How to reduce your accountancy charges

Bookkeeping to reduce accountancy costs These suggestions are mainly aimed at very small businesses who do not have a professional bookkeeper and do not have the skills or inclination to maintain full accounting records in a double-entry software package such as Sage. They mostly relate to the preparation of the annual accounts and tax return, as this tends to be the most expensive part of the service provided. They are also useful in making sure that your accounts are returned quickly and are as accurate as possible, and they help your accountant to claim the maximum amount of tax relief on your behalf.

  1. In general, it is better to give your accountant too much information for the current year than too little. Some of it may be irrelevant - but let your accountant be the one who decides that. Information from previous years is rarely relevant, so keep your records organised into separate years.
  2. Do not wait too long before handing over your records to your accountant. Most accountants get steadily busier as the annual self-assessment tax return deadline approaches on 31 January, so accounts that arrive in December or January may be charged at a higher rate.
  3. Do some of the very basic bookkeeping work yourself, on a spreadsheet. For example, if you have a lot of receipts for expenses, list them in a simple spreadsheet with 3 columns for:
    • the date;
    • what it is for; and
    • the amount.

  4. Reduce the number of bank accounts that you have. Most small businesses can be run efficiently using a single business current account, but one credit card and one savings account can often be useful. Juggling several credit cards with business payments on each, or managing a few savings accounts for different purposes, with frequent transfers between them all, will lead to higher accountancy charges. Does a sole trader need a separate business bank account?
  5. If you have a business bank account with a large number of transactions, you could have a go at a basic bank reconciliation. On a spreadsheet, have one column with all your bank payments for the year, with the date and payee beside each one, and a total at the bottom. Do the same with the bank receipts. Then, show that the bank balance at the start of the year, plus the total bank receipts, less the total bank payments, is the same as the balance on the bank statements for the last day of the year.

    If the numbers do not match up, there is an error somewhere, which you may be able to find yourself. Check your lists of payments and receipts again, for any missing or mis-keyed numbers. Check the starting and ending balances again. You could split the year into 2 separate 6-month periods, to narrow down your search.

  6. If you give your bank statements to your accountant to process, make sure that they are all there by checking that there is an uninterrupted series of sheet numbers from the very first day of your accounting year to the end. If your accounting year ends on 31 March, don’t assume that statements that only run to 25 March ‘will do’. They usually won’t. If any pages are missing, substitute statements downloaded from the internet are acceptable instead.
  7. If you write a lot of cheques, ensure that you give your accountant all the cheque book stubs for the year. Make sure that the stub for each cheque has been filled in (not left blank), and is legible. If it is not obvious to someone outside your business what the payment is for, you could add a brief note, for example, ‘car repair’. If it was a personal payment rather than anything to do with the business, describe it as ‘private’.
  8. Don’t forget to also give your accountant statements for any bank deposit accounts, loan accounts or credit cards used by the business. If you are a limited company, you will need to supply statements for EVERY account that is in the company name.
  9. If you have more than one business, or business income and rental income, or you just use one bank account for all personal and all business transactions, make it as clear as possible what all transactions relate to. For example, is an electricity payment for your business address, for your home, or for your rental property? You could use separate bank accounts for each source of income, or just write ‘business’, ‘rental’ or ‘private’ next to every entry on the bank statements.
  10. If you are registered for VAT and you prepare your own VAT returns, supply copies of the returns that were submitted, together with your workings showing how all the figures on the returns were calculated.
  11. If you have a rental property, supply the correct information on any mortgage interest. Unless you have an interest-only mortgage, this will NOT be the same as the monthly repayments. The best information is usually an annual statement that most mortgage lenders send, particularly if this closely matches the tax year (which ends on 5 April).
  12. Don’t forget to also supply details of anything else that may need to go on your tax return, such as bank interest received, dividends received, pension payments made, state benefits received, or any employment income.
  13. If you are aware that any of the following happened during the year, write some brief details on a sheet of paper and include it with your records:
    • You expect any of your main expenses to be a lot higher or lower than last year.
    • You paid some money into your bank account that was not business income.
    • You received some business income in cash, which was not paid into a bank account.
    • You bought or sold/scrapped any vehicles or business equipment.
    • Your private use of any vehicles was different to last year.
    • You didn’t get paid for any sales or work done.
    • You took out a new loan, or lease on a vehicle. Include a copy of the agreement.
    • Anything important happened shortly after the end of your year.

