Will the changes effect you? - The Book-keepers Forum (UK)

BobHarper · Guru

Will the changes effect you?

MarkS · Expert

No material affect.

Most people who use bookkeepers will still use bookkeepers

Most people who use accountants will still use accountants

May be a 5-10% move to people doing their own but dont foresee a significant shift

Regards

Mark

Spamkebab · Expert

Hi Bob,

I think the majority of sole traders have a Bookkeeper or Accountant because of the time consumed

by preparing ones own accounts, and also the need for having someone in the know actually carrying

out this work for them. I deal daily with a variety of sole traders and can't see any of these 'dumping'

their Bookkeepers. Peace of mind after a hard days graft. Time will tell though.

I take it, just because of the change, penalties will still apply? The tax Man will be rubbing his hands.

kjmcculloch83 · Expert

Peasie already has an ongoing thread discussing this.

Like mark I dont see a significant problem. None of my clients use me because they dont understand accrual accounting. Normally it's far wider than that. They may not have time or they may not think its the best use of the time they do have.

With the increase in bookkeepers and accountants going alone, I think this has been happening a lot over the past few years. I find it helpful rather a drawback. The more people promoting the profession the better. It certainly isn't an issue for me locally, although I have noticed someone local who does bother me slightly in that they seem to be targetting a very similar market in a very similar way to me.

Kris

Shamus · Forum Moderator & Expert

The Government are just trying to make things simple enough for people to think that they can do their own books which will lead to a greater yield in penalties and interest which are the real money spinners for the Government.

I'm not forseeing any great shift away from employing professionals to do the work as our main selling point is that by employing our services the client is left free to get on with improving their business.

The only sector that we may see a shift in is the micro businesses who use bookkeepers as accountants. The reasoning behind that is invariably cost and those are the ones who may try to take on the work themselves.

I am not seeing any change for the client base of most accountancy practices playing in the SME sector so no resources will be freed up needing to take on additional work from freelance bookkeepers.

I'm about as worried about this as I am online bookkeepers sweeping in and taking all the clients. (i.e. not at all),

regards,

Shaun.

Shamus · Forum Moderator & Expert

And there we have it. All of the usual suspects Concur (Bagsy being Kaiser Susek)

Spamkebab · Expert

Hey Kris,

Is it time to get the balaclavas out?

There should be a few ski masks knocking about around here somewhere lol.

Shamus · Forum Moderator & Expert

Spamkebab wrote:
Is it time to get the balaclavas out?

Are you thinking of starting a new breakaway forum sub group Neil... Bookkeepers, Provisional Wing.

Spamkebab · Expert

I'm more concerned with defending Kris's territory in the first instance, but you will go putting ideas in my head lol.

Shamus · Forum Moderator & Expert

Well, as our first action Neil we're going to strap several copies of cost accounting by Colin Drury to you and send you running into a Crunchers small business seminar.

Spamkebab · Expert

I doubt i could carry several copies lol.

That paints a funny image though. A high profile Druryist breaching the premises.

BobHarper · Guru

Thanks all, sort of what I expected.

Shamus · Forum Moderator & Expert

Hi Bob,

The denial that there's an issue or that the threads gone off piste.

My excuse is that its Christmas.... And Neil made me do it... lol

Spamkebab · Expert

I was speaking as a non bookkeeping or accountancy related sole trader.

Nobody i know personally, maybe 80 or so sole traders (this is a rough figure from our books, omitting LTD's)

will take on the responsibility of their own accounts. don't get me wrong, some of these people are very well

educated and highly interested in business development and growth, some are complete barm pots.

There are 2 issues which have already been highlighted, one being time (lack of) and the other being confidence

in a system that isn't broken.

Guys i know pay around 15 to 20 quid a week for bookkeeping/accountancy fees (normally a fixed price, so i've just averaged it out)

if this equates to an hours work per week they'd be better off doing an extra hours work in their own trade as this

would generate between 35 to 70 pounds per hour. ( the 35 is a standard, the 70 is an educated guess and can be much higher)

This is how we price up anything that we outsource. Better off doing that what you know and let them that know do

that that you don't lol.

BobHarper · Guru

@Shaun - the denial.

