There really is nothing worse than dealing with an accountant who is a poor communicator. Or one with substandard accounting skills and/or is a late filer. For a stress-free life as a contractor, you should research the market for the best accountant to look after your company.
Need an accountant? Where do you start?
You may have heard that one of the downsides of running your own limited company is the ‘hassle’ you will have to take on as a company director – dealing with the tax authorities, Companies House, and so on.
It’s true that all company directors do take on a number of responsibilities after incorporation.
As a company director, you might decide to do your own accounts. But, in reality, these tax and statutory obligations can easily be managed by a specialist accountant. For a reasonable fee.
The number of specialist accountancy firms targeting the contractor marketplace has grown at an astonishing rate over the past 10 or so years.
The contracting industry is a lucrative one, and contractor clients tend to have very simple accounting needs.
So it is unsurprising to see so many firms vying for business, especially given the cost-savings online accounting software adds to the mix.
So, how do you choose the best accountant from the hundred or so contractor accountancy firms advertising on the web?
Clearly, there are many subjective reasons why one contractor may opt to join one firm over another.
Here are some practical measures contractors can take when comparing contractor accountants:
1. Is the accountant a genuine contractor specialist?
This is an important point. Most contractors work in a similar fashion – their accounting needs are broadly the same – getting paid monthly or weekly, with few regular outgoings. Most opt to take a small salary, and draw down most of their income via dividends,
A specialist accountant will be very familiar with the accounting lifecycle of a typical contractor. A standard or high street accountant may not understand what a contractor actually does.
They may also not appreciate the importance of complying with IR35 (the Intermediaries Legislation) which can have a dramatic effect on take-home pay.
You will find that most contractor accountants charge a fixed monthly fee; you may end up paying more with a general accountant who doesn’t appreciate how simple your needs are in practice.
2. What is your accountant’s monthly fee?
Following on from the previous point, the costs of hiring an accountant will always be an important factor for contractors.
Unfortunately, it is not always true that the more you pay, the better the service you get.
You will pay something between £70 and £150 per month for an all-inclusive service. The fee will cover everything from dealing with Companies House to running your company payroll each month and completing your company’s annual accounts.
| Accountant | Cost | Key Features |
|---|---|---|
| Aardvark Accounting | £76 | Free company formation + FreeAgent. |
| Clever Accounts | £89.50 | Free company formation + IR35 FLEX solution – for any contract. |
| SG Accounting | £109 | Free company formation + free tax return. |
| InTouch | £105 | Free company formation. Easily switch between ltd and umbrella. |
| You can compare the monthly fees of over 30 accountants here. | ||
However, there is nothing more important than feeling comfortable with your accountant, knowing that your tax affairs are being looked after competently, and your tax deadlines are being met.
So, for this reason, we recommend that your decision isn’t overly influenced by price, as other factors (such as customer service) are arguably more important.
3. What service will you receive as a client?
Although you can never be sure what it will be a client of a particular firm until you actually experience the service, there are steps you can take to minimise the odds of choosing a dud accountant.
- Will you be assigned to a dedicated account manager?
- How many other contractor clients does the manager look after (over 75 might be pushing it a bit)?
- Is there some kind of service guarantee, i.e. the accountant will respond to enquiries within x hours?
- Is there a money-back guarantee if, for some reason, the service is not up to scratch?
- Does the accountant offer face-to-face meetings, such as an introductory chat, or annual tax planning reviews?
Find out more about the typical tasks and duties your accountant should carry out here.
4. Technology
Gone are the old days when contractors would put all their paperwork into an envelope each month and send it to their accountant for ‘processing’.
The web has made life for contractors and accountants so much simpler. That said, not all contractor accountants have embraced new technology to the same degree.
Many firms will boast about their ‘online accounting’ systems, but what does this term actually mean?
Some firms will ask you to upload an MS Excel spreadsheet via an online interface, whereas others provide a completely online service – allowing you to view and update your accounts in realtime.
You may be asked to use a bespoke accounting system, or a third-party add-on, such as the excellent FreeAgent software. This seems to be the most popular accounting software in the market currently (2023).
As long as the job gets done on-time, the technology a particular firm has on offer may not be of great importance to you. However, for many (especially as most of our readers are highly IT literate), this is a very important factor when choosing an accountant.
Make sure you know what type of accounting software a firm uses when conducting your research.
5. Reputation
The best contractor accountancy firms gain most of their new clients via word-of-mouth recommendations from existing clients.
If you know any contractors, ask for their opinions (good and bad) on the accountancy firms they have used in the past.
You could also do some online research, via industry bulletin boards and ‘comparison sites’, although we would urge some caution. Many so-called ‘reviews’ will have been written on behalf of the service providers themselves, rather than by contractors.
What is a preferred supplier?
If you are a new contractor, you may also be encouraged to join a large contractor accountancy firm by your recruitment agency.
There is often a ‘preferred supplier’ relationship between recruiters and service providers – whereby the agent receives some kind of ‘commission’ for each contractor they sign up.
So, don’t be rushed into making a decision on the spot – take your time to see what else is on offer first.
What happens if you want to change accountants in the future?
If you’re not happy with your current accountant due to poor service, a hike in fees, or any other reason, it is usually a fairly simple process to switch providers.
Once you have given notice, your new accountant will seek ‘professional clearance’ from your current accountant, and the handover process will then begin.
As you can imagine with any type of transfer, things don’t always go as smoothly as you would like
Find out how to maximise your chances of a smooth switch in our guide to changing accountants.
Where can I find a list of accountants?
Visit our directory of contractor accountants for some initial suggestions, and try our comparison table of the leading contractor accountancy firms in the sector.