Are you making the most of your accountant?

An accountant is just one of several business advisors that pharmacists should take on board at the start of their business venture. He can be your best friend, advising on the structure of your business and acting as both a sounding board and devil's advocate for any expansion plans you may have. But choosing the wrong accountant or ignoring the need for an accountant can turn out to be a costly error.

Why use an accountant?

As your business advisor, your accountant can help you with projections, testing your assumptions and avoiding expensive errors which would put your business at a disadvantage later on. They can also look at the structure of your business, advising you whether it is best to operate as a sole trader or as a limited company - deciding this from the outset avoids tax implications if you decide to change your trading status at a later date. However, to make sure you hire the most suitable person for the job it is best to look at the services on offer and decide what suits your business.

Selecting an accountant

First make sure they are a member of the Institute of Chartered Accountants (they will have either ACA or FCA after their name), or a member of the Association of Chartered Certified Accountants (with ACCA or FCCA after their name). This ensures your accountant has passed the relevant exams to the required standard.

You don't need to hire a local accountant - but it will be easier. The best way to start the process is to ask for recommendations from business colleagues or your bank manager or solicitor. Alternatively contact your local business club or one of the institutes to ask for a recommendation.

Next - check references. Don't let the fee choose your accountant - you need to look at the range of services and what suits your needs. For example there is no point in selecting one of the big firms in London if you own one pharmacy in East Anglia - there will be a good range of mid-ranking firms in your locality.

How to set up a working relationship

Treat your accountant like any other supplier relationship - make sure you are clear about what is required from the outset and discuss fully the services required. For example do you just need an annual audit, or do you want a more comprehensive service?

Estimated costs should be available upfront and you can discuss spreading the payments over a period by monthly standing order, rather than paying one lump sum.

Types of services

The range of services available is quite extensive - accounts, bookkeeping, setting up accounting systems, advising on computerised accounting, looking after payroll, PAYE and National Insurance requirements, cash management, helping to raise finance and negotiate with your bank manager, income tax, VAT returns, tax planning, pension and general business advice. But what services are best for you?

In general you want to make sure you are covered for the following services:

• Annual audit
• Assisting business planning
• Taxation advice
• Preparing management accounts

All businesses should prepare management accounts at least once a quarter, to ensure your business is on track as per your projections. This should include a monthly cashflow projection updated against what actually happened the previous month. This aspect cannot be emphasised too strongly, unfortunately it is advice many ignore!Finally please remember that investing the time and effort as you proceed through the year can save a lot of financial headaches later. Your accountant can help you do that - choose wisely and you will have a new best friend.