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Sloppy, short-sighted accountants are making costly mistakes and harming small businesses, according to a new report authored by Mark Wickersham and Steve Pipe.
The study by The Accountants Club found that accountants frequently make mistakes including:
- not considering incorporation for sole traders
- allocating illegal dividends
- failing to claim capital allowances properly
- not claiming R&D tax credits
- failing to undertake inheritance tax planning
- not reviewing tax credit eligibility
The report says there are two types of client: "overlooked" clients and "valued" clients, and that there are many instances where partners lavish outstanding service on a handful of favoured clients, while at the same time cutting budgets so drastically on the affairs of other clients that service is inevitably compromised.
Mark Wickersham, one of the report's authors, said: "Large parts of the accountancy profession are costing clients a huge £1.8bn in poor advice. The entire profession has to sit up and do something about this as a matter of urgency."
The study suggests that accountants are making mistakes with 40% of the 4.5m private sector businesses in the UK, therefore affecting 1.8m clients. In many cases these mistakes will cost those clients many thousands of pounds each, so factoring in an average cost of £1,000 is unlikely to be excessive, the study claimed.
The report labelled accountancy as a "two-track profession" made up of "stars" and "laggards". Laggards who fail to provide a full range of services and advice to their business clients make up the majority of the market. Star firms that pick up the mistakes other accountants tend to miss only make up 27% of the industry.
Star firms are also more likely to leave client meetings more profitable because they are:
- more proactive
- more likely to share ideas that can generate significant additional amounts of cash for the clients
- more likely to link the fee to the value so that the client can’t possibly lose
- Make it easier for the client to say yes by offering client satisfaction guarantees
If all accountants followed the example of Star firms they could get better results and small business could save billions, the report claimed.