Help! Accountancy Fees

littlejof · May 3, 2008

Could anyone please advise me on my next move!

My partner is a sole trader and I feel he's been given a bum deal on his latest accountants invoice. They recently completed 3 sets of accounts after previously only putting through estimated tax returns - he paid £2,100 early April 07 for this work and we thought it was all up to date. A month later we got another bill for a further £4700! thus making just under seven grand for three years accounts!

They are trying to tell us it took a lot longer than was originally billed but at no time did they ever contact him to say there was a build up of hours, or even to give him any option to pay monthly interim payments etc. We only found out when it landed on the doorstep. The communication was extremely poor although they pride themselves on this on their website!

I admit his accountants were not well kept during that period but I can't imagine the book keeping and subsequent accountancy skills would amount to so much for a sole trader? At no time has any proof of a time breakdown been given, or copies of timesheets to prove this.

Since Apr 06 I've been doing his accounts and they are fully kept up to date so we don't anticipate costs being so extortionate from now on, but this outstanding amount has halted all works, and they won't release any of the documents for us to go elsewhere. I'm worried now as not only are we faced with a huge bill, our next tax return is not going to get done until this is sorted and we might end up with additional charges from the Inland Revenue for being late!

Any advice would be greatly appreciated!

Many thanks

CassioAcc · May 3, 2008

Did you agree terms of engagement with the accountant. This should detail what fees have been agreed and how any additional work is to be carried out.

I would also push for a breakdown of what additional work was carried out. Did they have to do all the bookkeeping for the three years ?

littlejof · May 3, 2008

He doesn't remember any terms of engagement, if he did he certainly didn't keep a copy. I fully admit he wasn't at all organised until I met him! Is that something we can request a copy of? I would only assume the bookkeeping was done for the period but he doesn't have an awful lot of transactions going through, or receipts to process. I appreciate it's still time consuming as I do it all now, but can't see it adding up to what they're trying to claim? Like I said, at no time did they ever contact in relation to this excess - it just seemed to be an afterthought to them?

I need to get a copy of what was originally agreed but would they send me a copy knowing that I'm going to be disputing it?

CassioAcc · May 3, 2008

They should provide you with a copy. Are they qualified accountants? If so they will have a code of conduct to adhere to and this will include a complaints process.

Best to dispute the fee for now and ask for a breakdown and copy of the agreements. Then you will be able to assess if they are reasonable or not.

Did they have to do VAT returns ?

littlejof · May 3, 2008

They are chartered accountants. We are not VAT registered so nothing major in that direction to complete, he's just a plain and simple sole trader. When he received the massive bill he set up a monthly payment but even in doing this they are refusing to carry out any more work until the bill is cleared. We are in a no win situation as we cant go elsewhere until we get back all our docs for the new accountant, and we can't get them back until we clear the debt.

I read in the chartered accountants handbook that even if 'no estimate or quotation has been given keep a sense of proportion between the cost to the client for the work and the value to the client of the work. If in doubt, refer to the client to confirm the instructions' - this to me reads that even if he had no letter of engagement for a breakdown of costs that they should have been keeping us informed if fees were becoming excessive? Or have I read it wrong.

Do you think we should cancel the monthly payment in view of the disputed bill, or keep it running as a good will gesture on our part that we want to rectify things amicably? I worry that cancelling would force them into more of a legal action against us. We just want a fair price - the costs on the last invoice just seem so out of proportion?!

CassioAcc · May 3, 2008

Without knowing the full facts as to where the addtional costs have come from it is difficult to say if they are justified or not (they do sound a lot), but if you dispute them then make a formal complaint to the accountant saying you will not make any further payments until you get a breakdown and the matter is resolved.

littlejof · May 3, 2008

Thanks Aaron - I appreciate the advice. I'll contact them for a copy of the letter of arrangement - I'm pleased you think they sound a lot! I thought it was just me...

Once I've got that I'll cancel the payment and draft a letter requesting a further breakdown.

Jezclayton · May 3, 2008

There was a very similar post recently that you might find of interest.

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=63650

Whilst asking for a copy of the Terms of Engagement, check that they have been signed by your partner and not just drawn up to fit the bill.

littlejof · May 4, 2008

Thanks Jez - I'll check if I can get a fully signed copy and not just a hashed together one to cover themselves now.

I read the post you listed - very interesting stuff. Makes you wonder how many more are getting extortionate charges and don't question it.

littlejof · May 8, 2008

Still no luck on getting a copy... what happens if I can't get one?

taxattack · May 8, 2008

littlejof said:
Still no luck on getting a copy... what happens if I can't get one?

