Accountancy practices provide accounting and other services to local businesses, clubs, societies, charities and sometimes to private individuals. Read our practical guide on starting up and running your own accountancy practice.
- Research your target market
- Establish your customer profiles
- Decide which accountancy services to offer
- Your fee income
- Qualified accountant
- Regulated areas
- Buy an existing accountancy practice
Research your target market
Estimating demand
It makes sense to find out whether there is enough demand for an accountancy practice in your area.
Don't forget that accountancy services are available from:
- qualified accountants working in practices of all sizes
- unqualified people offering more basic services such as bookkeeping, completing tax and VAT returns and so on
- online accountancy businesses, many of which charge very competitive fees
- organisations like banks that offer personal tax services to customers, including tax return completion and submission and tax planning
- accountancy software and app providers sometimes provide a helpline providing advice and support for subscribers
Check out the competition in your area to identify how many other accountancy practices are already in existence. A quick search online will quickly indicate the number of competitors in your area and will help establish the size of these practices and the range of services they offer. Their websites and online adverts may also include details of any professional membership they hold such as Institute of Chartered Accountants in England and Wales (ICAEW).
It may be that you will only be competing directly against some of these practices because you will be offering very specialised services. For example, you might have the training and expertise to offer tax consultancy, or you might decide to offer a very comprehensive service to a certain type of business such as the medical profession or the catering trade.
Try to find out roughly what your competitors charge. This will help you to set your own fees. You could also have a good look at the premises and general set up of practices which are similar in size to yours. This will give you an idea of the standard of fittings and so on which is expected by clients.
Why will clients choose your accountancy practice
It is important to identify and advertise the factors which differentiate your practice from your competitors. Although clients are generally very cost conscious it is best to avoid competing on price - you will find it difficult to attract good calibre staff to your practice or to devote enough time to each client to provide a first class service if your fees are too low.
Be cautious when estimating the number of clients you will be able to take from other accountancy practices. Some accountancy start-ups have described getting people to change their accountant as being as difficult as getting them to change their bank.
Find out what clients want
You might consider carrying out an informal survey of businesses which you have identified as being potential clients. Ask them what, if anything, they find unsatisfactory about their present accountant. Many businesspeople accuse their accountants of having little interest in how their business works or in offering advice on how to grow or improve profitability. This might be something you could build on.
Be proactive when finding out what services potential clients would like you to provide. Suggest services they may not have considered, such as the preparation of management accounts, help with pension auto-enrolment, providing general business advice and so on.
The introduction of Making Tax Digital (MTD) in 2019 means that businesses need accounting services that help them comply with HMRC requirements.
Online accountancy services
Don't overlook the possibility of offering online accountancy services to clients anywhere in the country. Your clients can enter details of their business transactions using cloud-based accounting software that you could then work on. You'll need to make sure your website features prominently in online searches for accountancy services.
Research current trends, plus legal and tax issues
Establish your customer profiles
Your market
It is likely that your client base will consist mostly of self-employed sole traders, local businesses, clubs, societies, charities and other organisations, although you may also have some private clients. These may need personal taxation services or help with investment advice, particularly since the relaxation of the pension rules. If you have an area of specialist expertise your clients might also include other accountancy practices. Of course, if you decide to offer online accountancy services your clients can be based anywhere in the UK.
Clients are very demanding and are likely to put pressure on you to keep fees low. You might be asked by larger businesses to tender for matters such as audit work.
Most of the work that you do is likely to be charged out to your clients on an hourly basis. To this hourly fee you will also add any expenses or disbursements you incur while working on the case. Some practices charge their clients a fixed annual fee. For example, £1,000 to cover the range of services they're likely to require during the course of the tax year.
It is important to make sure that, when you take on a new client, you send them a letter of engagement which clearly sets out the basis on which you will be charging and when you expect your invoices to be paid. It is commonplace for an initial meeting to be held with a new client to discuss the services they will want and to give them an indication of the costs. Generally no charge is made for this meeting - you could use it as a way of telling the client about all the services you offer which would be useful to them.
