Thousands of us get the urge to ditch working for a boss and start up a new enterprise. In 2016 alone, around 660,000 people started a new business, breaking previous records. So if you want to set up an accounting and tax practice firm, now is the right time. But first, you need to consider the following:
Are you properly qualified? (UK certifications)
While you don’t need a degree in accountancy, it will help you gain your client’s trust. Consider getting your qualifications from:
- Association of Accounting Technicians (AAT) – This certification qualifies you to start a general practice.
- Association of Chartered Certified Accountants (ACCA) – With this certification, you’re now qualified to offer various accounting and tax services.
However, these qualifications mean little if you don’t have the relevant experience. Once you become certified, consider working with an accounting firm for a few years. This will help you to build valuable experience both for honing your accounting skills and running a practice.
As an accountant, you should also know what kind of services to offer:
- Preparing financial statements, budget plans and reports
- Creating accounts
- Managing cost and expenditures
- Providing tax advice or file tax returns
- Forecasting performance and potential profits
- Assisting financially distressed companies
- Auditing or investigating fraud through forensic accounting
As a professional working with numbers, an analytical mind is necessary for this line of work.
Other Things to Consider:
Are you going to be a jack-of-all-trades or specialist?
While there are plenty of small businesses in need of accounting providers, bear in mind that you’re also competing with other accountants. You can widen your potential client pool by becoming a general accountant but this makes it difficult to stand out.
Meanwhile, if you focus on providing services to particular groups like doctors, you can build a reputation offering specialist services. You could focus on offering specific types of services such as tax services. Also, specify that you’re doing Capital Gains Tax, Value Added Tax, or Inheritance Tax planning.
Whatever path you choose, make sure that you have excellent communication with your client. This is essential since, according to Northants Accounting, understanding the client’s requirements allows you to offer solutions tailor-fit for their needs. This can range from bookkeeping, tax matters, and finance management. Quickly adapting to your client’s business and industry will also help boost your professional reputation.
Business Structure
Before you start, consider writing a business plan first, since this serves as your guide on how to run and expand your business. You can also research your competitors to find ways to separate your business from them. In choosing a business structure, you have several options including setting up as a:
- Sole practitioner – This is the simplest and easiest to set up. You don’t have to fulfill any company act requirements, file annual returns or have fees to pay. When it comes to taxes, you have to make payments twice a year.
- Limited Company – The setup should follow the Companies Act requirement. You also need to file your return and pay the tax once a year except when you’re under a payment account regime. While attracting new shareholders are easier, raising capital during the setup and early operations could prove difficult.
- Partnership – To increase your capital and human resources, you can team up with other accountants. Except for your agreement, there is no formal setup required. You also have the option of setting up a Limited Liability Partnership where requirements are almost the same as a regular partnership.
Getting Up-to-Date on Legal Matters
If you’re conducting affairs on your client’s behalf, you must have HMRC’s formal authorization. You also require an agent code or reference number for your agent authorization. In addition, you need to update your knowledge and comply with accounting regulations and anti-money laundering laws.
Choosing an Alternate
Be prepared in case you are unable to work for one reason or another. If you’re in a partnership, others can cover for you. However, if you’re a sole trader or limited company, this is a serious concern. Your clients will suffer if you missed their tax payment deadlines and other legal matters.
As a precaution, you need to get an alternate who can cover and help your clients while you’re indisposed. It’s probably better to set up an alternate arrangement with a firm that has several accountants rather than with another sole trader. The idea is that your alternate satisfies the immediate needs of your clients.
Getting Insurance
As an accountant, no matter how careful you are, committing mistakes is a possibility such as:
- Professional negligence
- Breaches of copyright or confidentiality (unintentional)
- Data or document loss
- Defamation or libel
To protect yourself from these kinds of legal issues, consider getting Professional Indemnity Insurance.
Finding and Getting Clients
You’re lucky if you already have a list of clients for your new accounting firm. In reality, a startup business like yours needs to adopt creative strategies to compete with established competitors. If you have a niche, your chances of getting clients are better since you understand their business.
To find clients, consider:
- Asking your existing clients for personal recommendations to other potential clients. In exchange, you could offer a free hour of your service, for instance.
- Using traditional marketing (newspaper ads). You should also advertise your service online and through social media (Facebook, review sites etc).
- Sending newsletters via email to your existing and potential clients, providing them with relevant business and tax information.
- Sponsoring local charities and events in your community.
Networking with other business entities is also critical during the first three months of your business. The effort will cost you, but the knowledge and training can help secure bigger clients and contracts. Also, networking with banks is beneficial to your trade. In addition, consider seeking and getting advice from successful entrepreneurs or online forums.
Expectation Versus Reality
Building a business doesn’t happen overnight and can take years to make it stable. Expect to work long hours and take little time off whilst you build your accounting and tax practice. Meanwhile, avoid over-committing your time with clients. While you can’t afford to turn down any work, failing to deliver can cost you. Once clients lose confidence, they’ll take their business elsewhere. Also, consider watching your finances, especially when you are facing low-profit margins and lean months ahead.
Conclusion
Setting up your accounting and tax service firm requires dedication, time and money. However, the opportunities are there. You need to choose the right one for you and work on it. Specializing in a niche market can also boost your marketing efforts in getting clients.
Author’s Bio: Nishi Patel is the founder of Northants Accounting. He started his own company after a successful career as a management accounting and financial analysis. His company helps small business owners with Accounting, tax planning services, cash management, and identifying business opportunities. They don’t simply provide standard accounting services. Instead, they find solutions that will cover their client’s accounting, tax planning and bookkeeping needs.