Do you mean:

a) your request has been ignored, or
b) you have been told you can't have a copy?

In any case, if it goes to court (a long way off!) or is subject of a complaint to the Institute, it would have to be produced as evidence.

Chris

littlejof · May 8, 2008

I'm being ignored I think - I've request the terms and a copy of the timesheet of work carried out. I can only assume they know why I want it and trying to make it difficult. I've cancelled the direct debit so by the end of the month they'll have to contact me one way or another!

taxattack · May 8, 2008

littlejof said:
I'm being ignored I think - I've request the terms and a copy of the timesheet of work carried out. I can only assume they know why I want it and trying to make it difficult. I've cancelled the direct debit so by the end of the month they'll have to contact me one way or another!

Next step is a letter to the senior partner along the lines of "I don't appear to have received a reply to my letter of xxx, copy enclosed for your convenience".

Chris

littlejof · May 12, 2008

Me again.

My request for terms has already been passed to the senior accountant - the girl in the office said we had a signed copy on file but we couldn't have a copy of it? Also, am I in my rights to request for a copy of the timesheets to prove what work has actually been carried out in support of this horrendous invoice they've issued?

Thanks

Jo

taxattack · May 12, 2008

littlejof said:
Me again.

My request for terms has already been passed to the senior accountant - the girl in the office said we had a signed copy on file but we couldn't have a copy of it? Also, am I in my rights to request for a copy of the timesheets to prove what work has actually been carried out in support of this horrendous invoice they've issued?

Thanks

Jo

There is a pdf on the Icaew website which will be very helpful to you - go to www.icaew.com and search for "fee disputes".

Chris

littlejof · May 13, 2008

Thanks Chris
I've read a few documents off the link you gave me - they're very helpful. Do you know if I can get copies of timesheets from the accountants or is this not really allowed? I've no breakdown at all of the additional costs - just a figure. I feel like I'm hitting a brick wall in getting further information from them.

I appreciate the fact that his accounts would have needed some work in getting them in order - I only took over in April 2006 and they were in a poor state before that. The thing is I just can't get my head around those kind of figures when surely all the basic book keeping should be done by more junior staff. I've absolutely no proof on the hours worked, and by an appropriate grade of staff... if they won't give me this information how am I ever going to find out if the billing is justified?

Jo

taxattack · May 13, 2008

littlejof said:
Thanks Chris
I've read a few documents off the link you gave me - they're very helpful. Do you know if I can get copies of timesheets from the accountants or is this not really allowed? I've no breakdown at all of the additional costs - just a figure. I feel like I'm hitting a brick wall in getting further information from them.

Jo

The Icaew helpsheet "Fee Disputes" does not specify that copies of the actual timesheets must be provided. However it does specify that a fee breakdown should disclose the information which the timesheets contain:

what type of work was carried out

who did the work and how experienced they are; for example, clerk, senior manager
how long it took the staff to do the work and
the charge per hour for the staff involved.

Chris

littlejof · May 15, 2008

Thanks Chris

If someone more senior did the work of a more junior member of staff - sorting paperwork and book keeping etc - and I in my rights to refuse the pay the higher hourly rate as the work should have been carried out by an appropriate grade of staff? As far as I'm aware only one person (very experienced) has carried out all of the work - she's admitted she hasn't logged all the hours she's done so they haven't been added to the client ledger for billing so where on earth has the senior accountant got his figures from? Out of thin air I think!

Jo

taxattack · May 15, 2008

Jo

Subject to the engagement letter stating otherwise, I would expect to be charged for the grade of work rather than the grade of staff who actually undertook the work.

Chris

Paul Kelly ICHYB · May 15, 2008

£6800 is a lot of hours. Assuming data entry was done by a junior, the charge could be between £40-60/hr. The Senior could charge 2-3 times that. Even taking an average of £100/hr, 68 hours is a lot of work.

What we do not know is if it was a couple hundred incoices that needed processing or a couple thousand - that would make a big difference.

Also, bare in mind what would you expect to pay annually for the doing the accounts? Would this sum be charged (+/- £190pcm) be normally considered reasonable for the the work required?

One thing I will say is that I am peeved of by accountants throwing any old rubbish on to their bill. Every (yes, EVERY) time I have queried a bill, I have had deductions, which indicated they really like my business and want to keep it or are always trying to pull a fast one. I have even been charged for VAT application on a business that is not VAT registered!!!!

littlejof · May 15, 2008

Basing things on his last accountant he was charged approximately £800 for the year and I can only assume his paperwork was in the same state. I can grudgingly accept £1000 per year from the new accountant - it's just this additional lump sum on top of it all I can't get my head around. Like I've said I do all his book keeping now so no more groundwork for them to do - not that it helps us right now!