My take is that a sole-traders making £25,000* will be very interested in change if it saves them £750 to £1,000.

We have plans to have a Website which helps them do their own tax for free so time will tell.

What will be interesting is when HMRC make this standard for micro businesses and extend the turnover limit...why not put in line with cash accounting for VAT?

kjmcculloch83 · Expert

Bob, how will it save them £750 to £1000?

Kris

Shamus · Forum Moderator & Expert

I assume that by making £25k you are talking about turnover rather than bottom line.

For micro businesses turning over that sort of money then if they can do their books they should. I'm even quite happy to let them pay me one off fee's to put them on the right track and occassional consultations.

My lowest clients turnover last year was £58k and I charged them £450 (plus VAT, but they are VAT registered so no issue).

At that level (less than 0.8% of turnover) compared to your quoted 3-4% of turnover it's much less of an issue especially when considering that if they are in profit then my fee's will also reduce the tax liability so the real cost is down at around 0.6% of turnover (and if they're not then the loss created will eventually be used to bring down the tax liability).

The larger the company generally the higher my fee's but in percentage terms it has a tendency to hover around the same sort of ball park figure.

Personally I think that using the services of professionals for small businesses is a very cost effective solution for them. (Note that I would consider any business with turnover less than the VAT threshold to be a Micro business).

Shaun.

BobHarper · Guru

@Kris - I took £750 to £1,000 from Spam's comment that businesses are paying £15 to £20 a week.

I spoke to a self-employ guy who does his own books and pays an accountant £600. He is not interested in growing his business so he doesn't fit Crunchers but he'll be able to save himself £600 and the pleasure of dealing with an accountant once a year.

@Shaun - I said £25,000 meaning net profit on the basis that if they are earning more than this they should be a Ltd Co.

kjmcculloch83 · Expert

To suggest that they'd save that though doesn't take a number of points into consideration:

1. Bookkeepers don't just do data entry
2. The extra time it would take a business owner do do their own accounts
3. The cost of lost opportunity while doing this

Again, it's a case of over simplifying the work we do, and the value we add to businesses. Just because we don't value price doesn't mean there is no value in what we do.

Kris

Spamkebab · Expert

Did you ask why he pays an accountant Bob? what does the accountant do for him?

I agree that there may be some loss of business, Although i think it will be minimal and i can see

it reappearing within a couple of years, with clients having gotten themselves in a right

old 2 & 8.

BobHarper · Guru

@Kris - we'll see.

We plan to be targeting micro businesses helping them take advantage of this and saving costs dealing with red tape.

@Spam - for me this is just the start of the end.

People are under pressure and looking to save money and this pressure is not going to lift any time soon.

Shamus · Forum Moderator & Expert

oh I can't be arsed...

NickCraggs · Guru

As soon as they want a mortgage or want to raise finance they will see that this is a bad idea and they will want their accountant back.

Also any decisions based on the accounts would be pretty much worthless.

I was at the ICB conference where the lady from BIS was talking about it, and from all the delegates that i spoke to couldnt see that it would work in practice.

Spamkebab · Expert

Hey Bob, maybe Crunchers could make a killing selling 'The end is nigh' sandwich boards to alternative accountants lol.

Shamus · Forum Moderator & Expert

Or just selling sandwiches.

Spamkebab · Expert

Boloney anyone?

Shamus · Forum Moderator & Expert

And served with relish.

Spamkebab · Expert

Lol Shaun,

I can't top that!

kjmcculloch83 · Expert

Maybe if this is really the beginning of the end for us Bob will abandon ship and help another industry see the 'error of their ways'. Solicitors are terrible for charging hourly, as are cleaners.

Kris

Shamus · Forum Moderator & Expert

Think that you just fell off the law society Christmas card list Kris.

kjmcculloch83 · Expert

Don't worry there'll be the Crunchers Society of Law. They wont bow to these professional bodies who are based on unethical practices.

Kris

Spamkebab · Expert

Alternative Lawyers?

I hope i don't ever find myself in need of one of those lol.

Rhianrach · Expert

Spamkebab wrote:
Alternative Lawyers?

I hope i don't ever find myself in need of one of those lol.