Billing
It is also a good idea to agree with your clients how you will bill them. Ideally for regular work you will bill them frequently (for example, monthly) rather than submitting a large bill every now and then. Be prepared for the fact that many clients are very slow to pay. Don't go on supplying services to clients who do not pay their bills. Think about how you will go about collecting money which is due to you. Would the services of a factor be useful?
You might consider using the Premium Credit FeePlan finance facility - this allows your clients to spread the cost of your fees by monthly direct debit, but you receive payment in full. You can find out more about FeePlan on the ICAEW website.
Discounts
You might decide to offer a discount to local charities, housing associations, churches and so on.
Payment methods
Very few of your clients pay you in cash these days. However, some might so you'll need to put in place good cash handling procedures to make sure cash is fully recorded and securely held. Most people and businesses will prefer to pay with a credit or debit card or bank transfer.
Decide which accountancy services to offer
The range of services you decide to offer your clients will depend on:
- your own training, expertise and interests
- how many skilled staff you employ, and what they are qualified to do
- the nature of your clients - private individuals will require a different range of services to businesses
- the size of your clients - generally small businesses require a more basic range of services than large concerns
Many accountancy firms find that much of their workload consists of preparing accounts. They may also undertake a certain amount of audit work and offer taxation services to both private and business clients. You might also decide to offer services such as:
- business services including payroll, book-keeping and VAT
- insolvency
- investment business
- probate
- general business advice and support - including advising businesses on the requirements of pension auto-enrolment for their employees
Audit, insolvency, probate services and investment business are all reserved areas and you must make sure you are properly authorised to handle such work.
It is likely that you will make contact with specialist consultants such as tax and VAT experts so that you can offer your clients a 'one-stop' service without having to do all the work yourself. Try to establish who has a good reputation locally and how much they charge.
You might decide to outsource some routine work so you can spend more time providing higher value services for which you can charge more.
Making Tax Digital
The introduction of Making Tax Digital (MTD) by HMRC means that VAT-registered businesses must now keep digital business records and submit quarterly returns to HMRC based on those records. This increased record-keeping burden may provide you with the opportunity to offer bookkeeping services more widely so that business owners can get on with what they do best - running their business - and leave the burden of the MTD record keeping to their accountant.
In any case, you will have to familiarise yourself with the requirements of MTD and make sure that you are able to use the necessary software packages that your clients decide to install.
The right image
It is important that your business premises projects the right image if your clients will be coming in to see you. (Some accountants prefer to visit their clients in their business premises or homes instead of in the office.) Although you do not have to spend a fortune it makes sense to make sure that all public areas and your meeting rooms are smartly furnished, clean and tidy. It is also important to provide a pleasant working environment for your staff - make sure that rest areas and toilet facilities are well maintained. Your staff are also an advertisement for your practice and will be more prepared to co-operate with requests to be smartly turned out if they feel that you have their interests at heart too.
Of course, if you decide to offer online accountancy services only, your website will be your 'shop window' and you'll need to make sure that it is professionally designed and easy for clients to use.
Advertising your practice
Whatever the nature of your practice, it's vital that your potential clients know about you and the services you offer.
There are a number of things you can do to promote your practice:
- establish relationships with local solicitors, independent financial advisers (IFAs), banks and other professionals to benefit from referrals
- play an active part in your local business community
- contact local accountancy firms if you offer expertise in a particular field
- if you decide to target a certain trade or professional sector, for example, nursing homes, offer to speak to them on a topic of interest when they next have a function
- offer your services at a discount to local associations and clubs, or free to local charities
- set up a Google Business Profile so you appear in local searches
- set up your own website describing what you can offer and include local news items or useful business information
- participate in online business forums
- start a blog to highlight developments in the business world that might affect your clients
- advertise in local directories
- get listed in professional member directories - the ICAEW, ICAS, Chartered Accountants Ireland and the ACCA all maintain online directories of accountancy practices
- join LinkedIn so you can keep in touch with other professionals
- use social media like Facebook and Twitter to showcase your accountancy services and get referrals
Don't forget to check that any advertising you propose to do complies with the guidelines of your professional accountancy body.
