There really is nothing worse than dealing with an accountant who is a poor communicator, has 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 accountancy firm to look after you and your company.
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, but in reality, the tax and statutory obligations each company must meet can easily be managed by a specialist accountant, in exchange for a monthly fee.
The number of specialist accountancy firms targeting the contractor marketplace has grown at an astonishing rate over the past five 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, but 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. The majority 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, whereas 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 if compliance steps have not been taken to keep the contractor outside of its scope.
You will tend to find that contractor accountants charge a fixed monthly fee, whereas 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 may expect to pay something between £70 and £150 per month for an all-inclusive service, which covers everything from dealing with Companies House to running your company payroll each month and completing your company’s annual accounts.
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.
Take a look at our comparison table of leading contractor accountants’ fees.
3. What service will you receive as a client?
Although you can never be sure what it will be like to a client of a particular firm until you actually sign up, 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.
Gone are the old days where 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.
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, but for many (especially as most of our readers are highly IT literate), this is a very important factor when choosing an accountant.
Ask for an online demo before signing up.
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.
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.
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