I'm thinking

http://www.youtube.com/watch?v=I6CPPema0QY

smile

BobHarper · Guru

@Kris - the writing has been on the wall for years, but changes like this make it obvious (at least to me).

Our position (explained in our whitepaper to be released next year) is that it's time for accountants to choose between two different business models.

Option 1 - services based on efficiency

Option 2 - knowledge based on effectiveness

To maintain profits from option 1 a firm will need more clients which will require more marketing.

Option 2 is a complete change in the business model with new knowledge, skills, management and pricing.

With new technology like Xero being adopted by businesses bookkeepers have the opportunity to become reviewers and preparers. If they do this there could be up to 50% fewer accountants. Bookkeepers fees/profits will not increase because they will just have more clients each. This assumes services like Receipt Bank don't win pushed in my Accountants.

@Nick - there are other ways of processing mortgage applications other than a set of business accounts which only show a part of the picture.

Shamus · Forum Moderator & Expert

Those are not options. They are two facets of the 3E's.

All accountants whether consciously or sub consciously work towards achieving Economy, Efficiency and Effectiveness both for the their own businesses and for the businesses of their clients.

Your argument is based around the same logic as :

Option 1 : You can Breath

Option 2 : You can Eat.

There is no mutual exclusivity between the options.

BobHarper · Guru

@Shaun - we've been here before so you'll probably need to wait for the whitepaper before you understand why I say what I say.

But for now here are two statements:

1. Efficiency is about best practice, effectiveness is about the next practice...they are two different directions.

2. Become effective first and then think about being efficient

Do you want an effective cancer treatment or the efficient one?

Shamus · Forum Moderator & Expert

And for a small business owner would you like to tell us what other information a legitimate finance provider finds acceptable rather than accounts prepared by an accountant with a recognised supervisory body?

There are check indicators in the copybooks to indicate that the correct number and quality of accounts have been obtained. If the check indicators are not set then it will quite literally be "Computer says no".

I will agree that some of these checks were not in place with all institutions before the banking collapse and during those times some bank staff may have lied to assist applicants gain mortgages.

Where identified, those staff no longer work for the banks and the Mortgage systems are now much more stringently applied.

Nicks statement is completely correct.

Shamus · Forum Moderator & Expert

The definition of a white paper is that it is an authoritative report or guide that helps readers understand an issue, solve a problem, or make a decision.

The documents that you produce are not white papers but rather opinions dressed up as facts.

To become a white paper it would need to be the product of a diverse committee including those who had disagreement with what you were saying in order to reach an informed conclusion.

I take efficiency as the reduction of waste and effectiveness as the utilisation of resources. That is not next practice but rather concurrent with efficiency).

BobHarper · Guru

@Shaun - profit in accounts doesn't mean a mortgage can be paid/repaid.

If I were lending my money to someone I would review the personal finances including:

Review of the business (possible a report by the business bank manager)
Monthly savings in the last 36 months
Current credit cards/loans
Any commitments like maintenance
Tax payment position
Landlord reference

Shamus · Forum Moderator & Expert

BobHarper wrote:
@Shaun - profit in accounts doesn't mean a mortgage can be paid/repaid.

If I were lending my money to someone I would review the personal finances including:

Review of the business (possible a report by the business bank manager)
Monthly savings in the last 36 months
Current credit cards/loans
Any commitments like maintenance
Tax payment position
Landlord reference

Review of the business (possible a report by the business bank manager)

If the account has not been run to the banks satisfaction then a loan would not be granted.

Monthly savings in the last 36 months

The amount of disposable income per month is considered

Current credit cards/loans

Forms part of the wider credit search performed against an applicant

Any commitments like maintenance

See disposable income comment above

Tax payment position

Can't remember if there is any check on this

Landlord reference

If applicable this is an option

But the above doesn't get away from the necessity for three years certified accounts showing that the business is stable at the point that the loan is granted.

The accounts step is one of the key checks (along with the personal credit reference checks).

The report from the business manager can only damage an application, it cannot improve it as the decisions (including interest rate offered) is made by computer based on the key criteria of past, present and (projected) future credit worthyness.

kjmcculloch83 · Expert

BobHarper wrote:
@Kris - the writing has been on the wall for years, but changes like this make it obvious (at least to me).

