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Bill for "opening balances" work

Bill for "opening balances" work

As in-house house accountant for a small business we have just received a bill from our external accountant for "opening balance adjustments" work.

This comprised a meeting (and preparation) - so that we could see and understand the adjustments our external accountant had made between:

1) the trial balance and general ledgers that we provided them for year end

2) the year end accounts they prepared for Companies House

We fall under a small company exemption and submit abbreviated accounts to Companies House.

I would have thought that it would be perfectly reasonable for us to understand the adjustments that were made to our information to produce our accounts, and that we would not be expected to pay extra for this, over and above the normal year end fee?

If we did not know or understand the adjustments how could we make the relevant adjustments to our books and maintain reports like Balance Sheets going forward? Or indeed find out about any underlying issues in our record keeping?

I would appreciate any opinion and insight from those in practice.

Thank you in advance.

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01st Oct 2012 13:27

Should have been discussed and agreed from the outset as part of agreed terms of engagement.

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By RWACEM
01st Oct 2012 13:27

Bill for "opening balances" work

This is part of the job - Where clients run there own accounts systems we always give them a list of journals so that the accounts going forward agree to the accounts filed at Companiees House.No extra fees are ever charged.

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01st Oct 2012 13:34

We do the same as RWACEM

Although we don't charge separately for it, it does take some time to prepare the adjusting journals, so the cost is included in the fee for the accounts.

Also, why did you need to have a meeting to discuss the adjustments?  That is rather unusual and even more time-consuming, so a separate charge for a meeting would not be unreasonable.

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01st Oct 2012 13:46

You would be paying for it somewhere along the line

The work to which the OP alludes is required work which takes a finite amount of time undertaken by staff who are not working for free.  If there is no additional charge to be paid separately, then you should expect instead an increased "all inclusive" fee which takes into account a budget for that overhead.

If you have been quoted an all inclusive fixed fee, then you would expect to gain if there is a cost overrun due to the accountant's failure to estimate the true amount of time for the job.  At least for that year.  Whether the accountant can justify an additional fee in addition to the quoted fixed fee would be down to the fine print of your letter of engagement.   If not, then the accountant may have to take it on the chin.

But you may expect a correspondingly higher fixed fee quote the following year.  A question that you may need to address is whether you are content to go through the hassle of changing accountants each year or whether you place a premium on developing an ongoing relationship.

With kind regards

clint Westwood

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01st Oct 2012 13:49

Swimming against the tide....

..I'd disagree (a little) with the first 2 comments.

Formally agreeing to undertake the work obviously makes sense but can only be done where the external accountant knew it would be required. It's just as likely the scope of the job changed from what they had been expecting.

As for not charging, that depends on what is required. If it's a simple list of nominal journals and the client undertakes the work, then agreed that no additional charge would / ought to be due. But the fact there was a meeting makes it sound like this was a much more extensive exercise and IMHO charges would be entirely reasonable (would be better to advise client first but many accountants still work on the basis of trust); if furthermore the accountants actually performed the work, then it seems entirely reasonable to me that they charge for this as acting as the client's bookkeeper is not a standard part of the accounts job (or at least it isn't for me).

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to Tommy Evans
01st Oct 2012 18:35

part of the fee

though it depends whether this was specifically included or excluded in the terms of the engagement.

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03rd Oct 2012 12:25

Upfront notification

They should have told you upfront that this was going to come at extra cost - that would at least have given you the option to turn it down, or be prepared for the bill.  There's nothing worse than finding out after the fact that it's going to cost extra money.

I don't think that anything should be done on "trust" that the client will pay - you have to let them know that there is extra cost associated with something before going ahead.

Out of interest - who suggested a meeting rather than just sending you the list of journals?

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By enanen
03rd Oct 2012 12:32

Time & Fees

I would have added it to the time ledger rather than bill it separately so you wouldnt have been moaning, but any time an accountant spends on your affairs is recoverable and billable in line with the engagement letter. It is unworkable to do a fee offer letter and wait for an acceptance agreement every time you need to do work for a client, however small.

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03rd Oct 2012 12:39

Perhaps it depends

......on the extent of the adjs. Is it std stuff for which I wld not expect to be charged or did they have to make a lot of adjs due to errors in the ledgers. If u feel the fee is unjustified then the owner shld be challenging it.

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By appacc
03rd Oct 2012 12:45

There is a better way!

Many firms are looking at Cloud Computing for this very reason. If your accountant were able to work with your live data, there would be no opening balance adjustments. If you would like some independent free advice, phone my colleague Jon Green on 023 9235 2133

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By Myshkin
03rd Oct 2012 15:16

Typical

I find it is almost universal practice that accounting firms do one of two things:- (a) they never give you the adjustments they have made for you to process so they have to do them all over again the following year or (b) they give you a schedule (presumably from Iris or Sage equivalent) that lists the adjustments made but doesn't explain in the slightest what they are for.  This latter necessitates phone calls to them and you will need to hang on while they "find the file".

Both of these alternatives will be charged for at management/partner rates and there is nothing whatsoever you can do about it.

 

 

 

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