Accountants help you keep an eye on major costs as early as the start-up stage, a time when you’re probably preoccupied with counting every paper clip and postage stamp. Accountants help you look at the big picture.

In fact, perhaps no other business relationship has such potential to pay off. Nowadays, accountants are more than just bean counters. A good accountant can be your company’s financial partner for life, with intimate knowledge of everything from how you’re going to finance your next forklift to how you’re going to finance your daughter’s university education.

A general accounting practice covers four basic areas of expertise:

1. Business advisory services
2. Accounting and record-keeping
3. Tax advice
4. Auditing

These four disciplines often overlap. For instance, if your accountant is helping you prepare the financial statements you need for a loan, and he or she gives you some insights into how certain estimates could be recalculated to get a more favourable review, the accountant is crossing the line from auditing into business advisory services.

The best way to find a good accountant is to get a referral from a business colleague, maybe even in the same industry. Don’t underestimate the importance of a FCA (chartered accountant). This title is only awarded to people who have passed a rigorous training and examination process.

The first step in setting the stage for a successful search is to take an inventory of what you will need. Given the level of fees you are prepared to pay, you must decide where your responsibility stops and where the accountant’s begins.

Once you have compiled your documentation and given some thought to your expectations, you’re ready to interview your referrals. Two or three candidates is a good number to start with. For each candidate, plan on two meetings before making your decision. One of these meetings should be at your site; one should be at theirs. Both parties need to know the environment the other works in.

During the ensuing interviews, your principal goal is to find out about three things:

Services
Most accounting firms offer tax and auditing services. But what about bookkeeping? Management consulting? Estate planning? Will the accountant help you design and implement financial information systems? Other services an FCA may offer include analysing transactions for loans and financing; preparing, auditing, reviewing and compiling financial statements; and representing you before tax authorities.

Although smaller accounting firms are generally a better bet for entrepreneurs, they may not offer all these services. Make sure the firm has what you need. In addition to services, make sure the firm has experience with small business and with your industry.

Personality
Is the accountant’s style compatible with yours? Be sure the people you are meeting with are the same ones who will be handling your business. At some accounting firms, partners handle sales and new business, then pass the actual account work on to other partners.

When evaluating competency and compatibility, ask candidates how they would handle situations relevant to you. For example: How would you handle an HMRC investigation seeking verification of vehicle expenses? Listen to the answers, and decide if that’s how you would like your affairs to be handled. Realise, too, that having an accountant who takes a different approach can be a good thing. Be sure that the accountant won’t pressure you into doing things you aren’t comfortable with. It’s your money, and you need to be able to sleep at night.

Fees
Ask about fees upfront. Most accounting firms charge by the hour; fees can range from £50 to £200 per hour. Quite often the fees depend on the service being provided. However, there are some accountants who offer a fixed fee spread with monthly payments. Figure out what services you are likely to need and which option will be more cost-effective for you. Get a range of quotes from different accountants.

Try to get an estimate of the total annual charges based on the services you have discussed. Don’t base your decision solely on cost, however; an accountant who charges more by the hour is likely to be more experienced and thus able to work faster than a novice who charges less. At the end of the interview, ask for references or testimonials, particularly from clients in the same industry as you.

After you have made your choice, ask for the terms of the agreement in an “engagement letter” that details the returns and statements to be prepared. This ensures you and your accountant have the same expectations and helps prevent misunderstandings and hard feelings. All professional accountants should be doing this as standard.

Make the most of the accounting relationship by doing your part. Don’t hand your accountant a shoebox full of receipts. The better you maintain your records, the less time your accountant has to spend, and the lower your fees will be. Ask your accountant if they provide accounting software, good accountants will have several cloud solutions available.

It’s a good idea to meet with your accountant periodically. Review financial statements and go over any problems so you know where your money is going. This is where your accountant should go beyond number-crunching to suggest alternative ways of cutting costs and act as a sounding board for any ideas or questions you have.

A good accountant can help your business in ways you never dreamed possible. Spending the time to find the right accountant, and taking advantage of the advice he or she has to offer, is one of the best things you can do to help your business soar.

AUTUMN STATEMENT 2013: MEASURES FOR A ‘RESPONSIBLE RECOVERY’

Delivering the Autumn Statement 2013, Chancellor George Osborne said the latest economic data showed that the ‘plan is working’. He said the biggest threat to securing the economy for the long term would be abandoning the plan, before setting out measures aimed at providing a ‘responsible recovery’.

In stark contrast to the March 2013 Budget, the Office for Budget Responsibility upgraded its forecast for growth in 2013. It expects GDP to grow by 1.4 per cent this year, more than double its March estimate of 0.6 per cent. It also expects an additional 400,000 new jobs to be created this year and for unemployment to fall to seven per cent in 2015.

