A guide to changing accountants and sending termination letters
There’s no denying that the skills and knowledge accountants can bring to a business are absolutely invaluable. For company owners, an efficient and meticulous back-office procedure keeps things running smoothly while ensuring that their business is compliant with the ever-changing legislation of taxation.
It’s not easy to keep on track of accounting processes in real time while examining the finances needed to maintain a healthy financial future for the company. For this reason, and many more, finding the right accountants for your specific needs has never been more critical.
The reason for making a change
Those business needs mentioned above can and will change over time. When your business plans change, or your company experiences growth, you may have to stop and think about making some rather difficult choices.
There’s no universally accepted reason for changing accountants. And if you’re a smaller to medium enterprise, with a lot of pressure to deliver for your customers, you have an obligation to do what’s best for the needs of your changing business.
Some of the more common reasons for wanting to change accountants are listed below:
A lack of enthusiasm
Running a small business can be a draining and time-consuming affair. But if you’re passionate about what you do, and have clear goals in mind, the rewards for all that hard work are well worth the effort it takes to get there.
If a non-responsive and lethargic accountant is slowing down a proactive team, it can instantly shut down your fast-moving administrative momentum.
Problems with HMRC
When you’re a smaller business that depends on sound accounting advice, it’s essential that the advice you do receive is pertinent to both your business and HMRC’s guidelines.
Ensuring that your accountant understands the needs of small businesses as well as the government’s rules and regulations is vital. Not only does it keep you in line with the latest innovations, but it also tells you a great deal about the kind of accountant you’re working with.
If your company has experienced some unexpected growth, or a shift in your desired business path, the accountant you’re currently working with may not be the right person to help you accomplish what you need on this new trajectory.
Asking the right questions
Regardless of the reasons for changing your accounting firm, it’s always advisable to ask some specific questions to any potential new accountants to avoid the same issues from occurring in this new potential business relationship.
Be sure to ask them some pertinent questions about any alterations in accounting processes, for example, the changes associated with the greater usage of Making Tax Digital software. How did they manage to implement it with their existing clients? What challenges did they face? How did they overcome those issues?
Not only are you making sure that you’re avoiding repeating any previous issues with past accountants, but you’re also getting a better insight into how the accounting firm adapts to change, and how easy those changes were for their clients.
The nuts and bolts of switching accountants
While some accountants may imply that switching over to another accountant is a difficult and long-winded process, you can actually move between the two relatively easily, and with minimum impact on your business.
In fact, a lot of the work for this transition will be done by your new accountant. But in order to keep the process running smoothly, there are some important things you’ll need to do.
Things to consider when changing accountants
First of all, it’s always best to stop and take stock of the factors surrounding your transition between accountants. For the majority of businesses, the variables you’ll need to take into consideration are as follows:
- The number of accounting activities due (try to change during a quieter period)
- The number of reports that will be left halfway finished
- Making sure you don’t change accountants midway through an audit
- The loose business ends such as invoices and late fees
If the issues above aren’t going to have a significant impact on your business during this potential change, it’s time to make the first step of changing your accountant.
Officially notifying your current accountant about leaving
Regardless of any potential problems between you and your current accountant, it’s a common professional courtesy to notify them of your intentions to take your accounting needs elsewhere.
Not only does this help your current accountant to prepare for their own future, but it also allows them the time to properly put together any necessary documentation that your new accountant will need.
Writing out your termination letter
Most people feel more comfortable putting the above notice in writing as an official termination letter. And as long as you include all of the right information, and make it clear what the dates of this transition are, everyone can move forward on the same page to keep things as simple as possible.
To make this happen, be sure to include the following details in your official letter:
- A clearly stated intention to move to another account/accounting firm
- The dates on which this transition will take place
- The information that your current account will need to provide for your new one
- Your expectations for any current tasks to be completed
- The date you will officially no longer be their client
- Permission for your current accountant to pass information to your new one
The next steps in signing with a new accountant
During this transitional period, it’s important to know what to expect in your new relationship with a different accountant. Generally speaking, you’ll encounter the following 3 steps:
A form will be sent to you from your new accountant that you’ll need to complete. You’ll be required to provide a scanned copy of your passport, a recent utility bill, and other identification documents so that your new accountant can conduct an anti-money laundering check. This is a perfectly normal process and a legal requirement in the UK.
2. Completing a 64-8 form
Signing this form means that you’re officially authorising your new accountant to take care of your tax affairs with the HMRC on your behalf. This form can be completed on paper or submitted electronically on the HMRC website.
3. Reading your letter of engagement
Any accountancy company or individual that’s part of a recognised professional body must send you a Letter of Engagement. Essentially, this is an official document that provides clarity on what is expected of you and your new account, and the requirements needed to make it a professional and prosperous relationship.
What is your new accountant’s role in this?
When a new accountant can officially act on your behalf, they’ll ask for something that’s known as a ‘professional clearance’ form from your current accountant. This is a standard process in which your outgoing accountant will need to state that there’s no reason why your new hire should refuse to accept you as a client.
A standard professional clearance document will include the following:
- Any outstanding fees owed to the outgoing accountant
- A request for copies of tax records, tax returns and other accounting documents
- Confirmation that there’s no reason an accountant should refuse to take you on
If you follow these simple steps and keep the lines of communication open between all parties involved, your accounting details can be transferred to your new accountant in a matter of weeks.
Like all other aspects of business, by being prepared and keeping diligent processes in place, you can maintain a steady business while implementing the changes needed to move forward.