He doesn't produce a lot of invoices, I would estimate well under a hundred per year, most of the accounts are on property owned, mortgages, interest... that sort of thing. He's a simple sole trader, no VAT to do, not limited... I think their charges are unreasonable and unjustified and I still can't get a copy of his signed engagement letter!

Frustrated is not the word.

littlejof · May 16, 2008

Have now got the engagement letter copy and it's nothing drastic - it states nothing about fees, only that they are 'computed on the basis of time spent on your affairs by the principals and our staff, and on the level of skill and responsibility involved'... it doesn't state anything about any original quotation costs, hourly rates or 'billing at appropriate times throughout the year' as I've read on other posts.

Reading in the handbook of section 240.2B it states:
'The Institute is of the view that the arrangements agreed should be confirmed in writing prior to the commencement of any engagement, normally in an engagement letter, including a confirmation of any estimate, quotation or other indication, and where the basis of future fees will differ from that of initial fees, the basis on which such fees will be rendered'

Does this mean they should have confirmed at least their hourly rates to him on engagement? Even if they couldn't confirm a full quotation? I'm confused as to how it all works.

I've also got the copies of the invoices in question and they repeat themselves by quoting the same 3 years accounts... the last major one being a repeat of the other two which had already been paid? How on earth am I going to progress?

Jezclayton · May 19, 2008

littlejof said:
Thanks Chris

If someone more senior did the work of a more junior member of staff - sorting paperwork and book keeping etc - and I in my rights to refuse the pay the higher hourly rate as the work should have been carried out by an appropriate grade of staff? As far as I'm aware only one person (very experienced) has carried out all of the work - she's admitted she hasn't logged all the hours she's done so they haven't been added to the client ledger for billing so where on earth has the senior accountant got his figures from? Out of thin air I think!

Jo

I think the Terms of Engagement answer your first question in that the majority of work should have been carried out by a junior charged at say £35 per hour.

I guess you haven't had a detailed breakdown of the charges yet, since you indicate no proper records were kept of the hours worked. If this is the case, it would demonstrate appalling ineptitude for a firm of professionals who seek to charge on a time basis. I would ask the accountant what procedure is in place should you wish to formally dispute the charges. If you still get no joy, I would ask the same question of the relevant professional body.

You do need to be persistent but professional and stand your ground until the necessary answers are received. With the additional information given (100 invoices in a year), the indications are that you have been overcharged and it is now up to the accountant to justify the fee.

littlejof · May 19, 2008

Thanks Jez

I'm definitely going to be persistent in disputing this - the Senior Partner is due back from holidays this week so hopefully I can get a little further in my quest! Hopefully if they have no actual 'proof' on the client ledger then the fees cannot be justified and I have a stronger case should I need to pursue arbitration.

I'm pleased you also think we've been overcharged, hopefully we can get some adjustment.

littlejof · May 22, 2008

Hi all

How long do you think I should wait for the information ( or rather lack of it!) to come through before I contact Arbitration? I'm getting stressed out with all this waiting 'in limbo' feeling and just want to get to a decision either way...

The senior accountant obviously isn't in a rush to contact us or justify anything.

Jo

Jenni384 · May 22, 2008

Write to them saying you will wait x days and then will be contacting their institute for arbitration, and that you are very disappointed in their failure to contact you on what is an important matter for both parties.

I suggest maybe 7 days, or specify next Friday. That's more than enough time for them to at least acknowledge your request.

littlejof · May 23, 2008

Thanks Jenni

I'll do that today, it's so good to be able to get someone else's thoughts and views on things!

Jo

littlejof · May 26, 2008

Have finally got a response and a copy of the cost ledgers.

It appears that a junior member did some work on 'accounts preparation' but it also says the exact same thing by most of the entries for the more qualified lady that deals with his affairs ??? The junior being charged at £20.00 per hour - the other lady at £48.00 per hour - how can I prove the more senior has being doing work that should really have been charged the junior rate when it's all listed the as the same thing? 'Accounts Preparation'.

In addition to this they re-iterate that his account were 'in a mess' when they took them on - which to me raises the question as to why we've only been charged 14.5 hours at the junior rate if they were in such a state, the rest being at the higher rate.

I guess all accountants work differently, but he was only charged about £800 per year with the old one and his paperwork would have been in exactly the same state so I just can't see how they can justify it?

Also my arguement is that they should have contacted us when they could see it was accruing to a ridiculous figure, looking at the breakdown it all gets a little extreme from 01 March 2007 where it quickly adds a further £2592 for that month alone! Why on earth couldn't they have contacted us then in order to set up a monthly payment?