Read our Autumn Statement 2013 report

FOR BUSINESSES
A two per cent cap on next year’s increase in business rates was confirmed. The doubling of the Small Business Rate Relief, to 100 per cent for qualifying businesses, was also extended by a year until April 2015. From 1 April 2014, businesses will be able to pay their rates over 12 months. And employer national insurance contributions for employees under the age of 21 will be abolished from April 2015.

Read our business announcements summary 

PERSONAL FINANCES
The planned fuel duty increase for September 2014 has been scrapped. Train fares will increase in January in line with RPI inflation only – not by the usual RPI plus one per cent. And basic rate taxpayers will be able to transfer GBP 1,000 of their personal allowance to a spouse or civil partner from 2015/16.

Read the personal finance measures overview

OTHER ANNOUNCMENTS
From September 2014, all schoolchildren in reception, year one and year two – as well as disadvantaged students in sixth form colleges – will be eligible for free school meals. And the paper tax disc will be replaced by a new digital system from October 2014.

Read a round-up of other headline announcements 

This infographic was produced by Sage

Mark Barrett, Accountant at Cannon Moorcroft and a Sage Business Expert,
offers his thoughts and predictions for next week’s budget. 

With the economy casting a gloomy shadow and the loss of the coveted AAA rating it’s unlikely we’ll see any big changes in the 2013 budget. The Chancellor has found himself on the points of a two pronged dilemma: trying to cut spending but encourage growth. As there’s little wiggle room within the budget due to constrained economic conditions, we shouldn’t expect to see any real cuts without corresponding increases to balance the books.

Anti-avoidance measures

I predict the main focus of this budget will be anti-avoidance measures for those who the government see as aggressive tax avoiders. It’ll be a delicate balancing act though as we trade in a global economy and the Chancellor will not want to discourage foreign investment.

Company-wise, the focus of the budget will probably be at the larger end of the scale. I predict a further reduction in Corporation Tax by 1%, bringing the large company tax rate in line with small company at 20%. The aim being to discourage avoiders transferring “management fees” to other companies within the group based in lower tax countries. Although the tax rate would be lower as a percentage, the tax paid should be higher as an amount.

The disappointing results of the 4G auction, (which fell £1.2 billion short of the sum estimated in the Chancellor’s Autumn Statement), will have left a hole that needs to be filled. With no impending sell-offs due, anti-avoidance measures are likely to be the salve for this wound.

Personal allowance

There is likely to be a further move towards the target of a £10k personal allowance starting in the 2014/15 tax year, although this may be held off until the 2013 autumn statement as a political ace to keep up his sleeve.

Fuel duty

Fuel duty may feature, although as each 3p cut in duty costs £1.6 billion, it may be that any increase is postponed for 6 months or reduced to a lower-than-inflation rate. Reductions in this area are important to small business as fuel costs can account for a disproportionately high amount of their spending.

National Insurance

The Conservatives have historically criticised increases in employers’ National Insurance Contributions as a tax on jobs, but have done little to tackle this. The cost to a business of employing staff is one of the most significant, so any reduction here will have a direct benefit on all companies, and could encourage jobs growth.

VAT rate

Growth could be achieved with a reduction of the current rate of VAT rate. If prices on the shelves were lowered by 2.5% to 5% a larger volume of goods would be sold, generating increased revenue which would mitigate against the reduced rate. This would also help towards lowering costs of those small businesses not VAT registered.

Annual Investment Allowance

With the Annual Investment Allowance already having been increased to £250k for two years in the Autumn Statement, it’s unlikely we’ll see movement on this. The Chancellor will probably wait to see if, over its two years, it has achieved its goals of increasing investment in plant and machinery to help support engineering and manufacturing. If it has worked, it will likely be announced in future budgets as there is no benefit to making changes now.

Green issues

With the government continuing to champion green issues, albeit mostly in word rather than in deed, it may use further investment allowances for companies investing in the research and/or production of green technologies to encourage development in what is widely seen as an important future growth area.

Employee Share Schemes

With the EU vote on banker’s bonuses going against the Chancellor, we may see further amendments to the taxation arrangements of employee share schemes to create a workaround to EU legislation. This already allows companies to pay out bonuses as shares, but we may see a more incentivised way of delivery that reduces the tax burden on the employees. It would be useful to see these schemes improved to benefit smaller PLCs, as it has been shown that when employees become shareholders it increases productivity. Just look at John Lewis’s figures last year, and the 17% bonus being paid out to its staff.

Real Time Information

Real Time Information (RTI) comes into effect in April, which should achieve savings within the tax credit system as the aim is to make changes more quickly based upon employees’ actual situation. We may hear about further consultation on how this model can be utilised further, particularly for sole traders who currently have a large grace period between tax incurred and tax paid, although the payments on account system is meant to iron this out.

