When contractors and freelancers began to appear in ever-increasing numbers, starting with the IT contracting boom of the 1980s, there was the slow realisation from many accountants that contractors might be the market to enable real automation of the accountancy function, and to provide a ‘standard’ service, but at ‘professional’ prices.
In contractors, you have a bunch of accountancy clients with the same compliance needs as any other small business, but with a fraction of the number of transactions or complexity. No stock, few capital expenses, little or no supplier base, low volume transactions, simple VAT accounting, only one or two directors and shareholders; the list that describes the ‘uniqueness’ of contracting clients goes on.
So, contractors represent a well evolved market for accountants, but have accountants evolved to meet the needs of contractors? For the most part, accountants are still doing largely the same things they have always done. Most still take a fortnight or more to take-on a new contractor client, often requiring them to visit during working hours. This is an expensive and unnecessary hassle for knowledge workers like contractors, but many accountants insist on it unnecessarily to satisfy money laundering regulations. Plus, accountants typically process accounts manually, maintaining an expensive ‘back-office’ at their client’s expense.
Accountants 'sell-up'
Some accountants that claim to be contractor specialists still adopt the low-cost airline model. On the face of it, their fees are low, but add a second director’s tax return or additional board minute or dividend voucher, and suddenly the charges rack up. We’re back in ‘professions-land’ where unexpected time-charges kick-in with a vengeance.
But slowly, the contractor accountant marketplace is starting to see some genuine new market entrants that have taken the best parts of the old order, added some usable technology and created a contractor accountant service that actually delivers what contractors want and at a price that’s proportionate for the services rendered.
Genuine online contractor accountants provide contractors with the kind of web-based control panel that most contractors are used to from their bank, online suppliers and shopping and leisure activities. Such services combine the security of tax compliance and accountancy expertise, delivered by professionally qualified accountants, plus they feature a minimal back-office and a price to match.
Reducing barriers to online sign-up
Barriers to sign-up are increasingly being solved by technology. At Crunch, for example, they’ve cut average sign-up time to around twenty minutes. That sounds a bit like the sort of thing call centres say, but what they’ve done is assemble a switching team to facilitate an efficient sign-up process. Identity checking for money laundering regulations simply requires passport or driving licence numbers that are correlated with other personal data using a secure online service. This allows them to offer a low-cost but reliable solution, and the contractor doesn’t need to lose a half or full day’s paying work just to get started.
Online contractor accountants also have access to a market recognised ‘kite-mark’ for their services – the PCG Accredited Accountant Scheme. This is no rubber-stamping exercise. Even though contractor’s accounting needs are ostensibly less than those of equivalent-sized non-contracting small businesses, being a contractor accountant requires special skills that high street accountants don’t have, plus an expert knowledge of tax legislation like IR35. The PCG scheme rigorously ensures we have everything in place.
In order to become PCG accredited, Crunch’s tax expert and co-founder Steve Crouch, who heads up Crunch’s team of expert accountants, is a Chartered Tax Adviser and has previously worked within HMRC, underwent two days of intensive training with industry-leading IR35 experts Accountax. Steve was then required to prepare a 2,000-word essay on a highly complex IR35 issue, and draft a mock letter to a client about IR35, both set by Accountax. This was then stringently evaluated before Crunch could use the PCG accreditation.
Accounting for multiple directors and shareholders
Although many limited companies set up by contractors are one-man-bands, it is estimated that over 65% of these companies in the UK now have multiple directors and/or shareholders. Pound signs appear in many accountants’ eyes on hearing that fact. Extra tax returns, P11Ds, P60s, extended payrolls, board minutes and dividend vouchers all mean extra income for a traditional accountant.
But why does this have to be the case? Crunch’s ingenious technology has evolved to offer the same service for the same price to contractor limited companies that have multiple directors and shareholders, because that’s what most of the market wants. Being online and technology driven, they don’t have a back-office that creates additional overhead for every accountancy action.
People are understandably nervous about new offers, but in the same way that we’ve embraced online banking, shopping online, booking leisure events and holidays over the internet because of the ease and accessibility of the services; processing accountancy and tax affairs online will rapidly become the norm for all professional contractors. This will become particularly prevalent as online providers, like Crunch, prove that the accountancy sector has really evolved alongside its contracting clients.