Anyway, we've been given an deal to clear up the issue - the outstanding amount stands at £4188 and they've given us an offer to pay off £2500 to release our paperwork back to us, then want a further £50.00 per month for 10 months to clear the debt, effectively writing off £1288. Do you think this is a good offer, or should I stick it out and risk Arbitration? Maybe if arbitration see the accountant has already made an offer then they'll just uphold it and we'll get even more fees on top!!!

dp0848 · May 26, 2008

Well done on getting the information out of them.

I agree that they should have contacted you to discuss matters when it was clear that the fees were going to start to escalate. They should not have just assumed that you would pay or indeed were able to pay.

I think that if you went to arbitration then the professional body involved would look favorably on the firm for making an offer to you to resolve the matter. Therefore if I were in your shoes I'd take the offer, de-instruct them and find a new accountant.

When finding a new accountant look for one who fixes fees in advance. There are plenty of us out there who are not greedy and look to provide a service to our clients not just make as much money as we can.

Regards.

David.

Christiane · May 26, 2008

This is dreadful and is so stressful for you.
I paid a bookkeeper £1,000 to catch up on 8 months last year and my new accountant felt I was ripped off. The bookkeeping within his practice cost around £45 per quarter. An accountant would cost about £500 to £600. (cost are for sole trader's status as well, with a lot more invoices than yours).
When you say it was a mess, is it because there was just a pile of invoices and receipts to sort? If that's the case then the junior would have spent most of the time on it, not the more qualified person. Those people are not doing themselves any favours.

littlejof · May 27, 2008

Stressful is right - I can't sleep for worrying about this situation.
They're saying the accounts were in a mess, and in some areas 'non existent' - but as I've said before, most of the work would be on houses bought and sold, and a couple of motor changes. He didn't invoice a lot for additional property maintenance, and his receipts were all stapled into month order so I guess wouldn't have taken so long to write up. She apparently worked 54 hours alone on his paperwork in March 07!
I can't deny the fact that it's a struggle at the moment - the credit crunch has hit hard as with a lot of people, we could raise the lump sum they want if we borrow from family, and use some wedding present money from my Nan, but to also pay £50 a month for another ten months when we'll obviously also have a new accountant to pay is really stressing me out. We're going to be stretched enough as it is.
I can't believe that a professional body wouldn't recognise the fact we have obvious cash flow problems and should have appraised us before they completed the work, we were given no option at all. Why allow such an amount to accumulate when they are fully aware of our situation.
I feel cheated really.

dp0848 · May 27, 2008

54 hours? What on earth was she doing? Based on an 8 hour day that is well over a week. I take back what I said earlier about settling the matter. Unless you are running some very large operation and did absolutely no bookkeeping of any type then this is far too long to take over a set of books. I have clients that give me carrier bags of receipts and it takes me 2 days max to get it sorted out.

littlejof · May 27, 2008

It certainly isn't a large operation!

I've made an appointment with my own accountant to get his opinion on the matter, he also used to be a Tax Inspector so I'd imagine he'd have a good idea of the way things work. I think the hours they've logged are pretty extreme, and like I said earlier, I've no way of proving if the entries marked 'accounts preparation' could have been carried out at the lower rate. There are a total of 72.5 hours listed as this alone!

Incidentally, should I have had confirmation of hourly rates etc in the letter of engagement? As far as we're concerned we've never been notified of any charges, fees, hourly rates etc.

Going by our fees to date they've allegedly done over 120 hours!

To say I'm stumped is an under statement!

Blackberry · May 27, 2008

Your best option is to contact the accountants who completed the work and get them to provide a breakdown of what charges relate to.

If they are qualified accountants and unless you have agreed fixed fees with them then they have an ethical obligation to only charge for the amount of time that they have spent working on your partners accounts.

Its impossible to say whats fair and whats not as each case is individual and will depend on the size and turnover of your partners business and also on the state of the records provided.

I would talk to the accountant in question and say that you are unhappy with the fees charged and try to agree a settlement say at 70% of the total fee. if this doesnt work you may consider approaching the ICAEW to make a complaint about them.

By the way they have no legal right to hold onto your records until payment is made, they are your records and you can have access to them whenever you want. Again report them to ICEAW if they won't release them.

going forward make sure you get a good bookkeeper to keep matters up to date to avoid any future problems.

Tony

Jaydee · May 27, 2008

Blackberry said:
I would talk to the accountant in question and say that you are unhappy with the fees charged and try to agree a settlement say at 70% of the total fee. if this doesnt work you may consider approaching the ICAEW to make a complaint about them.