A monthly RTI style system for small companies and non-incorporated traders, based on cash based accounts, looks highly likely to be approved (maybe even in this budget), so payments on account may become more frequent and more accurate. This would smooth out the cashflow from taxes that the government receives; so that instead of a large inflow of corporation tax in December and personal tax in January the inflow would be spread across the year. This would mean more administration for small businesses, which is unwelcome and generally viewed as unhelpful, but may help reduce the month to month borrowing needs of the government which are in some part a result of inconsistent cashflow.

Capital Gains Tax

Capital Gains Tax rarely features in budgets, with it being limited to slight annual increases or freezes. It may be that with Lib Dem pressure the current 28% top rate may be increased to 30% to 35%. This type of tax affects more top earners than middle earners typically, particularly with the sale of valuable assets such as second homes or works of art. An increase here could be seen as a Conservative answer to the Mansion Tax, and is certainly fairer than retrospectively taxing an asset currently held, especially as those assets are, usually, paid for out of taxed income. Any increase wouldn’t attract too much criticism either as it would affect relatively few tax payers, but would be seen as asking the rich to pay a bit more, which seems to be a constant argument from the opposition.

Little room for maneuver

In conclusion, we can’t expect to see too much change as there’s little room for maneuver. There will be a couple of headliners for the next day’s newspapers, but even they won’t be earth-shattering. Anti-avoidance is likely to be the biggest focus, especially as it will be popular with the media. Realistically, it is unlikely that the VAT rate will change, even though some are calling for an increase, but it may be that more types of purchases are brought under the VAT umbrella. Fuel Duty has been a popular area in previous budgets, so we can expect to hear something, even if it’s just a freeze. And finally it’s likely that green technologies will feature, particularly as the UK is struggling to meet its legally-binding commitments to renewable energy and carbon emissions.

Mark Barrett, Cannon Moorcroft

Find out what the Budget 2013 means for your business and sign up for Sage’s free Budget 2013 guide today.

Share your comments and hopes for the Budget in the comments below.

Adverse weather has affected most of the UK recently – there’s some advice for businesses on dealing with the effects.

In marketing, industry experts outline the keys to marketing success in 2013. And we look at Government plans for a shake-up of the state pension; what will it mean for you in retirement?

Also in this issue we are giving away our ‘How to measuring business performance‘ guide for free.

While the profit and loss account shows important evidence of your financial results, there are other measurements that can provide alternative assessments of the business.

Using key performance indicators (KPIs) can give you greater insight into how your business is performing and help you in making better and more informed decisions. But you need to select indicators that are key to attaining your business objectives.
Download our free guide to learn the best ways to measure the performance of your business.

Year end tax guide

MINIMISE THE TAX YOU PAY

With WPP’s Martin Sorrell reigniting the tax row started at the end of 2012 by saying that tax ‘a question of judgement’ when speaking to Radio 4’s Today programme, is it time for the rest of us to consider the tax we pay?

For many, 2012 has been a tough year with the adverse weather affecting some businesses while the summer games have had differing effects on business. With the Government struggling to balance the public expenditure against tax revenues there is always the prospect of further stealth taxes around the corner. So, this is a good time of year for a tax check up – are you satisfied you are paying the minimum tax necessary? With a top rate reduction imminent, but the curtailing of a number of well used reliefs, there really is no time like the present to take a step back and look at how you are managing your personal finances and your business, and consider how you might reduce your taxes and/or improve your financial and business strategies.

In this year end guide we consider some of the ways you might act now to help achieve a more secure future for you, your family and your business. Please contact us now to discuss your specific situation and the planning opportunities you could consider before the end of the tax year. Acting now could pay dividends in the future.

New tax provisions have been introduced that are designed to assist businesses and investors. This year there have been generous increases in the Enterprise Investment Scheme (EIS), research and development relief, and Entrepreneurs’ Relief, and the creation of the Seed EIS scheme for investors in brand new businesses. New enterprise zones are being created, the main rate of corporation tax has been reduced and a special national insurance holiday scheme for new businesses remains in place in many areas within the UK.

Against this, over the last few years there has been a reduction in capital allowances, increases in national insurance, a new high rate of capital gains tax, further increases in the company car and fuel benefit charges, and the abolition of some capital allowances for buildings.

The reduction of the top rate of income tax from 50% to 45% on 6 April 2013 presents a clear incentive to defer income, while the continued above inflation rises in the basic personal allowance have the effect of widening the band
of income above £100,000 which is taxed at 60% due to the tax allowance being withdrawn.
With so many changes afoot, taxpayers should be particularly careful to make sure they appreciate the impact any present and future changes might have on them.

Download our free Year End 2012/13 Tax Guide for more information.

IMPORTANT INFORMATION
The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future.
This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The value of investments can fall as well as rise and you may not get back the full amount you originally invested.
Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. Errors & Omissions Excepted.