Andy Harris, a partner in the legal sector team at accountants Hazlewoods, outlines ten key areas you should think about when choosing a firm of accountants for your law firm. (Updated 2 March 2020)
- Sector expertise. Your accountants need to understand the regulatory environment in which the law firm operates – the SRA Accounts Rules, management of client funds and so on. More generally, you want an accountant with real specialism in the sector, who understands the legal market and the issues that face your firm.
- Financial management. While accounting and compliance are essential, support with financial management can be equally valuable. For example, your accountant might help create systems that help control and reduce lock-up, and be able to benchmark your performance against your peers.
- Strategic planning. An experienced accountant can help the firm anticipate and deal with strategic issues. For example, choosing the right corporate structure, succession planning (including the financial impact of partner retirements), or modelling the impact of new pricing structures.
- Tax advice. It generally makes sense for your accountants to take a holistic view of tax planning, including both the firm and individual partners’ personal tax positions. This may include effective use of pensions, structuring partnership exits, inheritance tax planning, and so on. Careful, bespoke remuneration planning for each owner in the firm can give significant tax savings.
- Specific requirements. You may need support in particular areas such as starting a new firm, raising funding, expanding internationally, or working towards a merger or sale.
- Clients. You may want your accountants to provide additional support for complex client matters (eg client tax and trust planning, litigation support). You may also want to assess any further potential for referrals and collaboration.
- Location and size. Although most day-to-day interactions can be handled online or remotely, working with a nearby firm makes it easier to meet face-to-face. A relatively small local firm may also value your business more highly and charge less than a national firm. Bear in mind that your accountants need to be a registered auditor to carry out the SRA Accounts Rules audit work, as not all accountants are nowadays.
- Recommendations. Ask any contacts who have worked with the accountants what they used them for, what the accountants were like to deal with and how satisfied your contacts have been with the quality of the advice they were given.
- Personal relationships. Check which individuals at the accountants you will be dealing with on a day-to-day basis. Arrange to meet them in advance to get a feeling for what they would be like to work with.
- Costs. Get clear guidance on billing rates, expenses and payment terms. Investigate any flat rate services offered and what these do and do not cover. Many accountants now work on a fixed fee basis, to help avoid unexpected fees.
"Sector specialism generates precious additional knowledge for an accounting firm. So our advice to law firms can be more pro-active, helping the firms to improve their business based on what is happening in the sector. When choosing your accountants, ensure that a specialism results in tangible benefits. This often far outweighs any reciprocity of client introductions"
Andy Poole, legal sector partner, accountants Armstrong Watson