IN this article, I was asked to look at
how an accountant can add value to
your business. But I thought it
would be more interesting to turn
this brief on its head and look at the
ways that some business people
manage to ensure that they get absolutely
no added value from
their professional
adviser and end up
paying a good deal
more than they need
to.
So this is my guide
on how to waste your
money. Firstly, be aware of
deadlines. Then you
can make sure that you
provide your
accountant only just
enough time, or
perhaps no time, to be
able to complete all of
your accounts and tax returns to meet
their due dates.
Not only will this ensure that the
accountant has no time to give you any
advice and the information that is
produced on your behalf is as historic
as possible, it doubles your opportunity
of paying HMRC more money – either
because there will be no opportunity for
tax planning or because tax penalties,
interest and surcharges become payable.
Basic bookkeeping
Another good way to pay more to
accountants is to treat them like
bookkeepers. Your accountant will
probably be a professionally qualified
person and so giving him or her basic
bookkeeping work is always going to be
a bad use of your money. Better still,
tricks to make such work as time-
consuming as possible include:
- Providing incomplete documentation.
Leaving random transactions out of
your records is a good way to waste a
lot of time, ensuring that nothing
reconciles and that the final accounts
can only be produced in draft, subject to
a good number of queries and a
possible meeting dominated by trivia,
rather than a useful discussion about
your business. - Carry out no year-end procedures.
Don’t bother to see what sums are owed to you or by you at the year end. Don’t
take stock and don’t undertake any of
the proper procedures on your
accounting software. - Analyse costs entirely randomly. Just
because, for example, your electricity bill may have been recorded
in the “light and heat”
section of your
accounts one month,
there is no reason why
you shouldn’t show it
in “premises” next
month, “drug
purchases” the
following month, and
so on. - Buy or lease assets
on hire
purchase/operating
lease/lease purchase
agreements. Fail to
keep the
agreements/fail to tell anyone how the assets
should be accounted for. - Use as many bank accounts as
possible. Forget why you opened them.
Forget which transactions are supposed
to be going through which account.
Forget to tell your accountant more
have been opened and funds have been
transferred. - Ensure that your staff are poorly
trained and given no authority. Ensure
you don’t help them if they seek
information about transactions going
through the business and regularly
check that they are operating a “garbage
in/garbage out” approach to computer
systems. - On no account prepare regular
management accounts which are
reconciled, as not only will these help
your accountant, but they will also assist
you in assessing the performance of
your veterinary assistants and running
the practice as a whole. - Finally, my particular favourite.
Operate as many of your personal
transactions through the business as
possible. This is particularly important if
you trade through a limited company as,
not only will it make the accounts much
more difficult and time-consuming to
prepare, but it will trigger a considerable
number of tax costs and implications –
such as overdrawn directors’ loan
accounts, P11d benefits, PAYE
problems and corporation tax liabilities.
Further help
To further ensure you get no value
whatsoever from the tax expertise of a
trained professional, don’t seek their advice before undertaking important
transactions, particularly involving fixed
assets and property; for example, capital
gains tax opportunities arising around
principal private residence elections.
Incorporate your practice without
telling anyone so that you lose the
opportunity to create a goodwill balance
on incorporation. If your annual taxable
income will be over £150,000 for 2010-
11, there are additional opportunities
arising this year to pay tax at 50% after
5th April 2010 on income that should
have related to the current tax year.
Good opportunities
There are also currently good
opportunities to pay the wrong
pension contributions and only
receive tax relief at the basic rate in
the minefield of new legislation.
What you should not do is to
contact your accountant in advance
of transactions. You shouldn’t
involve them with any discussions
around negotiations, particularly with
practice sales and purchases, as any money you inadvertently save on
advisory fees will be more than offset
by the additional tax you are likely to
pay.
Avoid planning for retirement or
new partner admissions; why bother
about future cash flow implications?
You shouldn’t discuss year-end tax
planning nor take advice on pension
contributions or tax efficient
investments. Don’t get them to
update your partnership or
shareholder agreements.
To really shoot yourself in the
foot, try providing further
information after tax returns and
accounts for that year have been
submitted. Companies, sole traders
and partners can all be winners here!
If you see any correlation
between my tips in this article and
your own behaviour, being more
organised in future is likely to save
you money. Or, if you can think of
other ways to pay more professional
fees for less return, any feedback via
the editor is welcome.
