How to start an accountancy firm How to start an accountancy firm

How to start an accountancy practice

There are a number of reasons for wanting to start your own accounting practice. You could have identified a gap in the market that your current employer can't capitalise on, you could have something different to offer customers or perhaps you simply want a more flexible way of working.

Starting a business from scratch can be a daunting prospect but there are perks to being your own boss and making your own decisions. The good news for budding accountancy business owners is that accountants are in high demand. While the top five accountancy firms may have the monopoly on large businesses, according to the Federation of Small Businesses, 99% of businesses in the UK are Small and Medium Enterprises (SMEs) which will value the expertise and service from small accountancy firms.

Thinking about starting your own accountancy practice? We've put together some handy tips and considerations to help you decide whether to go out on your own.

  1. Setting up your business
  2. Understand what you need to do to be compliant
  3. What will your pricing model be?
  4. Develop a business plan
  5. Go online...
  6. ...but remember security
  7. Will you be an employer?
  8. Safeguard your business
  9. Develop a clear marketing and sales strategy

1. Setting up your business

While there are many benefits to starting your own accounting practice, especially if you are already a qualified accountant, there are often risks involved with starting any new business. If you've weighed up the options and decided to go for it, you'll need to think about what your legal structure will be, and whether you'll be a sole trader, limited company or a partnership. Each structure has different legal requirements which you will need to consider before registering as a business. You will also need to register with HMRC so they know how much tax you have to pay.

You'll also need to think about where you will be based. Will you run a home-based business, or do you plan to lease an office space? If the latter, you will need to factor in time for arranging a lease and physically setting up your office space.

2. Understand what you need to do to be compliant

There are many different aspects to running an accounting practice and you need to spend time making sure you are legally compliant before beginning to operate. You are legally required to be registered with a recognised supervisory body as an accountancy firm.

As the Institute of Chartered Accountants in England and Wales (ICAEW) outlines, before you engage in public practice in the UK you need to hold an ICAEW practising certificate and comply with their professional indemnity insurance and practice assurance regulations. You will need to inform ICAEW of your firm's name and details before you begin practicing. As the regulator for practice assurance standards, they need to know the information of their members.

Data protection is another key issue for accountants as you will be handling sensitive client information. To find out whether you need to be registered under the Data Protection Act 1998 and register, take a look at the Information Commissioner's website.

3. What will your pricing model be?

Think about how you will set your pricing in order to make a profit. Will you charge based on time spent or have a fixed fee for a project? Whatever you decide you need to ensure you are consistent, that you're not far off your competitors and that you are priced to make a profit.

Clients may expect fixed costs up front, so make sure to cover off all aspects of your work within this. Reducing the amount a client needs to pay at the end of a project will make you popular, whereas increasing costs throughout because of underestimating your time could lose you profit.

4. Develop a business plan

Once you have decided what your business name will be, where you will be based, how you will price your services and have checked off the legal and regulatory compliance, you will need to develop a business plan. This should set out:

  • A description of your proposition, including the long-term ambition
  • An analysis of the market and your competition
  • A SWOT analysis – a study of your business's potential strengths and weaknesses, as well as the opportunities and threats. This will help you know your USPs and market inside out
  • The costs and your financial forecasts
  • Your marketing plans

5. Go online...

A website is an essential tool for any business, as most business owners and consumers alike find services via online searches and online review sites, although recommendations from trusted friends, family and colleagues are still highly valuable. You may want to wait a while before investing heavily in an 'all singing all dancing website' but a simple, easy to use, easy to find website is essential from day one.

Consider social media too, especially LinkedIn and Twitter. Do your competitors use social media channels and how effective do they seem to be? Are any of your prospective clients on social media platforms? Chances are the answer is yes, so spend some time checking out client and competitor social activity before deciding where to invest your time and efforts. Social media platforms are a cost-effective way to start connecting with new business prospects and presenting yourself as an authority and trusted partner.

6. ...but remember security

Whether you are setting up your accountancy business from home or an office you need to remember that you will be handling lots of sensitive company data and financial information. What may be sufficient protection for home personal use will not be for business use. A good place to start to work out what level of protection you need is the National Cyber Security Centre's website which provides clear advice for small businesses. It is also essential that you protect your customer's personal information and are compliant with the EU General Data Protection Regulation (GDPR).

You may also want to consider cyber insurance to protect you in case of cyber-crime. If your website or computer is hacked, it takes time and money to fix, plus there could be data protection regulation breaches to worry about. Cyber cover can help safeguard your business from being overwhelmed by expenses and provide you with expert assistance if you have to deal with this complex problem.

7. Will you be an employer?

To begin with, you may be working alone but as you grow your accounting practice you will probably look to employ other people to help you achieve your growth ambitions. Whether it's now or in the future, this means another set of considerations. Beyond the legal, financial and statutory holiday requirements, you are also required to have employers' liability insurance, which protects you against claims from employees as a result of illness or injury resulting from their work for you. You will also need to consider health and safety for employees, develop contracts and ensure you are familiar with employment law.

8. Safeguard your business

Now you have clients, and potentially employees, you should consider how to protect both, and your wider business, if anything happens. As an accountant you occupy a highly trusted position in the eyes of your clients. They rely on you to manage their financial affairs, maintain complex administrative tasks and offer valuable advice. If you get your figures wrong, you could harm your client's business.

No matter how rigorously you check your clients' accounts, mistakes can happen. So, it's important to obtain the right cover just in case someone makes a claim against you. Professional indemnity insurance will cover your legal expenses and any compensation costs you have to pay, and clients may ask to see proof of this before working with you.

9. Develop a clear marketing and sales strategy

Now you need to go out and find clients to bring into your new business. A marketing strategy is vital tool as it helps make others aware of your business and the services you offer and will ultimately drive leads.

Think about what will set your accountancy business apart from the competition and how you will market that to your audience. This will be your unique selling point (USP). Before deciding what this is, it's worth investigating who your competitors are and what they offer. Will you be offering something different? If not, are they communicating their offering well enough or could you do better? If you are offering something different then focus your marketing efforts on what sets you apart.

Your USP could be anything from the type of service you offer, like additional tax or estate expertise, or it could be that you have a particular sector focus, or you could have a different approach to working which sets you apart. Whatever it is, this should be part of your main sales message when marketing your practice. It should also be something which is easy to communicate and sell.

We understand that as your business grows, your insurance needs will change along the way too. Read more about our flexible insurance for accountants and bookkeepers.

Small Business Insurance

Added: 15 Apr 2020