By the way they have no legal right to hold onto your records until payment is made, they are your records and you can have access to them whenever you want. Again report them to ICEAW if they won't release them.

Blackberry, I would agree with much of your comments, but firstly with regard to the settlement, the accountants have already offered to accept 71% so I would suggest that the OP counter-offers significantly less than 70%, and secondly I believe that case law has agreed that the accountants can indeed exercise a "particular lien" over the records until outstanding fees are settled, where:

(i) the documents retained are the property of the client who owes the money and not of a third party, no matter how closely connected with the client
(ii) the documents must have come into the possession of the member by proper means
(iii) work must have been done by the accountant on the documents and a fee note rendered
(iv) the fees for which the lien is exercised must be outstanding in respect of such work and not in respect of other unrelated work.

It would therefore appear from my understanding of the OP's situation that the particular lien in this case is likely to be valid.

littlejof · May 27, 2008

Am I right in saying that if no fixed price was quoted at the start of their liaison then we should at least have been given a breakdown of hourly rates? And if I request a breakdown of what the charges relate to how will they know if it's all listed as 'accounts preparation'? Do they have more information on their original timesheets before it gets transferred to the client ledger for billing? Would they keep all copies of the actual timesheets too?

I can assure you that all book keeping is extremely organised now! I'm totally up to date for year ending apr 08 and have even done full analysis of income and cash book, bank account from opening balance and sub analysis of each column from property mortgages to sundry! Everything is accounted for and best of all it all balances!

I don't anticipate the same problems with the next accountant!! If only we could get our paperwork back and move on now....

littlejof · May 29, 2008

I can appreciate that the accountant is holding back paperwork until we settle the account - but how do I stand on getting our next tax return in this Oct if we haven't managed to sort things in time?

I have a copy of the sets of accounts to Apr 2006, have got full copies of my own analysis breakdowns for yr end Apr 07 (although the invoices, receipts etc are with the accountant) and I have everything for yr end Apr 08 here. Would my own accountant (who we're hoping to move to for my partners accts too) be able to help us in sending in an estimated tax return? And if the accountant we're in dispute with has the tax return we need to fill in, is it possible to request a copy from the tax office?

littlejof · May 31, 2008

Just a quick update...
Have spoken to my own accountant and basically he's confirmed my thoughts that yes we've definitely been ripped off, but that

a. if we go to arbitration the original offer will be withdrawn immediately
b. arbitration would look favourably on the accountant in making his offer and we may not get the reduction to that level again
c. that if the accountant can instantly reduce his bill by that amount then it's definitely been overcharged in the first instance and...
d. that he wouldn't have taken that long on the largest limited co he has, bad record keeping or not!

We've decided to make a counter offer of £2500 as full and final payment to release the paperwork to us and close the account.. none of this dragging on for another 10 months in instalments business... effectively writing off a further £500. Will let you all know if it's accepted or not, the letter was posted to them today.

It really grates on me paying this lump sum but I can't take the stress any longer - it's one of those situations where you have to get on with it and move on.

Just wanted to say a big thank you to all those who have helped me in this situation... and taken the time out to read such a long thread!! I really appreciate it - fingers crossed for a speedy result!

Jo

Philip Hoyle · Jun 3, 2008

There isn't an ongoing tax enquiry/investigation is there? I note from another of your posts re your dispute with your bank that HMRC have asked for details of a banking. They wouldn't do this unless they were conducting a formal enquiry. A tax enquiry completely changes the picture as it is very easy to run up tens of hours of time and hundreds/thousands of pounds of fees.

I would agree that if all they are doing is your accounts and tax returns, it is very expensive, but if there is also an ongoing tax enquiry, then the fees start to look a lot more reasonable.

littlejof · Jun 3, 2008

It is an enquiry but the accountant froze all work on our account last year so it has been dealt with directly by ourselves. The tax officer said he would go into the accountants to view the paperwork and assured us there wouldn't be a cost to us or the accountants as he wouldn't need anyone there to take time out to help him on it. Despite this we still have an entry of an hour on the time ledger copies we received for his visit.

I can appreciate that if there was a full enquiry dealt with by the accountants then the fees would escalate but this hasn't been the case. The majority of the time ledger entries are 'accounts preparation', as I said previously I still don't know if a lot of these entries could have been charged at the lower rate.

Anyway, still waiting on a response to the letter for full and final payment so hopefully I can get it cleared and stop thinking about it soon!!

Just the bank to sort then I can hopefully relax and enjoy our wedding at the end of this month - talk about a stressful time...

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