When you’re running a business, keeping costs under control is important. Whether you’re a sole trader or the director of a limited company, it can be tempting to choose the accountant offering the lowest fee.
But when it comes to accounting, the cheapest option isn’t always the one that saves you the most money.
Accounting isn’t simply about producing a set of accounts or submitting a tax return. Amongst other things, a good accountant should help you understand your numbers, meet your obligations, identify opportunities and avoid expensive mistakes.
In this blog post, we will look at what a good accountant should do for you and your business and will compare that to the true cost of cheap accountancy services. If the fee sounds too good to be true, it’s because it often is.
There is nothing wrong with looking for good value. The problem arises when price becomes the main deciding factor.
Very low-cost accounting services often work by offering a highly standardised service with limited contact and little scope for advice. You may get your accounts or tax return filed at a good price, but the service can stop there.
That can mean:
- Limited communication with your accountant
- Not being given tailored advice linked to your business context
- Little or no proactive tax planning
- Minimal review of your bookkeeping
- Advice only when you specifically ask for it, often tied behind higher fees for meetings
- Important deadlines being left for you to manage
- Mistakes or inconsistencies not being picked up
The worst part might even be that you have to pay additional charges for services that you assumed were included. So, the initial fee may look attractive, but the real question is: What are you actually getting for that fee?
You might be asking yourself, “how can a £300 accountancy fee cost me more than a £500 accountancy fee?”. Well, it isn’t always about choosing a cheaper fee over another, it can be about the value provided for the service. The best way to think of it is to look at an example:
Imagine two sole traders each pay £500 a year for accounting. One receives a basic tax return with little discussion. The other has their figures reviewed, receives guidance on allowable expenses and is advised on how to plan their tax position.
If the second trader saves £1,000 in tax through better planning and avoids a costly mistake, the £500 fee has effectively paid for itself twice over.
The difference isn’t necessarily that one accountant charges more. It is that one accountant is providing more value.
The same is true of limited companies. A company might pay a low annual fee for accounts and a corporation tax return, but if nobody is reviewing the director’s remuneration, expenses, VAT position, bookkeeping or tax planning opportunities, there may be much more money at stake than the annual accounting fee.
For both sole traders and limited companies, compliance is only one part of accounting. Yes, your accountant needs to prepare and file the relevant returns. But a good accounting relationship should also help answer questions such as:
- “Am I paying the right amount of tax?”
- “Can I legitimately reduce my tax bill?”
- “Is my business structure still right for me?”
- “Am I taking the right amount of money from my company?”
- “Are my VAT returns being prepared correctly?”
- “Are there any problems in my bookkeeping that I haven’t spotted?”
- “What do these numbers actually tell me about my business?”
Those questions can be worth considerably more than the cost of submitting a return. Don’t forget, as discussed earlier these services can often be locked behind additional fees!
If you have gone for a highly standardised service from an accountant, then it is possible for accounting mistakes to creep in where your specific industry requirements haven’t been considered. Accounting mistakes don't always result in an immediate problem.
A VAT error might go unnoticed for several quarters. An incorrect treatment of an expense might continue year after year. A missed filing deadline could result in penalties. A poor decision about how money is extracted from a limited company could create an unnecessary tax liability.
These errors can build up over time, but sometimes the biggest cost isn’t a penalty.
It’s overpaying tax.
If an accountant charges £300 less but fails to identify £2,000 of legitimate tax savings, you’ve saved £300 and lost the tax savings on £2,000.
That’s not value for money.
For a limited company, the difference between a basic compliance service and a proactive accountant can be particularly significant.
There are often decisions around:
The right answer can depend on the individual circumstances of the company and its directors.
A low-cost, one-size-fits-all approach may not take those circumstances into account. If not considered appropriately, mistreatment of the decision can cost you and your business in terms of missed tax savings or penalties from HMRC.
If an investigation by HMRC is launched, this too can cost your business in terms of the time required to work on that investigation and the likelihood that your accountant will ask for an additional fee to support you during the investigation.
It can be easy for a sole trader to think:
“I just need someone to do my Self Assessment.”
But your accounts can tell you much more than how much tax you owe.
Your accountant should be able to help you understand your turnover, gross profit, overheads, cash flow and overall profitability.
They can also help you make better decisions about expenses, equipment, VAT registration, business growth and, where relevant, the transition from sole trader to limited company.
The value isn’t just in completing the return, it’s in helping you make better decisions throughout the year.
Instead of simply asking:
“How much do you charge?”
ask:
“What does your fee include?”
Then consider:
1. What services are included?
Does the fee cover just the annual accounts and tax return, or does it include bookkeeping support, VAT returns, payroll, tax planning and ongoing advice?
2. How accessible is the accountant?
Can you speak to someone when you have a question, or are you simply submitting documents through a portal?
3. Are they proactive?
Will they contact you when they spot something that needs attention, or will they only respond when you ask?
4. Do they understand your business?
Your accountant doesn’t need to know every detail of your industry, but they should understand how your business operates and what you’re trying to achieve.
5. Are there hidden extras?
A low headline price can become considerably higher once additional services and amendments are added.
6. Do they explain things?
Good accounting isn’t about overwhelming you with technical terminology. Your accountant should be able to explain what your numbers and tax position mean in language you understand.
Your accountant shouldn’t simply be another annual expense. Instead, they should be part of your business support network. The right accountant should show an interest in your business and how best they can help you with your long-term goals.
For a sole trader, that might mean helping you understand your tax position and make informed decisions about growth.
For a limited company, it could mean helping you structure your finances efficiently, plan ahead and understand what the numbers are telling you.
So, when you’re comparing accountants, don’t just compare the fees. Compare the service, the advice, the experience and, ultimately, the value they can provide to your business.
The cheapest accounting service might save you money today. The right accounting service could save you money for years.
If you’re currently choosing an accountant based mainly on price, it may be time to look at what you’re getting for your money.
You may find that the question isn’t “How much does a good accountant cost?”
It’s “How much could poor accounting be costing my business?”
