Good advisers can make a huge difference to a new business. From the start, they can ensure that you set your business up the right way.
Your accountant can help you establish effective information and book-keeping systems to help put the business on a solid financial basis. Your solicitor can make sure you understand the key legal issues affecting your business and that you have the right contracts in place.
To get the most out of your advisers, you need to take an active approach. Identify the areas you need them to address. Choose advisers who understand your kind of business and who will value you as a client.
You also need to manage the relationship so that you are making the best use of their expertise and getting value for money. Good advice will more than pay for itself.
An accountant can help you decide the most appropriate form for your business - sole trader, partnership (or limited-liability partnership) or company. You might also need help setting it up, for example, forming a new limited company, negotiating a shareholders' agreement with any business partners, or registering with HM Revenue & Customs.
You might want help preparing or reviewing your business plan.
You might want advice on the best way of financing your business. An accountant might be able to introduce you to suitable sources of finance.
If you are buying an existing business, you will need help investigating its financial position.
An accountant can advise you how to set up manual or computerised book-keeping systems. You may want your accountant to handle day-to-day book-keeping, but this can be an expensive option.
The accountant can also help you set up management information systems to budget key figures such as sales volumes, costs and profit margins, and to control stock and credit. Forecasting and controlling cashflow is especially important for smaller businesses with limited financial resources.
Your business will need to produce annual accounts for the tax inspector. Your accountant can prepare a profit and loss account and a balance sheet if required. Smaller businesses may be able to prepare their accounts themselves if they choose.
You are legally required to produce accounts containing specified financial information laid out in a particular way, and to have them audited if your annual turnover exceeds £5.6 million.
You might want to produce audited accounts in any case, for example, if other shareholders in the business require these.
Most companies use their accountant to handle corporation tax. Many sole traders and partnerships take advice on their income tax returns. Unless you are an expert yourself, or have very simple financial affairs, advice is almost always worthwhile.
A good accountant can provide advice on tax planning, helping you reduce your tax bill or defer tax payments.
You might want help with other taxes if you are liable for them. For example, you might need to register for VAT and complete VAT returns. If you have employees, you will need to operate PAYE to handle income tax deductions and National Insurance contributions.
For example, your accountant could help you with personal income tax planning, advice on ways to minimise inheritance tax, and so on.
Ask business contacts if they would recommend their own accountant.
Ask your bank if they can recommend local accountants.
If you already have an adviser (such as a solicitor) they might be able to recommend someone.
Ask business support organisations such as your trade association, Chamber of Commerce and Enterprise Agency.
Contact the Institute of Chartered Accountants in England & Wales for a list of local members and details of their expertise (www.icaewfirms.co.uk or 01908 248 250).
Directories and advertisements can also provide names of local firms.
Ask business contacts what they have used their accountant for, what their accountant's strong and weak points are, and how much they were charged.
Ask how large the accountancy firm is. Smaller, local firms are usually used to working with smaller businesses, charge less than larger firms and are more likely to value your custom.
Published information sources will not be able to offer the same details, but might at least indicate what an accountant's areas of expertise are.
A qualified accountant will normally be a member of one of the three accountancy bodies and be entitled to use the appropriate letters after their name. If in doubt, check with the accountancy body they claim to belong to:
Unqualified advisers are likely to provide a lower quality of service and are legally prohibited from providing certain services (eg auditing accounts).
Arrange meetings with at least three firms. You will learn what to look for and will be in a better position to negotiate fees.
Confirm in advance that the initial meeting will be free of charge.
Explain why you are starting the business and how fast you expect to grow.
Give them a copy of your business plan or key information, such as product information, forecast sales, numbers of customers and payment terms you offer, suppliers (and their payment terms), employees, existing management and book-keeping systems.
Set out the areas in which you think you need advice, but be prepared to listen to their suggestions for other issues to consider.
Provide a brief, written summary at the start of the meeting. If your business is unusual or complicated, consider providing this summary in advance.
Ask how many partners they have, what each one specialises in and what their total number of employees is.
Ask how many clients they have, how many are of your size and how many are in your industry.
Ask which individual would handle your work and what experience and training that individual has.
Ask how quickly you will get a response when you need advice.
Ask what services they think you need and why they would be an appropriate adviser for you.
Get a rough idea of how they charge and how high their fees are (see section 5).
Think about whether you found them approachable and easy to get on with. Make sure that you have met the individual who would be working with you.
Ask yourself what you think they would offer your business. An accountant who helps you plan ahead is more valuable than one who just adds up numbers at the end of the year.
A qualified solicitor must be a member of the Law Society (www.lawsociety.org.uk).
Find a list of local solicitors and lawyers suitable for smaller businesses on the Law Society website at www.lawsociety.org.uk/find-a-solicitor.
You might already know many of the key regulations for your industry, or be able to get advice from your trade association or business support organisation.
You might want to retain a solicitor, to give you regular updates on legal changes that affect you.
For example, you might use a solicitor to draw up your terms and conditions of trade, or to draft the main elements of a standard employment contract (if you employ staff).
Most smaller companies use an external adviser to handle the paperwork needed to comply with the Companies Act (eg sending required information to Companies House).
If you do not retain a solicitor, your accountant will usually offer this service.
For example, you will need legal advice if you are leasing premises or buying an existing business.
You might also want to take advice on personal matters, such as drawing up a will.
Advisers typically charge hourly fees, which can be anything from twice the hourly pay of the individual upwards. More senior advisers will charge higher rates, and tax partners are often the most expensive of all.
You might be charged extra costs (such as travel expenses) separately. You will also be charged any costs the adviser incurs on your behalf, for example, if your lawyer pays for a local authority search for premises you are buying.
In some circumstances you may be offered a flat rate for a service. For example, an accountant might quote a flat fee for preparing your annual accounts, submitting your corporation tax return and providing an agreed amount of 'free' advice. This is usually the most economical option.
Other charging schemes can include working on a 'no win, no fee' basis (some solicitors will undertake legal action for you on this basis) or charging a lower rate plus a success fee (for example, if you are negotiating to buy a company).
Confirm what payment terms are offered.
Be wary of introductory rates for annual services (such as your accounts) that then increase sharply in the second year, when it will be more disruptive for you to change adviser.
Agree timescales. Be aware that insisting on a short-term deadline may increase costs.
Be prepared for partners to delegate work to less experienced (but cheaper) employees when appropriate - so long as the overall service standard is maintained.
Set up systems that make life easier for your advisers and so reduce your costs. For example, an efficient computerised book-keeping system reduces the work your accountant must do.
Use advisers in a structured way, rather than phoning them whenever you have a question. You are likely to be charged for every contact.
Prepare for meetings and provide a written briefing in advance when appropriate.
Take advantage of free advice and subsidised training from your local business support organisation.
Consider cheaper options, such as using a payroll agency to handle PAYE, or hiring a part-time book-keeper.
Query bills you don't agree with or believe to be unreasonable.
If you do not agree with a bill for legal fees, you can also ask for the bill to be 'taxed' (assessed by a court).
Find and consult advisers before starting your business.
Encourage your advisers to be proactive, helping you anticipate and deal with potential problems, rather than just reacting.
Ask for their suggestions on how you can improve your business. An adviser might be able to suggest ways you can improve your systems and the working relationship with them, and highlight new developments and opportunities you should know about.
Understand that small amounts of relatively expensive, expert advice are better value than a lot of inexpensive, poor quality advice.
Compare the costs you are paying and the service you are getting with your original agreement and expectations.
Compare notes with other businesses you know.
If your adviser does not have the right expertise, be prepared to use specialist advisers to handle particular issues. Ask your regular adviser for recommendations.