Accountant fees, am I being over charged?

[snap1897]

Hi, I run my own small business and have been up and running for just over 18 months. (the turn over for the last 12 months was just over 30k), I am looking for some advice and your comments on an invoice I received from my accountant who has just checked and submitted my first end of year accounts ( 18 months worth of account in total). The invoice amount was just over £2200 (inc VAT) for checking and submitting the accounts.

Now just to clarify a few points: The accountant is a chartered accountant, I kept the books in excel and all the receipts and invoices were in month order, numbered and organised well (which the accountant has confirmed by email). When I first set the business up I met with a couple of other accountants and was quoted between £600 - £800 for end of year + self assessment etc, (the invoice I have received is just for the end of year). I decided to go with this accountant as he was recommended by a friend (who still uses him).

I have signed a contract with the accountant who detailed there hourly rate, unfortunately no fixed fee was agreed. In total taking this invoice into account I would have paid this accountant easily over £3000 for a business that has not yet taken over 40k

I have asked for details of the hourly work but have not received any yet. Taking there highest hourly rate (£110) I estimate they took about 20 hours to check the books and complete the end of year? Is that a lot of time? Should I have to pay additional money to get a detailed breakdown of the hourly rate?

Am I being unreasonable? Is his charge high?

Thanks in advance for your comments

 

[MartBrooks]

We pay our accountant something like £1800ex per year on a fixed fee basis. I don't think you're being overcharged by much if at all.

Our accountant is _awesome_, we love them to bits.

 

[elaine@cheapaccounting]

Always difficult to know but if he / she is chartered then there will be a clear complaints procedure. Ask for and follow this.

Then if not happy you can take to ICAEW. - check their web site for details.

For same work we charge £29.99 / month plus vat if you enter info into our free system.

 

[MyAccountantOnline]

Its an impossible question to answer as accountants, like any other service providers, charge different rates and have different ways of charging for what they do.

Certainly an accountant charging a fixed fee could have saved you a large amount of money.

You should certainly query the fees if they are above what you were advised was an approximate charge. If your accountant found it was necessary to undertake additional work, and with respect it often is when people supply records in Excel which initially appear to look good, they should have discussed any issues with you before incurring a large amount of additional time.

The fees you mention you were initially quoted are certainly nearer to what I would expect some of our high street competitors to be charging.

 

[David Griffiths]

20 hours for dealing with accounts in Excel is not unreasonable for an 18 month period. However, it is my firm opinion that Excel is not a suitable medium for accounting records, because (usually) nothing is reconciled or cross checked and that is not taking into account the high possibility of errors. People who use Excel think that "everything is done" - quite simply it isn't, and getting a proper accounting system would be a good start in keeping costs down, not to mention giving you better information throughout the year.

You also seem to be comparing a VAT inclusive price of £2,200 with VAT exclusive quotes of £800, and a period of 18 months with quotes that might possibly be for one year and not include tax returns etc

Such basic accounts preparation would not normally be undertaken by somebody charged out at £110 per hour and of course without a breakdown you don't know if it was. Sometimes if work is brought in close to a filing deadline it's necessary to use more senior staff to meet that deadline and that costs more. We also don't know the type of business, what tax work was involved, and what other work was done through the year.

As is always the case, we only get one side of this story, and there may be other factors which you haven't mentioned or the accountant hasn't communicated to you.

So many variables, but the main lesson here is to get a fixed price in future, and get a better system which does more of the basic work.

 

[MyAccountantOnline]

..... it is my firm opinion that Excel is not a suitable medium for accounting records, because (usually) nothing is reconciled or cross checked and that is not taking into account the high possibility of errors. People who use Excel think that "everything is done" - quite simply it isn't, and getting a proper accounting system would be a good start in keeping costs down, not to mention giving you better information throughout the year.

A view I share very strongly. If a new client comes to us with records in Excel I always suggest if they dont want to pay for some accounting software they use VT cashbook instead.

 

[paulears]

My small business accounts prepared in a software system I love and my accountant hates, with a bigger turnover, costs me just under £1000 plus VAT.

