I think I may have a new client but want some advice on what questions to ask and the possible pitfalls to consider in taking on his books. The potential client is a plumber and has several years worth of invoices that need recording. He can provide supplier and bank statements, but unfortunately only has a personal bank account which he also uses for the business. I also need to consider what would be a reasonable amount to charge for each year I complete. Any advice based on your own experiences would be gratefully appreciated.
Has he / accountant actually submitted a tax return at all for the last few years, cause if not then he could have some fines. Or is it just a case that hes paid his taxes etc but has never recored his paperwork correctly ie on a computerised system and wants that done to move forward?
Its not great that he has used his personal bank account as business account as well and I would strongly encourage him to open a separate business account as soon as possible to make life easier.
I wouldn't really know what to charge him as I suppose it depends on how big his turnover is and is he VAT reg or near the VAT threshold maybe? Does he employ anyone or use a labourer? Or is it just him on his own?
How does he invoice his customers? Has he got records of his income even if its only written ina cash book?
Sorry I probably not much help, its just the things that I can think off of the top of my head at the moment.
Thanks for the pointers. Although I have many years of accounting experience in industry, I am a little apprehensive as this could be my first client for my own book-keeping business. I am therefore very grateful for any help/guidance provided.
His turnover is approx £40K per annum so is below the VAT threshold. I will check whether he employs anyone - I hadn't thought about asking this. I suppose this could be a problem as I am not looking at offering any payroll support at this stage. I am assuming he hasn't completed his tax returns as he mentioned that he has boxes of invoices etc that need sorting. I am not too concerned about this as I have pointed out that I would only offer my services to take everything up to the trial balance stage - after that he would need to use an accountant to prepare the final accounts and complete his tax returns.
I think the issue of the personal bank account should be OK if he confirms what are personal expenses/income (ie those which are not clearly matched to invoices etc). Am I right in thinking I should still reconcile the bank and record all personal expenses/income to drawings?
At the moment I am thinking it would be easier to quote an hourly rate for the first year as this will involve some initial sorting and setting up, and then maybe charge the equivalent of £50/quarter for the remaining years. I am not sure if this is excessive - he stated that he has in total approximately 400 invoices for 3 years worth of trading. I would be grateful for any thoughts on this.
Hi Jules, whenever I have had a job where the client has only used a personal bank account I have always done a full reconciliation. Accountants sometimes like to see how much is business and personal so they can establish whether there is enough income from his business to support his lifestyle. Helps them to question missing income such as cash not banked. If this is their only bank account it is often included in the accounts.
Reconciliation can be a long process, especially first time round as you're not sure what is business / personal, so make sure you build it into your fees. Explain to the client that fees may be high this time round but when a system is in order it will be a lot cheaper.
I think I would use an hourly rate to get it all sorted, so you're not left short, and then arrange a fixed fee when the systems are in place. Make sure what you charge is worth your while. Its hard to say whether £50 a quarter is too low or high until you know how much work is going to be involved. Personally I think it may be a little low.
Sounds like a good first client. Personally I think £200 for a years bookkeeping is anything but excessive. I guess that due to the fact he has been using a personal account can more than treble the number of transactions.
I'm always amazed when I hear about people managing (in the loosest sense of the word) their business in this manner. Anyone can make a profit if they don't worry about bookkeeping or tax.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
I would generally deal with the apportioning of business mileage. I suppose you can do it or leave it as long as the accountant knows which.
Direct Line offer PII, you could also try simply business. You'll pay a bit more than if you were with a professional body, but it will start instantly.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
I just want to say thankyou to you all for the advice. I unfortunately lost the potential client to someone else as he wanted 3 years books (which are in a total mess) sorting in too short a period of time. I have a full-time job and looking to run a book-keeping service alongside initially, so I think I would have found it difficult to turn this around in around 4 weeks. I hope I wasn't wrong!
I think you probably made the right decision. There's nothing will damage your reputation more than over running on timescales. It amuses me that these people let things pile up for years then expect someone to wave a magic wand and make their problems vanish.
Probably not the best first client anyway. The key now is to get your systems in place to hit the ground running with the next.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
Well done for turning down the possible new client, it is very easy to get carried away with the thought of having a new client and thinking that you can achieve everything for them when in reality you know it is not possible. It is brave and right to have made the decision that you have.
Thanks for your kind words. It was disappointing to turn the business away as I am really looking forward to get started. Still the good thing is it made me realise that there are a few things that I need to get sorted as soon as possible. I had thought about setting up in bookkeeping a few years ago but took it no further due to long working hours at my last employer. It is only recently that I decided I really want to do this again, so I need to sort out PII cover etc.
Yes, the right decision there I think. Sometimes I think some clients are more trouble than they're worth and perhaps this could have fallen into that category. Good luck with getting the next client and I think it's likely to be less of a mess!
