Do accountants need to state charges up front?
Discussion
A quick question for a friend/client of mine:
I am in the process of arranging a mortgage for a friend, and as she is a locum GP the lender required a reference from her accountant with projected earnings for tax year 2012/2013.
I contacted said accountant, they asked for some info regarding her income so far this year, I offered to provide it over the phone/email but they asked me to come in to discuss it.
I took my friend in with me, we were there all of about 15 mins, dropped off the required info, and probably spoke about the weather for longer than the actual matter at hand.
A couple of weeks, and phonecalls chasing them later, they send over a 1 page letter with about 4 lines of text.
She gets a bill for over £600 for this!
They have invoiced for general advice, meetings and discussions with her financial advisor, and writing the reference.
Now firstly there was not "meetingS" - we met once upon the request of the accountant. There was no general advice - I told him what was required, asked whether they can do it, and that was all.
I can understand a charge for the letter, nobody works for free after all. But over £600??
I have had many accountants references before, and none of my clients have ever even been charged for them.
I am of course going to query this with the accountant, but I was wondering whether they have any duty of disclosure of charges in advance of doing the chargeable work?
If I am going to charge a client a fee, I am bound legally to inform them at the first contact, not to do a job then send a huge bill!
Thanks in advance for any help.
I am in the process of arranging a mortgage for a friend, and as she is a locum GP the lender required a reference from her accountant with projected earnings for tax year 2012/2013.
I contacted said accountant, they asked for some info regarding her income so far this year, I offered to provide it over the phone/email but they asked me to come in to discuss it.
I took my friend in with me, we were there all of about 15 mins, dropped off the required info, and probably spoke about the weather for longer than the actual matter at hand.
A couple of weeks, and phonecalls chasing them later, they send over a 1 page letter with about 4 lines of text.
She gets a bill for over £600 for this!
They have invoiced for general advice, meetings and discussions with her financial advisor, and writing the reference.
Now firstly there was not "meetingS" - we met once upon the request of the accountant. There was no general advice - I told him what was required, asked whether they can do it, and that was all.
I can understand a charge for the letter, nobody works for free after all. But over £600??
I have had many accountants references before, and none of my clients have ever even been charged for them.
I am of course going to query this with the accountant, but I was wondering whether they have any duty of disclosure of charges in advance of doing the chargeable work?
If I am going to charge a client a fee, I am bound legally to inform them at the first contact, not to do a job then send a huge bill!
Thanks in advance for any help.
Firstly if it's her firm of accountants (presumably they do her annual tax return) then there should be an engagement letter in place. Within that should be some sort of fee structure.
Secondly how big is the firm? If we're talking big 4 accountants that could be an hour of senior manager time she's being billed for.
Finally it doesn't really matter what the output is, its what went into preparing it. Under the terms of their professional indemnity insurance policy accountants have a duty to ensure that they have checked and double checked what they are are saying to ensure they are not leaving themselves exposed. Therefore if they are being asked to state the last three years earnings then it's one thing submitting that to HMRC (the ultimately responsibility will lie with the taxpayer) then telling a bank or building society what the earnings are.
Secondly how big is the firm? If we're talking big 4 accountants that could be an hour of senior manager time she's being billed for.
Finally it doesn't really matter what the output is, its what went into preparing it. Under the terms of their professional indemnity insurance policy accountants have a duty to ensure that they have checked and double checked what they are are saying to ensure they are not leaving themselves exposed. Therefore if they are being asked to state the last three years earnings then it's one thing submitting that to HMRC (the ultimately responsibility will lie with the taxpayer) then telling a bank or building society what the earnings are.
vinnie83 said:
A quick question for a friend/client of mine:
I am in the process of arranging a mortgage for a friend, and as she is a locum GP the lender required a reference from her accountant with projected earnings for tax year 2012/2013.
I contacted said accountant, they asked for some info regarding her income so far this year, I offered to provide it over the phone/email but they asked me to come in to discuss it.
I took my friend in with me, we were there all of about 15 mins, dropped off the required info, and probably spoke about the weather for longer than the actual matter at hand.
A couple of weeks, and phonecalls chasing them later, they send over a 1 page letter with about 4 lines of text.
She gets a bill for over £600 for this!
They have invoiced for general advice, meetings and discussions with her financial advisor, and writing the reference.