 

[Philip Hoyle]

The question is how accurate were your excel records. Were all transactions analysed correctly into columns that match the accounts/tax return headings? Did you perform a bank reconciliation regularly to check your excel totals balanced to the bank statement balances? How did you account for different dates of invoice as opposed to payment dates within a spreadsheet? How many transactions were there?

It is quite possible that an account could spend 20-30 hours trying to make sense of an amateur spreadsheet simply because of the enormous time to trace even 1 or 2 minor errors (i.e. transaction not entered, or entered slightly wrong) - you end up having to cross check everything to find the error. Also, it's possible that your formulae weren't right. It's also possible that some cells may have looked to contain a number, but which weren't included in the totals (i.e. if you managed to end up with the number wrongly formatted as text by, say, entering a pound sign, or accidentally putting a space in front of the number). The list of possible foul-ups is endless!

Considering 18 months covers two tax years (i.e. 2 returns), and 1.5 times the time usually spent to do a year, you should expect to pay about 1.75 times the annual rate for 18 months accounts, so if you were quoted £800 plus vat, a figure between £1500 and £2000 for 18 months isn't unreasonable anyway.

By all means, talk to the accountant about why it took more time, but you're probably best to spend your time on improving your spreadsheet or using some proper accounting software to make sure it doesn't happen again. Also, what's probably more important is whether you're otherwise happy with the accountant - you may well get the job done cheaper, but at what cost in terms of the risk of getting a poor accountant?

 

[snap1897]

Thanks for all you responses

The excel spread sheet was provided by the accountant; each invoice was numbered in date order and entered as shown by the accountant. All receipts were entered in the correct field e.g. fuel and again numbered, I then crossed referenced every entry on the bank statement by month, putting the number in the excel sheet onto the statement. Where a customer had taken a while to pay an invoice I noted the payment date on both the paper copy of the invoice and the bank statement. It is only a small business (3 day week) and a typical month will have between 3-10 invoices and a similar amount of purchase receipts. I fully agree that I have only detailed my side, I have asked on 3 occasions for details of the works carried out but have not received any. The person in the office dealing with my accounts left and another took over at the end.

I think it will be a case of pay the bill and get a fixed fee from another accountant, part of me wants a full detailed listing of hours worked but if they are going to charge £110 per hour to do this is it really work the money! In the 18 months I have been trading I have learnt many lessons most of which have cost me a lot of money.

 

[David Griffiths]

Thanks for all you responses

The excel spread sheet was provided by the accountant . . . .

Doesn't sound like an accountant who uses much software then. Excel can be OK for very small cases - smaller than yours - but Solar Accounts is £90 or less and VT cashbook is free. Both will do a much better job than spreadsheets and reduce the accountants work considerably. There are plenty of other options, including cloud solutions

but if they are going to charge £110 per hour to do this is it really work the money! In the 18 months I have been trading I have learnt many lessons most of which have cost me a lot of money.

They should not, indeed as Chartered Accountants must not, charge you for providing this.

 

[payrolloxford]

I was going to suggest hiring a book-keeper once a month or every two months to enter up everthing into a proper accounts programme, then get some quotes from accountants, based on you providing them with reconciled accounts up to trial balance. However, the price that cheapaccounting is offering would seem to me hard to beat.

 

[elaine@cheapaccounting]

To add the reason that we provide a free system is that it produces a Profit and loss account and balance sheet as you go.

We then use that, do our accounting checks and magic to produce the year end accounts, CT600s etc.

You can of course use a package such as Kashflow, Clear books, Free Agent etc to do the same.

Our system is entry level and free.

You will pay for the other systems mentioned but they do more than ours.
Horses for course.

All of these IMO are ‘better’ than a spread sheet as they have in built functionality, consistency of format, checks and balances etc.

I am sure that the users of spread sheets will argue this – we can all have an opinion.

 

[MyAccountantOnline]

part of me wants a full detailed listing of hours worked but if they are going to charge £110 per hour to do this is it really work the money! In the 18 months I have been trading I have learnt many lessons most of which have cost me a lot of money.

You are quite justified in asking for this and as Chartered Accountants they should have a formal complaints procedure in place to address any issues you are not happy with, including fees.

That aside I think we all all learn by experience and wish you well in getting the matter resolved and moving forward.

