As qualified bookkeepers and not qualified accountants we don't offer accountancy compliance services such as tax returns, partnership or limited company accounts. This is because, whilst we may have covered the foundation of these in our bookkeeping qualifications, we don't have the knowledge or experience to give our clients the advice they need on tax matters.
Of course we know what can be claimed for both VAT and tax purposes but when it comes down to knowing how best to use the tax rules for your personal and business circumstances we leave that to accountants who work with tax matters frequently and for more clients and therefore have the knowledge and experience that we don't.
Because we choose not to do this work all our clients have accountants who provide compliance services and any additional tax and financial advice and support they need. Our clients generally have an accountant they are happy with when they come to us or if they don't have one or want to change we provide them with some recommendations which we feel will suit them and their business. We therefore work with a number of different accountants across Wiltshire and Hampshire, in London and further afield. .
I have always felt it important for a business to have both a bookkeeper and an accountant because they support each other with different knowledge. Accountants have a high level view of your accounts whereas a bookkeeper works with the day to day transactions.
Many business owners prefer to have a one stop shop for bookkeeping and their tax return or final accounts and I can understand this if you are a sole trader working to provide enough income to support your family. But if you are a sole trader who plans to grow their business, become a limited company or partnership and perhaps, in time, employ people, then you will find a bookkeeper who concentrates on the day to day themselves and becomes a part of your business of much more value than an accountant who may well outsource your bookkeeping, possibly overseas. Bookkeeping done by your accountant can be an expensive option and you may be reluctant to pick up the phone to chat things through with them as you would do with a bookkeeper.
Accountants can be a great support to a business as well as to the bookkeeper. As a bookkeeping practice we ensure we always provide accountants with tidy accounts once year end is complete and in return, usually several months later once they have completed the accounts they provide us with adjustments to align the accounts we maintain with the figures they have finalised and submitted to HMRC and Companies House.
Sadly though 95% of accountants we provide accounts to never ask us questions or talk to us before they finalise the accounts. It would be enormously helpful if they did because some of the adjustments they make are not correct or need an explanation. In the past I used to accept their adjustments but now, if they don't make sense to us, we ask for an explanation. These are the types of adjustments we have been asked to make and what we would question:
- Debit the PAYE balance to Nil - even though the liability is correct at year end and we have told them it agrees with the payroll and HMRC when we send accompanying year end notes
- Adjustment to the VAT account - with no explanation of why. Is this because too much or too little VAT has been claimed and if so what on? One accountant made an adjustment to VAT and on questioning I found that they had discarded VAT on client gifts even though they were well under the threshold.
- Adjustment to Accounts Payable or Accounts Receivable - even though you can't post a journal to a control account. Often no explanation of what they are writing off so the invoice remains and the adjustment is posted to Suspense for them to sort out next year.
- Moving assets out of separate codes in the accounts to a single asset code - because that is what they have to do for the accounts being submitted. It really doesn't help us or the client when everything is lumped together and you have to provide separate values for insurance purposes for computers, furniture and fittings, etc.
- Moving some Cost of Sales into Overheads for the final accounts even though they are definitely Cost of Sales
- Changing the value of a Hire Purchase code at year end and/or the charges that go with it even though they have been calculated over the term. This throws out all the calculations that have been maintained throughout the year and the prepaid charges never balance again because there is no explanation of which agreement/s they have made an adjustment to.
- Writing off invoices which have been paid in the new financial year.
- Prepayments and accruals - an adjustment with no explanation so every year when we reconcile these codes with the prepayments and accruals we have done during the year we have to add a line for "accountant adjustments" because we have no idea what they relate to.
- Adjustments to a new nominal code - with no explanation of whether they are an asset, a liability, an equity or a P&L code.
- A change in the depreciation figures, even though monthly depreciation has been recorded based on asset value with no explanation of what item/s has been depreciated differently.
It is so frustrating for us because we pride ourselves on giving accountants accurate accounts and after their adjustments we end up with inaccurate accounts just because the accountant didn't communicate with us or offer an explanation.
It would be so good to work with accountants who realised that bookkeepers have a good understanding of what they are doing and why and it would make such a difference if accountants would communicate their adjustments with us before they finalise the accounts. If they did that bookkeepers would learn where they had made errors and if the bookkeeper needs to question why certain adjustments have been made they will have the opportunity to do so before the accounts are submitted. Accountants and bookkeepers should be working in partnership for the benefit of their client and not as completely separate entities.
It would be good to know if you are an accountant who communicates with your client's bookkeeper because I would love to work with a selection of accountants who do rather than a selection of accountants who just want to tell us what to do as though we don't know what we are doing.