Now firstly there was not "meetingS" - we met once upon the request of the accountant. There was no general advice - I told him what was required, asked whether they can do it, and that was all.
I can understand a charge for the letter, nobody works for free after all. But over £600??
I have had many accountants references before, and none of my clients have ever even been charged for them.
I am of course going to query this with the accountant, but I was wondering whether they have any duty of disclosure of charges in advance of doing the chargeable work?
If I am going to charge a client a fee, I am bound legally to inform them at the first contact, not to do a job then send a huge bill!
Thanks in advance for any help.
Their approach to fees and an indication of the hourly rates they charge at should normally be included in the engagement letter she/they signed up to when they first started to act for her. Not all accountants offer fixed fees or menu pricing so it's not unknown for situations like this to occur...I am in the process of arranging a mortgage for a friend, and as she is a locum GP the lender required a reference from her accountant with projected earnings for tax year 2012/2013.
I contacted said accountant, they asked for some info regarding her income so far this year, I offered to provide it over the phone/email but they asked me to come in to discuss it.
I took my friend in with me, we were there all of about 15 mins, dropped off the required info, and probably spoke about the weather for longer than the actual matter at hand.
A couple of weeks, and phonecalls chasing them later, they send over a 1 page letter with about 4 lines of text.
She gets a bill for over £600 for this!
They have invoiced for general advice, meetings and discussions with her financial advisor, and writing the reference.
Now firstly there was not "meetingS" - we met once upon the request of the accountant. There was no general advice - I told him what was required, asked whether they can do it, and that was all.
I can understand a charge for the letter, nobody works for free after all. But over £600??
I have had many accountants references before, and none of my clients have ever even been charged for them.
I am of course going to query this with the accountant, but I was wondering whether they have any duty of disclosure of charges in advance of doing the chargeable work?
If I am going to charge a client a fee, I am bound legally to inform them at the first contact, not to do a job then send a huge bill!
Thanks in advance for any help.
All a bit strange really. I'd be interested to know what the 4 lines of text said. When I was in practice we used to hate mortgage letters as there's a reasonably significant risk in putting in writing to a third party a projection of a client's income when you have no control over whether they'll actually ever deliver and you know the mortgage company want to rely on your view.
That said, £600 does seem steep for what was probably something along the lines of "we have acted for X since xx/xx/xxxx and whilst we cannot provide a definitive forecast for 2012/3, her accounts for the years end x,y &z indicate that she booked profits of a,b,c and records for the period since then indicate profits of d etc etc etc"
Are you sure that the bill doesn't cover other work performed?
Sorry just noticed you said projected 2012/13 earnings. That brings a higher level of exposure in my eyes. You tell the Lender it'll be X, turns out to be Y, individual defaults on the mortgage and the bank look for someone to blame.
I know you'll say it'll have a slim chance of happening and the person won't default but that would be my concern.
I know you'll say it'll have a slim chance of happening and the person won't default but that would be my concern.
mx stu said:
Secondly how big is the firm? If we're talking big 4 accountants that could be an hour of senior manager time she's being billed for.
Fair point but you'd have to be mad to pay Big 4 (or even top 20) rates for a GP Locum's tax and accounting needs wouldn't you? (and I speak as someone who's worked in both Big 4 & small firm)basherX said:
Fair point but you'd have to be mad to pay Big 4 (or even top 20) rates for a GP Locum's tax and accounting needs wouldn't you? (and I speak as someone who's worked in both Big 4 & small firm)
Short answer: some people do!I started out in personal tax in a big 4 firm and my first caseload was a band of little old ladies and self employed university lecturers who were legacy clients (i.e. that had ended up with the firm after years of mergers and acquisitions of smaller firms). Each of them paying best part of £1,000 a year to get a relatively straight forward tax return (or even R40 in some cases) completed.
It's a mid sized accountancy firm in Leicester.
A bit of background info.
I informed the accountants that the practice that she was locuming at had been happy to (again, at the lenders request) put in writing that they will be able to provide work for her for the foreseeable future.
I emailed a copy of this letter to the accountant at their request.
I took in the invoices for her income so far this year, I had even totalled it up for them!
The reference is to state that her projected income for the tax year, should her work continue at the current rate, would be £X.