Your fee income
You will normally charge your clients for the work you do for them by keeping a record of the time you and any other staff spend on the case and then multiplying the time by the appropriate hourly charge-out rate. The charge-out rate is higher for principals than for technical and support staff. Charge-out rates also vary according to:
It would be a good idea to find out what hourly rates your immediate competitors are charging. Although you will have to base your own rates on your costs and on the level of income you want to bring into the practice, you'll also need to remain broadly competitive.
Remember too that more and more clients are using online accounting software to produce their accounts, do their tax computation and file returns online. This has made it more difficult for accountancy firms to charge high fees for routine compliance work. It makes sense to highlight the added-value services you can offer, helping your clients improve their business performance and plan for the future.
Chargeable hours
When thinking about the charge-out rate to apply for yourself and your staff, remember that only a certain proportion of the hours you work will actually be chargeable hours. This is because you have to spend a significant amount of time on other things such as:
Make sure that you and your productive staff are very disciplined when it comes to keeping time records.
Fee recovery
Bear in mind too that it is unlikely that you will recover from clients all of the fees due to you. Sometimes you may feel that an excessive amount of time has been spent on a case that can't realistically be billed - at other times your clients may refuse to pay the amount that you've invoiced. Research has shown that fee recovery rates might typically fall between 80% and 90%.
Fixed fees
As an alternative to billing clients an amount based on the time you spend working on their business you might consider charging a fixed fee for certain jobs - for example producing a business plan. Some accountancy practices - including online-only practices - charge a fixed monthly fee that covers a whole range of accounting and tax services.
Don't forget to set out in your engagement letter the basis on which you will charge and your terms and conditions.
Qualified accountant
To become a qualified accountant you must undergo a period of training in a training practice which has been authorised by one of the professional accountancy bodies such as the ICAEW. Training generally takes between three and five years, during which time you will study for the professional body's exams and gain practical experience. The training practice will pay you during this period and will allow you study leave so that you can complete the course.
Once the training is satisfactorily completed, you will have gained a professional qualification and become a member of the professional body. After a further period of work experience you can apply to the professional body for a practising certificate so that you can set up in public practice. You will be entitled to use the title Chartered or Certified and you will have to comply with the rules and regulations of the professional body.
If you want to do audit work, you'll need to obtain a recognised audit qualification. This can only be awarded by a Recognised Qualifying Body like the ICAEW or ACCA.
Regulated areas
Insolvency, probate and audit work
If you want to undertake work such as insolvency, probate services or audit work you must be a qualified accountant and you must also obtain the appropriate authorisation from your professional accountancy body. You'll need to register with a Recognised Supervisory Body (RSB) like the ICAEW if you want to carry out audit work.
Investment business
Membership of a professional accountancy body, which for the purposes of the Financial Services and Markets Act 2000 is a Designated Professional Body (DPB), allows you to carry out a limited range of investment business, general insurance or mortgage business or offer consumer credit services. These are known as regulated activities. However, this type of activity must be 'incidental' to the provision of your main services of accountancy, audit work, taxation and so on. You will need to apply for a DPB licence from your professional body. If you want to carry out 'mainstream' regulated activities you will need to obtain authorisation from the Financial Conduct Authority (FCA), or become the appointed representative (AR) of another firm that has been authorised by the FCA. You can find out more about this on the FCA website and the ICAEW website.
Buy an existing accountancy practice
You might decide to buy an existing accountancy practice rather than start your own venture from scratch. Buying a going concern can mean that the clients, staff, premises and equipment are already in place.
Are all the clients listed still being dealt with or are there many 'ghosts'. Think about the client profile - you might not want the majority of your clients to be small concerns that have difficulty paying realistic fees
Look critically at the business accounts for the past three years and consider the selling price in the light of what the accounts reveal. Make sure you budget for professional fees such as legal fees and valuation and survey costs.
Buying a business can be a hazardous, expensive process unless you have the right skills and experience on your team, including legal and financial know-how. Establish the genuine trading and financial position, so that the price you pay for the business is not too high.