 

[Homshaw]

If your not happy move. There are plenty of accountants

I had a gentleman came in Tuesday who had been charged £5500 to set up a Limited company and register him for VAT. (I charge about £170)Completion of his first VAT return was £1500

Overcharging does happen

 

[MyAccountantOnline]

I had a gentleman came in Tuesday who had been charged £5500 to set up a Limited company and register him for VAT.

Do you really mean £5500? Is that for a normal everyday company set up?

 

[Homshaw]

Do you really mean £5500? Is that for a normal everyday company set up?

I really mean £5500. Apparently there are three people involved. (third each) but no known complications. The three were a bit green. They have already paid it

I told him it was unreasonable and to complain. Whether they get any money back is another matter. The accountant isn't even Chartered

His asking them to set up a standing order for £1500 a month which has provoked them to ask if it was reasonable

 

[MyAccountantOnline]

I really mean £5500. Apparently there are three people involved. (third each) but no known complications. The three were a bit green. They have already paid it

I told him it was unreasonable and to complain. Whether they get any money back is another matter. The accountant isn't even Chartered

His asking them to set up a standing order for £1500 a month which has provoked them to ask if it was reasonable

That IS one expensive company formation!

 

[DFL]

That is ridiculous! I had someone come in this week and their accountant had charged £1,000.00 plus VAT for company formation. I thought that was excessive beyond belief.

 

[Chris94]

With a turnover of 30k and most of the bookkeeping already done (assuming you've entered everything), I would not expect to pay more than £500.
(And unless you have some really complicated business with lots of assets depreciating etc, you could probably do it all yourself. I am sure people will correct me if I am wrong in saying that you do not HAVE to use an accountant at this level of business?)

 

[Tom McClelland]

With a turnover of 30k and most of the bookkeeping already done (assuming you've entered everything), I would not expect to pay more than £500.
(And unless you have some really complicated business with lots of assets depreciating etc, you could probably do it all yourself. I am sure people will correct me if I am wrong in saying that you do not HAVE to use an accountant at this level of business?)

Yes, you can do it yourself, but...

For a Ltd with that level of business, the chances of an amateur getting AA and CT computation right are negligible.

Furthermore, at a guess, at Elaine's fee level (for example) the tax savings from advice lumped in with the service would probably exceed the fees.

 

[Homshaw]

That is ridiculous! I had someone come in this week and their accountant had charged £1,000.00 plus VAT for company formation. I thought that was excessive beyond belief.

The guys dishonest and he's taken advantage of some people who are overawed at dealing with matters of this kind. I don't like to see it happen. I have told him what I would charge. The most I've seen previously is 300 pounds. It only takes 30 minutes plus the company formation fees and another 20 minutes for the on-line VAT registration. I usually do it at a reasonable cost to get clients

The guy is a member of a "non Chartered Accountancy" body and I suggested he wrote to them if he couldn't resolve it in any other way

 

[Jaydee]

The guy is a member of a "non Chartered Accountancy" body and I suggested he wrote to them if he couldn't resolve it in any other way

Providing that the accountant quoted £5,500 and then provided your new client with the newly incorporated company, I do not see any grounds for complaint.

I doubt (hope!) that their Institute would get involved with "value-for-money" type disputes.

 

[Homshaw]

Providing that the accountant quoted £5,500 and then provided your new client with the newly incorporated company, I do not see any grounds for complaint.

I doubt (hope!) that their Institute would get involved with "value-for-money" type disputes.

He's not a new client because I didn't sign him up and would be unlikely to do so. When I started up the business I took on clients that turned out to be too much trouble to be economic. Now I don't do so. Neither am I too keen to be in the middle of an argument over fees that have nothing to do with me.

The accountant never quoted in advance he sent the bill after doing the work. Limited Companies and accounts are an area that many people feel uncomfortable the same as elderly householders and itinerent roofers. It doesn't mean you should take advantage of the situation.

Should an institute get involved? I think it is a matter of degree. When does a bill go from being expensive to what is unacceptable. I do a tax return for a 90 year old lady. If I got her a quote and charged her 5K I'd expect the Institute to ban me for life

 

[DFL]

I would hope that the institutes wouldn't normally get involved in this type of thing as it is down to the firm and the client to agree price and for institutes to get involved in price disputes (if clearly coneveyed to and agreed by client) would lead to all sorts of problems.