They even included the following statement at the bottom of the letter : "This information is provided on the grounds that no liability whatsoever attaches to this firm and any use that you make of this information is entirely at your own risk"
So they have well and truly covered their back from a comeback - not that any lender would really come back to said accountant if the person defaulted on a mortgage - they would simply repossess.
I instructed a barrister, infact, he is currently the 2nd highest earning criminal barrister in the UK - a while ago - he charged ~£500 for the numerous conversations, and couple of meetings we had. He invested significantly more time than the accountancy firm did.
This accountant has charged £600 for effectively taking her year to date earnings, dividing them by the number of months passed, multiplying by 12, and deducting the expenses (which they will have an accurate idea from the prev years accounts).
They have billed for "providing general advice, meetings and discussions with your financial advisor and writing a letter for a mortgage reference".
They gave me no advice, and other than my initial call to request this document, all other conversations were me chasing up why the letter was taking so long. The only meeting was at their request - I had offered to email all info over.
They only charged ~£400 for her accounts last year!
I also enquired about the cost of them preparing my company accounts, they estimated £1000. So how they figure this letter was 3/5 of the work of preparing accounts for a ltd company baffles me!
A bit of background info.
I informed the accountants that the practice that she was locuming at had been happy to (again, at the lenders request) put in writing that they will be able to provide work for her for the foreseeable future.
I emailed a copy of this letter to the accountant at their request.
I took in the invoices for her income so far this year, I had even totalled it up for them!
The reference is to state that her projected income for the tax year, should her work continue at the current rate, would be £X.
They even included the following statement at the bottom of the letter : "This information is provided on the grounds that no liability whatsoever attaches to this firm and any use that you make of this information is entirely at your own risk"
So they have well and truly covered their back from a comeback - not that any lender would really come back to said accountant if the person defaulted on a mortgage - they would simply repossess.
I instructed a barrister, infact, he is currently the 2nd highest earning criminal barrister in the UK - a while ago - he charged ~£500 for the numerous conversations, and couple of meetings we had. He invested significantly more time than the accountancy firm did.
This accountant has charged £600 for effectively taking her year to date earnings, dividing them by the number of months passed, multiplying by 12, and deducting the expenses (which they will have an accurate idea from the prev years accounts).
They have billed for "providing general advice, meetings and discussions with your financial advisor and writing a letter for a mortgage reference".
They gave me no advice, and other than my initial call to request this document, all other conversations were me chasing up why the letter was taking so long. The only meeting was at their request - I had offered to email all info over.
They only charged ~£400 for her accounts last year!
I also enquired about the cost of them preparing my company accounts, they estimated £1000. So how they figure this letter was 3/5 of the work of preparing accounts for a ltd company baffles me!
Sarnie said:
Would it not have been prudent to have asked the anticipated cost when initially requesting the reference?
I never used to but do now after one Accountant, who spent no more than 3 mins filling out an accountants reference wanted £350!
You may be right - something I will certainly be doing in the future!I never used to but do now after one Accountant, who spent no more than 3 mins filling out an accountants reference wanted £350!
I have requested many accountants references for clients in the past, some of which certainly involved more work than this - not one of them has charged my clients.
I assume that they simply do it out of goodwill, knowing that it will keep their client sweet and retain the business.
She will certainly not be using this firm in the future, and nor will I.
I should also add that this firm has an in house IFA, so they would have known exactly what they were doing, not like some smaller firms who may not have known exactly what was required and therefore spent more time figuring it out.
The £600 is a bit ridiculous if they only charged her £400 to produce her annual accounts!!
I fell out with my previous accountant as he sent me an invoice for producing my companies accounts that was significantly higher than the previous years. His sole explanation was "Your turnover has gone up by 40% therefore so has our fee"
Errr what???
He then said "The more you earn, the more we charge".
I asked how inputting different numbers into his software incurred him more time than the previous years accounts to which he had no justifiable response.....I even asked if the fee would go down next year if my turn over decreased and he said no!!! haha..........needless to say we now use another firm!
I fell out with my previous accountant as he sent me an invoice for producing my companies accounts that was significantly higher than the previous years. His sole explanation was "Your turnover has gone up by 40% therefore so has our fee"
Errr what???
He then said "The more you earn, the more we charge".
I asked how inputting different numbers into his software incurred him more time than the previous years accounts to which he had no justifiable response.....I even asked if the fee would go down next year if my turn over decreased and he said no!!! haha..........needless to say we now use another firm!
vinnie83 said:
It's a mid sized accountancy firm in Leicester.
