Case study: Moving from a traditional high street accountant to a specialist contractor firm
Like moving banks or changing your energy supplier, changing your accountant may seem like a huge gamble which (you may think) requires months of meticulous planning. However, nothing could be further from the truth.
Read how Malcolm, an IT Contractor in London, made the move and hasn’t looked back since.
How to change accountants: Malcolm’s story
“Prior to leaving the perceived safe and cosseted world of permanent employment (whatever that means) and making the move to become a contractor, I did lots of research about the various methods of operating which really came down to using an umbrella company or working through my own limited company.
I asked contractors I worked with how they worked – limited or umbrella company – and views were fairly mixed. Some liked the admin-free life of using an umbrella company whilst others preferred the control and financial benefits of working through their own limited company. Both groups seemed happy with their choice and I could see the benefits of each.
I was pretty sure when I left permanent employment I’d be a contractor for a while, so I decided to take the limited company route. I secured a contract position and went about forming a company and appointing an accountant.
Choosing a firm of accountants came next. I knew I wouldn’t need Deloitte or Ernst and Young, as my accounting affairs would be quite simple; I wouldn’t be buying any stock, have huge numbers of customers or renting/purchasing any company premises.
I approached a small local firm with a typical high street shop window. They seemed like nice guys, they charged a standard set fee payable at the time of my year-end accounts, a fixed quarterly fee for VAT, payroll and PAYE, plus admin fees for letters and calls to them.
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They provided a very efficient service, but there were a few things that I did find a problem:
Signs I needed to change accountants
- Bookkeeping - antiquated systems that involved me sending paper copies of sales invoices, purchase invoices and receipts for business expenses to my accountant quarterly - believe me, this is a real pain photocopying everything and sending it all recorded delivery.
- Not contractor-friendly - issues around IR35, Managed Service Company and Personal Services Company legislation weren't easily answered and I often came away feeling I should really do my own research to protect myself.
- Complicated fee structure - which left me not knowing exactly how much I would be paying at the end of the year. It wasn't that the fees were excessive, it was just that they were unpredictable.
- The elusive accountant - yes the firm was friendly and yes it did live up to its promises and SLA's. However, I often wasn't able to speak to my accountant as he was frequently out meeting larger clients.
IT Accountants are different
From one who knows, I can tell you now that you need a lot of advice and support when you first start out and if your accountant isn't there at the time you call it is very annoying.
I felt their expertise really sat with companies who employed people, purchased stock, had company premises, numerous customers etc - in other words, typically limited companies, not IT contractors.
After my first year of trading and chats with colleagues, I decided to look at other options. One contractor mentioned having a chat with his accountant at SJD. After meeting up with him I decided I wanted to change but really didn't know what was involved.
What's involved in moving accountants?
Basically sending a letter telling them I was changing!
I discussed my concerns about changing accountants with SJD. It appeared that the cost of change is zero and they would sort out all the transfer issues. I would obviously have to pay any outstanding costs with my previous accountant, which didn't amount to much, as most work is done around the year-end.
Online accountants for contractors and freelancers vs high street firms
- Nearly all of their clients are contractors, freelancers, and consultants. What this meant for me was they had heard just about every question I wanted to ask and knew the answers immediately - this filled me with confidence.
- They know what contractors lives are like and are always there, they weren't out meeting larger or more important clients, or auditing companies.
- They have offices everywhere and indeed had an office near me. Being local is vitally important to me. I like to know that, should the need arise, I can always pop in and have a chat, especially if I don't understand something.
- Bookkeeping - all done electronically on a spreadsheet and e-mailed monthly. Gone are the days of my visits to the local post office.
- They knew all about the latest legislation that would affect contractors and emailed me before I called about key changes. They also text me when special dates were due.
- Simple one fixed fee price which meant no surprise bills. They were roughly still the same price as the other guys - it's just the fees were spread more evenly.
For me the move was easy. There is nothing wrong with using a traditional shop front firm - they delivered on what they promised. I just got the feeling I was a square peg in a round hole."
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