When launching a new recruitment agency, there is a long checklist of tasks that directors must complete before they can begin trading. One of these tasks is appointing an accountant. However, this is often placed near the bottom of the list and not treated as a priority.
By the time directors turn their attention to this, they may underestimate the value an accountant brings, often because they don’t fully understand the accountant’s role and as a result, they may opt for the cheapest option, typically a generalist accountancy firm.
Generalist accounting firms tend to have a broad client base, “the butcher, the baker, and the candlestick maker”, and usually support only a handful of recruitment agencies. This lack of industry-specific knowledge means they’re unable to provide the tailored advice that a recruitment agency needs to grow effectively.
In addition, delays in appointing an accountant can result in missed opportunities, such as tax allowances or registrations that could improve cash flow or profitability from day one.
Here are some key reasons why recruitment agencies should appoint an accountant right from the start:
ENSURE THE COMPANY’S SHAREHOLDER STRUCTURE IS SET UP CORRECTLY
When establishing a company, especially one with multiple directors and shareholders, it is advisable to consult an accountant. They can ensure the structure is tax-efficient, which might include creating different classes of shares or involving spouses for tax benefits.
REGISTER FOR HMRC TAXES STRAIGHT AWAY
Most recruitment agencies should register for VAT as early as possible. This enables the agency to reclaim VAT on any start-up expenses, even before any sales invoices are raised. There may also be a requirement to be registered for PAYE payroll to make use of the tax-free allowances by declaring a director’s salary.
TRACK START-UP EXPENSES FROM DAY ONE
Agencies should adopt good habits early, including submitting expense and mileage logs monthly, or even as expenses are incurred. If costs were incurred before the company was officially formed, those should be submitted too, as they may be eligible for corporation tax relief and reimbursement to the director.
UNDERSTAND MANAGEMENT ACCOUNTS
An accountant’s role shouldn’t be limited to submitting VAT returns and annual accounts. They should also provide monthly or quarterly management accounts to help the director understand the agency’s financial position. Reviewing these with the accountant can support better decision-making and foster growth.
All of the above services should be offered by any qualified accountant. However, for recruitment agencies, it is strongly recommended to work with a specialist accountant who understands the recruitment sector and can offer the best possible advice from the start. Just as recruitment agencies thrive by operating in niche markets, recruitment-specific accountants offer targeted, informed advice tailored to your industry.
MAYACHI partners with a range of recruitment-specific back office and accountancy providers which are recommended to clients to ensure they maintain a clear understanding of their financial position. MAYACHI ensures that any new agency is set up correctly and receives the right advice to ensure their first year of trading runs smoothly without unwelcome surprises
