We’ve had a few new clients come to us recently from cheaper accountants reporting that their cheaper accountant had gone out of business, or at least they seem to have disappeared. We thought we’d just comment generally on why we think some cheaper accountants may go out of business, and to reassure our clients and others why some other cheaper accountants should not go bust.
Too Cheap to be true?
Some cheaper accountants offer to do company accounts for as little as a couple of hundred pounds with no VAT charged. Charging an extremely low price for an apparently good product or service that is in demand and marketed well, should sell very well. However, selling well doesn’t always lead to success as the saying goes:
“Turnover is Vanity, Profit is Sanity, but Cash is King.
A high volume of sales means you need a lot of products or, in the cheaper accountants case, time to sell. A cheaper accountant may start out on their own at home with lots of spare time. But with fees so low they then get too busy which means either a poorer standard of service and/or hiring help. Finding more time or hiring other people’s time can be expensive and even more time consuming initially. An additional problem of increasing sales is when the VAT registration threshold is crossed. VAT must then be added to fees which effectively increases prices to non-VAT registered customers by 20%, unless a discount is offered and the VAT is absorbed by the business reducing its profit.
At CloudBook Accountants we work solely and securely in the cloud with clients and associates all collaborating online and on-demand without the need for expensive hardware and one big office. This helps us cope with a high turnover, and we are already VAT registered.
Selling cheap usually means a low profit per unit, or even a loss per unit or job. A low profit per job is fine if you sell enough, and other administrative expenses (overheads) are low. Even losses are ok if it means you’ll make more profit elsewhere from that customer (loss leader). The trouble with providing cheaper accountancy services at a fixed rate is that it is very difficult to control how much profit you make on each job. One client may have perfect accounting records and you make a profit, but another may have terrible records but you can only charge the fixed fee so less profit or a loss is made.
At CloudBook Accountants, for a start we’re certainly not as cheap as some cheaper accountants because we want to work with you throughout the year and save you tax, which takes a little more of our time. Also, all of our clients use online accounting or at the very least tidy spreadsheet records. Online accounting makes it much easier for our clients to produce tidy records. It also allows us to log into our client’s records at least quarterly to check everything looks ok, fix the odd thing or two, and offer any advice e.g. how to save tax. If something looks wrong, we’ll advise on what needs to be done to fix it. That way, we know you have good records helping you run your business well, and we can still make a profit and not go out of business.
With traditional accountants and some cheaper accountants, the time they spend during the year working on accounts etc. is billed some time after the year end, after the accounts are completed. Sometimes giving you a nasty surprise of extra fees. Then some time afterwards the bill is paid, hopefully. So cash is received potentially a couple of years after starting some work for a client which, when coupled with very low profits, would make it difficult for a cheaper accountant not to go out of business!
CloudBook Accountants bill their clients small fixed monthly amounts throughout the year (see our fixed fees here), helping you (and us) manage cashflow more easily, and gives you the reassurance that we’re there to help you throughout the year, which we make a point of doing anyway with our quarterly reviews.
Cheapest or Cheaper?
The cheapest isn’t often the best option especially if it seems too cheap to be true. But if someone is cheaper than others, can justify why they are cheaper, and can demonstrate the quality standard of service you need from an accountant, why not save on accountancy fees?
CloudBook Accountants are fully qualified chartered accountants, with over 15 years experience, who collaborate with clients and associates efficiently using the cloud. Please contact us if you have any questions, or get an instant quote for accountancy fees using the button below.About Us Our Prices Instant Quote