BobHarper · Guru

@Shaun - the point is that things can change and what accountants have relied on will not necessarily be there in the future.

Shamus · Forum Moderator & Expert

That is true of all things.

you must always apply Porters five forces model to the environment within which one works in order to identify weaknesses and use the appropriate tools to identify solutions.

I was in business, Systems and Data analyst in the retail and corporate banking sector (Accounting's second cousin, once removed) for a long time but you take a look at the way that the industry is going and know when it is time to change and time to leave.... However, when it starts raining the first thing you do is run for cover, not change countries.

Yes, change is happening, but it's not the doomsday scenario that you are predicting and not everything being pushed as empirical evidence of change is such, but rather clever marketing dressed up as change (Have you read Guerrilla marketing by Levinson? You seem to be employing the tactics from the book)

I can however see that it would be advantageous for Crunchers to make others believe that such is the case.

In more ways than one we are not all sheep to believe everything that we are told, we have our own minds and can clearly evaluate the available evidence and to my mind there is nothing in the changes that is a threat to the profession as we are a very adaptable bunch.... We have to be, they change the tax system every year and you get dizzy trying to keep up with the changes to the financial reporting standards.

I've been around long enough to tell the difference between genuine change and a sales pitch for a new business or yet another bit of new software (and I've had real marketing experts trying the same line as yourself with approximately the same results).

You really need to move away from this trying to show that what is there already is broken as it's really not.

Shaun.

VinceH · Expert

"Systems and Data analyst in the retail and corporate banking sector (Accounting's second cousin, once removed)"

Is that the second cousin, once removed, that Accounting points at when there's any kind of family gathering and says "You'll have to excuse him, he's 'special'" ?

Shamus · Forum Moderator & Expert

lol Vince,

but for a result of cousins marrying take a look at Actuaries... Of course, they don't get to go to family gatherings, they are just locked in the basement with Excel to play with.

NickCraggs · Guru

Yes, but from the self employed actuaries accountants i have done, it will be a great big basement with a bentley parked outside, and they will only be "playing" with exel for 7 months of the year when they feel a bit short of cash!

Shamus · Forum Moderator & Expert

I cannot disagree with that.

I haven't got any Actuaries as clients but I used to play with them in the day job and they were not short of a bob or two.

Don't know what your one's are like Nick but at one Pension company that I worked at the actuaries seemed to be on a permanent dress down Friday and one even wore sandals to work (Sandals : Kryptonite for accountants).

Most outrageous that we ever seem to get is wearing non matching socks... Take that society.

BobHarper · Guru

@Shaun - people can make up their own minds up. I see:

More competition
New competition
Technology doing more work
Tighter client budgets
More capable clients

Yes, perhaps existing service providers can carry on as they are for a few more years but I am not sure about that. I think the market has an appitite for something new.

I'll let you know when we start promoting in April.

Shamus · Forum Moderator & Expert

I don't disagree on any of the points made there.

I think that there will be casualties in all camps. Bookkeepers, Accountants, Franchisee's, franchisers, software companies and clients.

That's just the cycle of business where the strongest and most adaptable will survive.

I just don't think that you are right about the relative strength of the Crunchers brand against the traditional accountant service. Or that Xero will be the software that dominates the market.

Those however are two elements that no matter the amount of conjecture and speculation posed on the site, only time will witness how the scenario pans out.

My flags in the accountants camp... Not a very big flag and I've only snook in there unnoticed whilst they're all on extended lunches but it's in there non the less.

So, is this going to be a major relaunch of the Crunchers brand in April?

How many franchisee's do you think that you will have on board by then and how much of the country do you think that you will have coverage of?

BobHarper · Guru

@Shaun - yes, time will tell and I think many industries/countries are facing radical change.

I think this is an interesting article:

http://www.guardian.co.uk/education/2012/nov/11/online-free-learning-end-of-university

As regards Crunchers, I'd describe the launch as highly targeted.

We will be inviting start-ups and young firms who are looking to grow to read the whitepaper. If they find it interesting we will discuss the pros and cons of them joining us.

However, it could be that we decide to have regional offices and employees rather than franchisees.

Time will tell.