterly accounts and that to me shows a genuine respect for our services and the advice that we can give.

However even for the first category of client if we spotted something that they could improve on (eg tax planning) it would be our duty to mention it.

I do not think management advice is within the remit of most small practice accountants, we do however have a basic duty to all clients to help them understand the numbers, plan for tax and comply with legal obligations.

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By Roland195
19th Sep 2014 09:39

Business Consultants

If you press most accountants who brand themselves as all in one business oracles on exactly what they do that will help you "maximised your profits" it almost always comes down to bull [***] with common sense.

We can offer the knowledge & experience we have gained from running our own businesses and dealing with others but I don't see this as being any different from what accountants have down since the invention of the profession.  

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By Vaughan Blake1
19th Sep 2014 10:18

"Bull [***] with common sense"

I just love that phrase!

Frequently businesses get into a situation where thy cannot see the wood for the trees.  The accountant is the best person to point out the obvious that they often miss. The accountant should have sound understanding of the client's business.  Sometimes the technological complexities are way over my head, but the basic premise of any business is always to sell something to customers and make a profit.

Running through the P&L account and discussing the figure for each heading usually highlights problem areas and lets the client focus on each aspect in turn.  Clients often have eureka moments along the lines of " I had no idea each year I was spending so much on X".

When you are working 12 hour days and stressing about delivery times, customer orders, staff problems etc etc it is easy to miss the blinding obvious!

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By jonsa
19th Sep 2014 12:56

Agree

I agree with John, johngroganjga, that this is nothing new for the "modern accountant".  Exactly the same as 35 years ago when I set up - just the terminology has changed.

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By TaxMatters
19th Sep 2014 13:56

The real question


The Question we should be asking is what is the role of the Institutes (ACA or the ACCA etc.)?

They are doing nothing to protect us from the unqualified (so called) accountant. I have a dozen clients who have been dropped squarely in it with the Revenue and they then simply walk away. They should be prevented from using the title accountant unless they are qualified.

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Replying to lionofludesch:
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By pawncob
19th Sep 2014 14:32

Don't start that discussion again.

TaxMatters wrote:


The Question we should be asking is what is the role of the Institutes (ACA or the ACCA etc.)?

They are doing nothing to protect us from the unqualified (so called) accountant. I have a dozen clients who have been dropped squarely in it with the Revenue and they then simply walk away. They should be prevented from using the title accountant unless they are qualified.

 

It's fairly easy to spot the qualified accountants. But you have to educate the GBP to look for the letters.

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Replying to kathyfez:
By mrme89
19th Sep 2014 15:09

Qualified or Unqualified - There's good and bad in both groups

pawncob wrote:

TaxMatters wrote:


The Question we should be asking is what is the role of the Institutes (ACA or the ACCA etc.)?

They are doing nothing to protect us from the unqualified (so called) accountant. I have a dozen clients who have been dropped squarely in it with the Revenue and they then simply walk away. They should be prevented from using the title accountant unless they are qualified.

 

It's fairly easy to spot the qualified accountants. But you have to educate the GBP to look for the letters.

 

It's usually our qualified colleagues asking the 'dumb' questions on Any Answers.

 

Lets not get into that debate though - it's already been done to death.

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By North East Accountant
22nd Sep 2014 09:08

General Engagement Letter
When giving general advice regarding all and sundry what do you say in your engagement letters?

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