Dealing with accountants with debt problems
Accountant, heal thyself: You would think the last person that needs financial advice would be an accountant – Think again
AN ACCOUNTANT IN need of financial advice may sound like the start of a joke but it is no laughing matter. They are not as astute at looking at their financial affairs as some may think and are not bulletproof from the personal debt shotgun.
In August last year, the Chartered Accountants Benevolent Association (CABA) revealed a 50% jump in personal debt queries compared to July, with that percentage increasing each month to January 2011.
CABA chief executive Kath Haines believes the number of queries will continue to “grow substantially” in 2011. But, how are accountants – the number crunchers – finding themselves in such difficulty?
Mark Sands, head of the national bankruptcy team at RSM Tenon, said the professional service sector is rife with people needing financial advice. Many of these high earners are the last people to address a financial problem, he added.
Accountants may be fooling themselves into thinking they don’t have a financial problem, through recycling their debt across credit cards, loans or overdrafts, leaving the problem to get worse.
The majority of these individuals could be partners of smaller firms hit hard by the recession. They could have less money coming in and need to cut overheads but are reluctant to make redundancies, move to smaller offices or force other team members to retire.
There is also the stigma attached to an accountant seeking money advice with many embarrassed to seek help from colleagues.
CABA’s team leader of the debt division, Will Solomon, explains that people on higher salaries simply accumulate higher amounts of debt.
The charity has a team in place dedicated to offering accountants advice on this issue. It consists of three specialist advisers supported by six volunteers. The team has handled approximately 140 cases since its inception two and a half years ago.
Solomon claims it can be a challenge to offer advice to accountants. “You can’t over simplify, which is patronising, however, accountants don’t know much about the options available.”Controversially, some institutes hand down costs reprimands to financially challenged members. Aside from insolvency practitioners (IPs), accountants can generally continue to work if in a formal insolvency process. However, they can be reprimanded, usually in the form of costs.
The ICAEW charges accountants about £400 for entering into an Individual Voluntary Arrangement (IVA). This must be organised by an IP, who consolidates the debt, with a portion written off and arranged monthly repayments over a maximum of five years. Other institutes such as ACCA and ICAS have similar rules.
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Some accountants have suggested that piling on extra costs onto these members can exacerbate their problems.
Although CABA can offer grants to accountants in dire financial straits Kath Haines said it is not the charity’s place to “simply write cheques”.
CABA’s team is there to help organise informal arrangements such as debt management plans. These can last up to three years and, in some cases, a percentage of the debt can be written off.
The aim is to avoid a bankruptcy at all costs. Any accountant who enters into insolvency can lose their licence and earning capability.
