One entrepreneur was asked for her margin. Cue five seconds of silence. Painful!
Don’t they have accountants?
They surely do. But here’s the hair-tearingly annoying thing. Most won’t have used their accountant correctly. If they did they wouldn’t be umming and ah-ing over the financials.
In fact, I’ll bet most of these folk don’t even know what an accountant should be doing for their business. Most people don’t.
So let me explain.
An accountant is the financial director of a small business. They should take care of everything numerical. And I mean everything.
Need to work out cash-flow? That’s the job of the accountant.
Need to generate monthly management reports? Again, that is the accountant’s job.
The list of basic duties for an accountant includes doing data entry for receipts, filing VAT returns, logging invoices and sending invoices.
Now, most sole traders and small firms will be shaking their heads at this. My accountant will never do all of this. Well, they should. You are paying them to. By some weird quirk, accountants have convinced their clients that their role is limited to filling in tax returns.
No. An accountant’s job is anything with financials. All of it.
And let me stress this – a basic annual fee should cover all of this. With no added extras.
When accountants charge extra for standard services such as those listed above they are bang out of order.
No other profession works like this. You don’t go into a hairdressers and get a trim, without knowing the price. You don’t let the hairdresser charge whatever they feel like when the job is done. It is a fixed, agreed price. There are no surprises.
Same with accountants. The annual fee should cover everything you need.
When entrepreneurs go on Dragons’ Den they should be armed with all the numbers they need, prepared by their accountant.
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And if they land investment, that process should be handled by the accountant too. Again, for no extra money. This includes paperwork informing Companies House. Even the initial company valuation – a vital part of negotiating with the Dragons, should be done by the accountant. I’ve heard accountants charge £2,000 for this! Hey! It should be part of the basic service. No extra fees.
In a big company the CEO can rely on their FD for expert advice. Such as where to raise funds. Should the company float on the stock market? Crowdfund? Or go on Dragons’ Den? The FD will know.
For small businesses, their external accountant should play that role. They should be able to offer expert advice and, at the risk of repeating myself, for no extra fee.
Some accountants will quibble. They’ll claim they can’t do all this for their client. This does not impress me. As a proud accountant I’ll tell them they must, and they should.
Furthermore, KPMG practices what we preach. Our small business service is fixed fee and works on a one month rolling basis.
We make sure our clients don’t do data entry. Not for invoices. Nor for receipts. It’s our job.
We want our clients to think of their outsourced accountant as their FD. They should be someone who is available for a chat, or advice, whenever it is needed. At KPMG we make sure our clients can ask for anything, including investment advice from our specialist investment team, as part of our small business accountancy service. It comes as standard. So don’t tell me I’m asking for something impossible.
The performance of the entrepreneurs on Dragons’ Den is a reminder that accountants have a lot of catching up to do. They need to offer more to their clients. And the clients need to ask big questions of their accountant.
Entrepreneurs should have all the figures they need at their fingertips. So when Peter Jones asks for cash-flow statements they have them ready and waiting.
I’ll know when this is a reality because I’ll stop shouting at my TV screen.
Bivek Sharma, head of small business accounting at professional services firm KPMG.
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