A bit of background info.
I informed the accountants that the practice that she was locuming at had been happy to (again, at the lenders request) put in writing that they will be able to provide work for her for the foreseeable future.
I emailed a copy of this letter to the accountant at their request.
I took in the invoices for her income so far this year, I had even totalled it up for them!
The reference is to state that her projected income for the tax year, should her work continue at the current rate, would be £X.
They even included the following statement at the bottom of the letter : "This information is provided on the grounds that no liability whatsoever attaches to this firm and any use that you make of this information is entirely at your own risk"
So they have well and truly covered their back from a comeback - not that any lender would really come back to said accountant if the person defaulted on a mortgage - they would simply repossess.
I instructed a barrister, infact, he is currently the 2nd highest earning criminal barrister in the UK - a while ago - he charged ~£500 for the numerous conversations, and couple of meetings we had. He invested significantly more time than the accountancy firm did.
This accountant has charged £600 for effectively taking her year to date earnings, dividing them by the number of months passed, multiplying by 12, and deducting the expenses (which they will have an accurate idea from the prev years accounts).
They have billed for "providing general advice, meetings and discussions with your financial advisor and writing a letter for a mortgage reference".
They gave me no advice, and other than my initial call to request this document, all other conversations were me chasing up why the letter was taking so long. The only meeting was at their request - I had offered to email all info over.
They only charged ~£400 for her accounts last year!
I also enquired about the cost of them preparing my company accounts, they estimated £1000. So how they figure this letter was 3/5 of the work of preparing accounts for a ltd company baffles me!
On that basis I would dispute the fee and ask for a breakdown along with the charge out rates used and go from there.A bit of background info.
I informed the accountants that the practice that she was locuming at had been happy to (again, at the lenders request) put in writing that they will be able to provide work for her for the foreseeable future.
I emailed a copy of this letter to the accountant at their request.
I took in the invoices for her income so far this year, I had even totalled it up for them!
The reference is to state that her projected income for the tax year, should her work continue at the current rate, would be £X.
They even included the following statement at the bottom of the letter : "This information is provided on the grounds that no liability whatsoever attaches to this firm and any use that you make of this information is entirely at your own risk"
So they have well and truly covered their back from a comeback - not that any lender would really come back to said accountant if the person defaulted on a mortgage - they would simply repossess.
I instructed a barrister, infact, he is currently the 2nd highest earning criminal barrister in the UK - a while ago - he charged ~£500 for the numerous conversations, and couple of meetings we had. He invested significantly more time than the accountancy firm did.
This accountant has charged £600 for effectively taking her year to date earnings, dividing them by the number of months passed, multiplying by 12, and deducting the expenses (which they will have an accurate idea from the prev years accounts).
They have billed for "providing general advice, meetings and discussions with your financial advisor and writing a letter for a mortgage reference".
They gave me no advice, and other than my initial call to request this document, all other conversations were me chasing up why the letter was taking so long. The only meeting was at their request - I had offered to email all info over.
They only charged ~£400 for her accounts last year!
I also enquired about the cost of them preparing my company accounts, they estimated £1000. So how they figure this letter was 3/5 of the work of preparing accounts for a ltd company baffles me!
vinnie83 said:
It's a mid sized accountancy firm in Leicester.
A bit of background info.
I informed the accountants that the practice that she was locuming at had been happy to (again, at the lenders request) put in writing that they will be able to provide work for her for the foreseeable future.
I emailed a copy of this letter to the accountant at their request.
I took in the invoices for her income so far this year, I had even totalled it up for them!
The reference is to state that her projected income for the tax year, should her work continue at the current rate, would be £X.
They even included the following statement at the bottom of the letter : "This information is provided on the grounds that no liability whatsoever attaches to this firm and any use that you make of this information is entirely at your own risk"
So they have well and truly covered their back from a comeback - not that any lender would really come back to said accountant if the person defaulted on a mortgage - they would simply repossess.
I instructed a barrister, infact, he is currently the 2nd highest earning criminal barrister in the UK - a while ago - he charged ~£500 for the numerous conversations, and couple of meetings we had. He invested significantly more time than the accountancy firm did.
This accountant has charged £600 for effectively taking her year to date earnings, dividing them by the number of months passed, multiplying by 12, and deducting the expenses (which they will have an accurate idea from the prev years accounts).
