Ditching Accountant - FreeAgent Only?

[ladymuck]

It's perfectly feasible to do most of the work yourself and then hand over to an accountant at year end. That's what I've done for about 13 of my 16 years' trading.

I prepare accounts to 'trial balance' then send closing bank statements and the TB over to my accountant for them to do the CT calc and submissions to HMRC and CoHo. They will also fill in forms/attest stuff where I need some evidence of turnover or trading or whatever, which isn't very often.

My accountant will generally turn around in about 2-3 weeks. Their fee is related to my turnover so I pay a bit less in poor earning years and a bit more when I'm doing well. Last year I paid £550 +VAT. I don't pay monthly, I pay on receipt of completed accounts that I'm happy with. I check them, sign them, send back forms for filing and then pay up.

I use Xero and previously was on SageOne but FreeAgent will give exactly the same output. My accountant doesn't have access to my accounts, and I prefer it that way, but other people want their accountant to see everything.

[Maslins]

Unless your company needs a statutory audit (I doubt any contractors which reach that size, basically 2 of 3 from >£10m turnover, >£5m assets, or >50 staff) you don't legally need an accountant. Indeed if you were that size then most of the typical accountants on this board wouldn't be able to assist anyway, as you'd need someone with a current audit qualification.

Below that size, it's horses for courses. Some will DIY everything, relying on experience, Googling, and some software (eg Fred Bloggs). Some will DIY many things, just wanting accountant to top and tail (eg like ladymuck). My hesitation with the latter is you may find it's not that much cheaper than one of the more all inclusive pay monthly outfits. If you're paying £550+VAT/year to the accountant, presumably a fee for Xero (perhaps £100-200/year), you're not far off 12 x many of the pay monthly brigade.

References are an area where some people may still feel they "need" an accountant. Generally you as director DIYing then saying to whoever it is "I confirm the figures are valid" won't cut it. However there's typically workarounds for those who don't have an accountant to verify things. Eg for mortgages often lenders will accept SA302s.

For the majority of contractors, yes I'm biased, but I still think the sensible route is to find a reasonably priced pay monthly accounting firm. Assuming they're not pants, they'll provide everything you need, prompt you when things need doing, answer any ad hoc queries you've got, and generally help keep you on the straight and narrow.

[ladymuck]

Just to clarify - I wasn't trying to say my approach was cheaper. I agree with Maslins, my annual fee plus charges for Xero aren't going to be hugely cheaper than those paying monthly.

We get a lot of enquiries from people who pay monthly but don't realise the bulk of an accountant's work is at year end and wonder why they still have payments to make when they want to drop/change their accountant.

[Fred Bloggs]

Thanks for the responses. I did search, but could only really see FredBloggs having taken the leap of faith to DIYing accounts.

There are some problems with FreeAgent for year end accounts, from reading their FAQ. It can't handle negative corporation tax if CT ends up being a negative calculation due to offsetting.

An accountant or accounting firm is also called upon for references for mortgages, some projects that require clearances and other matters.

Given that we only have one person who has responded that they are DIYing accounts, I have concerns that the lack of accountant will cause hassle when requiring an accounting reference. How have you dealt with that FredB? Can FreeAgent themself be a reference or a business bank account? With high retained funds and years of accounts available to, for example, the mortgage provider, I would've thought that would suffice, but I also imagine the squeeze on contracting will mean the banks are discouraged from giving references to PSCs and would rather we all disappeared.

I have never needed references from an accountant, or anyone else for that matter.

For HMRC and Companies House returns, I used the gov.uk portal a few weeks ago. It was the first time I did this myself. It isn't difficult. I just took my time using the numbers from Quick File. I think to complete the returns, I only needed to use something like three numbers. (From memory, but it was very simple indeed if rather clunky). It would be very simple to take the numbers off the draft return in FreeAgent and input them manually the way I did at the gov.uk portal. You get plenty of opportunity to back out of the actual submissionat the gov.uk portal until you are 100% happy with what you are reporting. You then have two possible avenues to submit your year end.

I already said that I don't recommend DIY for everyone. But by the same token, it really isn't that difficult with a very simple business. It is definitely do-able. Modern tools have made it easier than ever.

[Fred Bloggs]

Just to clarify - I wasn't trying to say my approach was cheaper. I agree with Maslins, my annual fee plus charges for Xero aren't going to be hugely cheaper than those paying monthly.

We get a lot of enquiries from people who pay monthly but don't realise the bulk of an accountant's work is at year end and wonder why they still have payments to make when they want to drop/change their accountant.

It is quite easy to find adequate free book keeping tools though. FreeAgent is bundled with some bank accounts and Quick File is simply free for basic use. ( It's astonishing how good it is and the support community is very good indeed). So that means you would just pay for the annual close out tasks if you wanted to use an accountant.

And the modern tools have made it so simple, you might argue in many cases, there's little an accountant can offer beyond a comfort blanket.

I think the post above from Maslins is very fair. If I needed an accountant they would be the kind of practise I would be looking for. The sausage machine large firms appear to have had their day. Times have moved on. The market has changed.

[css_jay99]

I just wanted to point out that if you have a Natwest business account you can have freeAgent for free.

[d000hg]

From seeing what accountants actually generate over the years it's clear you can do this yourself if you are prepared to put the effort in even without FreeAgent. Like most things, it's not a black art and there is no 'magic' to it. A 1-man PSC especially is a very simple case with typically one client to bill, one salary to pay and few expenses mostly small. RTI and VAT make it more onerous than it once was but also ensure you keep up to date rather than getting to year-end and having to figure it all out.

But you have to put the time in and then you have to keep current. For instance imagine you're doing it yourself when RTI was launched, and you didn't realise.
I don't think the adage "an accountant saves you more than they cost" is true for such small, simple businesses but if you cock it up you might face big fines.
And of course do you want to spend the time doing it? Would you be better billing an extra couple of hours a month or seeing your family or painting the bathroom?

[eek]

And of course do you want to spend the time doing it? Would you be better billing an extra couple of hours a month or seeing your family or painting the bathroom?

Given how much work has been passed from Accountants to their customers and who much of that work freeagent now does for you I suspect you gain anything like 2 hours a month using an accountant - possible 10 minutes max.

[d000hg]

Given how much work has been passed from Accountants to their customers and who much of that work freeagent now does for you I suspect you gain anything like 2 hours a month using an accountant - possible 10 minutes max.

Yeah maybe although it depends how much time you spend keeping up to date and how long your CT/SATR/VAT takes, averaged over the year. Once you get up to speed you might well be right but there's a learning curve.

[eek]

Yeah maybe although it depends how much time you spend keeping up to date and how long your CT/SATR/VAT takes, averaged over the year. Once you get up to speed you might well be right but there's a learning curve.

On freeagent? I doubt it's much of one.