Having said that, as questioned above, when there is clear abuse then where is the line?

There is no absolutely no justification on charging £5.5k for a company formation even if agreed by client, who clearly wouldn't have agreed had they known the work involved and comparable prices charged by competitors.

All institutes expect their members to act in the best interests of the client(s). This is clearly not the case here and, on the facts provided, the firm in question should have the book thrown and them and named and shamed.

 

[Bob]

Steve Pipe from AVN reckons each incorporation should generate fees between £2,000 and £10,000

There was an article in this month's Accountancy magazine by him quoting similar figures

 

[Tom McClelland]

Steve Pipe from AVN reckons each incorporation should generate fees between £2,000 and £10,000

There was an article in this month's Accountancy magazine by him quoting similar figures

In all fairness, having heard Steve Pipe talk about how he believes accountants should operate, I don't believe that he is an advocate of unreasonable charges for compliance services. Steve believes that accountants should pro-actively sell value-added services to their clients, to the benefit of their clients as well as themselves. I'm not in the profession myself, so I have no idea how realistic Steve's views are, but he is persuasive.

 

[Davidad]

I don't know if this is any help, but we set up 4 months ago as a Ltd company and our fees are £1250 py ex VAT. We provide all our data via KashFlow (ie it's good data, they don't need to chase errors) and they do all the registration, filing, provis. of tax advice and even payroll for a few people if required). Oh, I do the VAT by the way.

So your fees look to be similar, but I think the issue is how much time they have to spend on the data

 

[xJustmyluckx]

I would say that while its not unreasonable as chartered accountants are expensive and have the right to charge a high hourly rate for a quality service it is indeed wrong for you. With your turnover its too high. I have a turnover 10 times that and like you keep books handing in end results and I'm about £750 to my accountant although there not chartered. Why not ask for the hourly breakdown again afterall your entitled to a receipt but maybe ask if it was because it was your first year and you may have been charged for advice as well as actual accounting. Then ask if this is likely to be the amount for next year if so better options may be out there for your business.

 

[Homshaw]

I would hope that the institutes wouldn't normally get involved in this type of thing as it is down to the firm and the client to agree price and for institutes to get involved in price disputes (if clearly coneveyed to and agreed by client) would lead to all sorts of problems.

Having said that, as questioned above, when there is clear abuse then where is the line?

There is no absolutely no justification on charging £5.5k for a company formation even if agreed by client, who clearly wouldn't have agreed had they known the work involved and comparable prices charged by competitors.

All institutes expect their members to act in the best interests of the client(s). This is clearly not the case here and, on the facts provided, the firm in question should have the book thrown and them and named and shamed.

The gentleman has just popped in to see me. He has received a further bill for £8000. He has asked for a breakdown as he has no idea what it's for

 

[Tom McClelland]

The gentleman has just popped in to see me. He has received a further bill for £8000. He has asked for a breakdown as he has no idea what it's for

Presumably the bodies have catch-all clauses in their regulations about avoiding conduct that would bring the body into disrepute. I would have thought that unjustifiable levels of charging @ about 20x the going rate would be covered by that. Unless of course there is a satisfactory explanation for the charge-levels that we're currently unaware of.

 

[accounting-help]

You can check out our "fixed-price packages" on our website if you want to get some kind of idea of what you can expect for your money. We don't claim to be the very cheapest but do offer a pro-active, value-added service.

 

[Homshaw]

Presumably the bodies have catch-all clauses in their regulations about avoiding conduct that would bring the body into disrepute. I would have thought that unjustifiable levels of charging @ about 20x the going rate would be covered by that. Unless of course there is a satisfactory explanation for the charge-levels that we're currently unaware of.

Looked up the complaints procedure for the body involved and it clearly states they don't get involved in fee disputes

Don't know where it goes from here

 

[smooreaccountancy]

I agree with above that it is difficult to look at another person's quote and say whether it is wrong or not. It is higher than what I would have expected, especially as they had not come back during the process to say whether any issues had arisen or not.
Unless you are happy pursuing the issue, it may just be a case of "taking the hit" and looking elsewhere - with maybe a fixed cost this time.
Good luck,
Sid