They have billed for "providing general advice, meetings and discussions with your financial advisor and writing a letter for a mortgage reference".
They gave me no advice, and other than my initial call to request this document, all other conversations were me chasing up why the letter was taking so long. The only meeting was at their request - I had offered to email all info over.
They only charged ~£400 for her accounts last year!
I also enquired about the cost of them preparing my company accounts, they estimated £1000. So how they figure this letter was 3/5 of the work of preparing accounts for a ltd company baffles me!
Our staff are told that if clients want any service that we have not budgeted and included in our current fees then it should be charged extra and agreement reached before the work is done. You/ your friend are aggrieved at this bill and the accountant now has the situation where his charges have not been paid.A bit of background info.
I informed the accountants that the practice that she was locuming at had been happy to (again, at the lenders request) put in writing that they will be able to provide work for her for the foreseeable future.
I emailed a copy of this letter to the accountant at their request.
I took in the invoices for her income so far this year, I had even totalled it up for them!
The reference is to state that her projected income for the tax year, should her work continue at the current rate, would be £X.
They even included the following statement at the bottom of the letter : "This information is provided on the grounds that no liability whatsoever attaches to this firm and any use that you make of this information is entirely at your own risk"
So they have well and truly covered their back from a comeback - not that any lender would really come back to said accountant if the person defaulted on a mortgage - they would simply repossess.
I instructed a barrister, infact, he is currently the 2nd highest earning criminal barrister in the UK - a while ago - he charged ~£500 for the numerous conversations, and couple of meetings we had. He invested significantly more time than the accountancy firm did.
This accountant has charged £600 for effectively taking her year to date earnings, dividing them by the number of months passed, multiplying by 12, and deducting the expenses (which they will have an accurate idea from the prev years accounts).
They have billed for "providing general advice, meetings and discussions with your financial advisor and writing a letter for a mortgage reference".
They gave me no advice, and other than my initial call to request this document, all other conversations were me chasing up why the letter was taking so long. The only meeting was at their request - I had offered to email all info over.
They only charged ~£400 for her accounts last year!
I also enquired about the cost of them preparing my company accounts, they estimated £1000. So how they figure this letter was 3/5 of the work of preparing accounts for a ltd company baffles me!
Are you sure that this is not the bill for all services this year? If so the mortgage would have added £200 to last year rather than being £600 on it's own.
James P said:
Our staff are told that if clients want any service that we have not budgeted and included in our current fees then it should be charged extra and agreement reached before the work is done. You/ your friend are aggrieved at this bill and the accountant now has the situation where his charges have not been paid.
Are you sure that this is not the bill for all services this year? If so the mortgage would have added £200 to last year rather than being £600 on it's own.
She has had no services from them this year other than my inquiry into this matter. Are you sure that this is not the bill for all services this year? If so the mortgage would have added £200 to last year rather than being £600 on it's own.
Frankly, I think they thought she was a GP who earns enough to pay, and doesn't know any better to dispute it.
I have spoken to one of the partners of the firm, who laughed (in agreement) at the points I raised to him (the same as those raised here) and has assured me he will speak to the accountant who dealt with the matter and get back to me.
Let's hope something sensible is agreed on - I made it clear that nobody expects anybody to work for free, but there's something amiss here.
I should add that they have applied a 'discount' on the invoice of £121 to reach the £600 figure, so they actually would have charged £745.20 inc VAT!
And here's me thinking solicitors/barristers charged a high hourly rate!!
sumo69 said:
As a practcing accountant, there IS something amiss with all this.
There is not a 1% chance that the fee levied is only for that mortgage reference.
Had she paid her most recent bill for accounts and tax return??
I have charged for these in some cases - never been more than £125.
David
Hi David, There is not a 1% chance that the fee levied is only for that mortgage reference.
Had she paid her most recent bill for accounts and tax return??
I have charged for these in some cases - never been more than £125.
David
Yes, she has paid her accountant for tax year 2011/2012 a few months ago. They have done no further work for her yet.
As the invoice states, it's for apparent advice given to me and meetingS with me. None of which actually happened - the one meeting was at the request of the accountant, whereas I had offered to send all info electronically.
I fail to see what mortgage advice I would need from an accountant (no disrespect intended) so what advice they feel they gave me is baffling me!
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