What is cost of hiring an accountant in London?

Every business needs to keep accounts, no matter what size.

‘It sounds pretty obvious, but having a finance function that’s competent and credible is an absolute must. There isn’t any way around it,’ says Phill Westcott, a director of commerce at recruitment agency Robert Walters. ‘Everyone needs an accountant.’

But not every business will be able to hire a team of salaried accountants within a finance team, which can often be around £50,000 minimum per year for a well-qualified accountant, according to Walters. For many businesses, it’s about finding a practice that suits them on a contract basis.

Sole traders, freelancers, landlords and small businesses will often be the ones needing to hire an accountant. Business owners may have either come to the end of their capabilities or lack confidence keeping their own accounts, or they feel their time is better spent elsewhere.

Typically finding these services in London will be pricier, due to higher base costs for rent and salaries and a more competitive market.

But, how much does it actually cost to hire an accountant? And does the London market offer anything different to the rest of the UK?

Costs- how are they broken down?

The cost of an accountant can either be calculated by hour or by fixed fee. Alex Rawlings, operations director at accounting firm Stonebridge Pay, says hourly rates start at around £20.

‘Typically accountants offer varying packages from £20 an hour to fixed fee, depending on business requirements and needs. Nowadays accountants offer different packages for the services, therefore it is much easier for businesses to decide which one to choose,’ says Rawlings.

Robert Bean, managing partner at accounting firm Grunberg & Co, says the hourly rate can vary greatly.

‘Typical costs for an average UK accountant will be around £35 per hour for basic services, such as working on a return, but for more complex work such as tax planning you could pay £150 an hour or more,’ says Bean.

It is the role of an accountant to prove their cost is worth it, by saving their clients time and money.

Getting started

Any accountant-client relationship needs to start with filling out a 64-8 form, which will provide the accountant with the authority to work on behalf of their client with HMRC.

There will also be hidden tasks the client may be unaware of, such as contacting the client’s previous advisor to obtain relevant documents from previous tax years and talking to HMRC about incorrect tax codes and P60 information.

Laura Moss, accountant and founder of Laura Moss and You, which seeks to support female entrepreneurs, says there are multiple ways accountants can save their clients money.

‘When hiring an accountant you can save money by ensuring you have claimed for all the allowable business expenses which can reduce your profit and therefore your tax bill. Plus, there are other ways of reducing your tax bill by the use of losses from previous years that you may not be aware of if you decide to complete your own self-assessment,’ says Moss.

As well as female entrepreneurs, Moss works with limited companies, landlords and those who need help processing slightly more complex accounts, including higher income tax charge, employed expenses or capital gains.

However, the job of an accountant is more than just making sure the accounts are in check and tax is paid, according to Katie Cazaly, investment and advisory manager at Edition Capital.

‘Accountants offer more than invoice-processing, bank reconciliations and Companies House filings. They have the expertise to get under the skin of your business, and advise you on strategic decisions for the company,’ says Cazaly.

This can be done through KPI reporting and management reporting, to tell you what is and is not working, where money should be spent and where savings can be made, she says.

Does London offer more for the money?

London accountants will often be higher in price. It can be 10-15 percent higher, according to Rawlings from Stonebridge, despite offering the same services as accountants in the rest of the UK.

This additional percent is thanks to the extra cost of rent and salaries in London.

Bean from Grunberg & Co agrees that hiring an accountant in London ‘is going to carry a premium’, and says this figure is likely to climb substantially depending on which part of the city you hire from. For example, firms linked to the City of London and those working in the Big Four will often charge more.

However, services across the country should not greatly differ, as the basic principles of accounting remain the same.

‘Fundamentally there shouldn’t really be much of a difference,’ says Bean. ‘However, you may find that London firms benefit from a greater pool of talent as many high-flying experts make the move to London to seek out their fortunes. They may have access to more professional connections in leading law firms or financial planning firms.’

London firms also might have more experience working on high-value matters, due to their proximity to large corporations in the city.

Jamie Grossman, partner at Wilson Wright, suggests that London firms might also specialise in areas that other firms in the UK don’t specialise in, such as tech start-ups which tend to be London-centric, and businesses that want to have international reach and easy access to the international market.

Start-up opportunities

Grossman says many of the London firms may also take more chances on smaller businesses and start-ups, with the hope that they will become valuable and profitable clients in the future.

‘You’ll find a lot of the London practices will take a commercial view on fees with some of the younger businesses, if they believe in the concept and management team,’ says Grossman.

‘Some of the Big Four firms are doing more and more with SMEs and entrepreneurs where they offer fixed monthly packages for a suite of services or they take a very low fee for doing some initial tax work. Effectively, they’re playing the law of averages and they know that at least a certain percent of them will thrive and can end up becoming fantastic clients,’ he says.

He says the London firms are also the ones ‘leading the charge’ in using technology in accounting, such as the use of cloud-based software, such as Xero and QuickBooks.

‘Clients aren’t interested in sending us boxes of paper bags anymore. They can take a photograph on their phone and we have automated feeds that connect to their bank account,’ says Grossman.

Some of this software can lead to real savings in accounting, with less time needed to process receipts, chase invoices and compile spreadsheets.

Ed Molyneux, CEO and co-founder of accounting software FreeAgent, says by doing your accounts digitally, you can save half the money you would spend on doing all your bookkeeping on paper.

‘If you automate the process, you take a lot of cost out of the accountancy services proposition, and the accountant’s time ends up being much more time spent looking at the end result, looking at the accounts and flagging up things in the accounts,’ says Molyneux.

The FreeAgent software, for example can cost as little as £19 a month for a sole trader, or £29 for a limited company. Businesses who have an RBS or Natwest business account can also get access to the software for free.

FreeAgent is also experimenting with offering bundles of software plus an accountant assigned to the contract in order to streamline the process, and to ensure customers who need extra advice or support during the year can get it through this all-in-one bundle.

‘This is very early work for us, we’re starting to talk to customers and accountants to put the feelers out on how it could work for them, but it’s something we’re hoping to develop and roll out a little bit later on in the year,’ says Molyneux.

What are clients looking for?

Matching up businesses and accountants in the current market can be a challenge, says Molyneux.

‘Accountants can find it very hard to find new clients because it’s quite a competitive environment and marketing is very expensive – you have to work quite hard in the digital market to be successful,’ he says.

The basic requirements businesses should be looking for in an accountant is a chartered accountant qualification, such as ACA, ACCA or CIMA, and firms who are approved by the Institute of Chartered Accountants in England and Wales.

But Moss suggests businesses should look for more than just these required qualifications.

‘The most important thing I would advise is to get to know the accountant or look for a recommendation. You are putting your trust in someone to provide you with the correct advice and complete your accounts correctly,’ she says.

‘You want to find someone you can talk to, someone who helps you to understand what is required of you and that you are comfortable with,’ says Moss.

With the growth in digital, this does not have to be restricted by region, she says.

‘At the end of the day, it’s important to find someone you like and trust – distance shouldn’t be a problem.’