8 Comments (oldest first)

  1. SS

    I have retired from my business, but still do the occasional work. When I invoice my customers I also charge them mileage on their invoice. What am I entitled to claim against my expenses? Can I claim business miles at .45p/mile? Part of my tax, insurance and repairs? What about capital allowances? Can I still claim this?
    Thank you for reading this.

    5 August 2015

  2. Admin

    You can claim part of your petrol, tax, insurance, repairs and capital allowances, or you can claim business miles at 45p/mile, but you cannot claim both.

    5 August 2015

  3. Kevin Davis

    Hi Admin

    I am employed currently and also starting a self employed business at same time. I will use separate account for business income and expenditure, and then move any profit into personal account.

    If the business account is empty of funds and I have to transfer money into it (from personal account) to pay for business items or bills, how do I record this within accounts? Or would it be good practice to always leave an amount in the business account to cover unexpected bills related to the business?


    18 September 2015

  4. Admin

    “If the business account is empty of funds and I have to transfer money into it (from personal account) to pay for business items or bills, how do I record this within accounts?”

    This is correctly described as “Advances”.

    “Or would it be good practice to always leave an amount in the business account to cover unexpected bills related to the business?”

    That is sensible. That is known as the “working capital” of the business.

    19 September 2015

  5. Kevin Davis

    Hi Admin

    Many thanks for reply.

    One further question relating to this. If I make an advance from personal account to business to cover large business related bills, how would one prove (if questioned) that the money being transferred from personal or savings accounts to business as an advance inst earned income as part of the business?
    Obviously there would be a record of the account it has come from (and statements would show that there is no income into these accounts other than transfers from business accounts as wages), but is there any method or good practice to help prove that advances from personal accounts or savings accounts are funds that have had tax paid on them previously?


    19 September 2015

  6. Admin

    It is probably helpful to understand that as a sole trader, there is no distinction made between you and your business, or between your personal money and the business money. The fact that you have a business bank account is therefore of little consequence.

    On the specific point of how you prove that money being transferred from a personal account to the business account is an advance instead of earned income, that should be obvious from the bank record. To be extra clear, you might give it a reference of “Transfer” or “Advance” when you set up the payment.

    However, the matter is wider than that. If you have a substantial amount of money in any bank account (personal or otherwise), that appears inconsistent with the income that you have been declaring over the years, you might need to explain or prove where that money came from. You should of course be able to explain why any bank receipt into any bank account is not taxable income, if it has not been treated as such.

    20 September 2015

  7. Kevin Davis

    Hi Admin. Your responses are most helpful.

    Finally, one last question I promise, relating to equipment sales.

    I operate as a tennis coach, my main income is through taking lessons and billing clients for my time. As a service, I purchase and sell equipment such as balls, rackets etc to clients (only rarely though). I sell at same cost price I pay, therefore no profit is generated on these items.

    Is this money given for the items taxable? Or would it be only the profit that is taxable? And would the amounts being paid be put under income, or under a separate heading to show what it relates to?

    Many thanks in advance


    1 October 2015

  8. Admin

    If you are not making any profit on these items, there is no question of having to pay income tax or NI on them.

    More difficult is the question of whether they are considered to be your sales and related purchases. This is a matter of presentation, but it might also affect whether you need to register for VAT.

    If you were buying each item specifically for each client, on their request, so that you were merely acting as their buying agent, you could probably ignore them.

    If you kept a stock of such items, so you were ready to sell them to clients when they wanted them, you would probably have to treat them as separate purchases and sales.

    If the treatment would mean the difference between having to register for VAT or not, you should get proper paid advice.

    1 October 2015