Setting up your practice
Call yourself a professional?
A key part of being your own boss is ensuring you are compliant with legal requirements and AAT standards. Calum Fuller takes you through it all
At a glance
Licensed accountants and bookkeepers must meet AAT and legal requirements
Members must update their arrangements as they grow and develop
A key part of setting up and running your own firm is basking in good practice. All AAT licensed members have to adhere to a basic set of requirements and AAT standards in order to ensure clients receive the level of service they deserve and that legal obligations are fulfilled.
It’s rigorous, but that’s because AAT and the wider accounting profession has a reputation to uphold, and getting it right early on will ensure compliance becomes second nature and a basic part of running your firm.
Rosie Berridge FMAAT has run her firm, Accountability Edinburgh, for 12 years and, while there is a lot of compliance to keep abreast of, she explains she “wouldn’t know how to run a business any other way”.
So, how do you reach that point?
Andy Sullivan FMAAT says it’s vital to regularly check that the arrangements you have in place are sufficient for your firm’s activities and offerings
LICENCES
How to think about…
…business data
As you’ll be providing accountancy or bookkeeping services to clients, you will have responsibility for deciding how you process sensitive information about your clients. Registering with the Information Commissioner’s Office (ICO) and paying its data protection fee is a key condition of AAT’s licence requirements. While AAT expects its members to register with the ICO, Helen Barrett, professional standards manager at AAT, adds that it is a legal requirement. Accountability Edinburgh founder Rosie Berridge FMAAT adds: “It’s setting up a system, making sure it’s robust and you’ve got adequate controls in place and accountants are used to that right through their professional lives.”
…insurance
For both your own and your clients’ protection, professional indemnity insurance (PII) is mandatory for all AAT licensed members. It is strongly advised they undertake a risk assessment to determine the level of cover required based on the type of work you undertake and the characteristics of your clients.
“As well as the steps you need to take when members initially set up, it’s about the ongoing management of the requirements as well,” says Barrett.
…continuity of practice
In the unlikely event you are unable to fulfil your role as an accountant or bookkeeper to your clients, you must have continuity of practice arrangements in place with a comparable firm. This means regularly reviewing your business continuity arrangements to ensure your backstop is still appropriate and able to provide a similar level of service to your clients. It’s also vital that secure access client data can be arranged in the event your continuity arrangements are called upon. Andy Sullivan FMAAT is founder and owner of CompleteHQ. He found that, although he had a written continuity of practice agreement in place, a more formal contract was required detailing the procedures for migrating clients.
…maintaining and developing processes as you grow
Sullivan has found the best method for ensuring his firm continually meets both AAT’s requirements and legal obligations is by reviewing each of them annually.
“So long as you set it up correctly in the first instance, it’s difficult to forget to do it in the future. You need to be aware of any potential changes you might need to make to the registrations, such as changes in your services.”
Establishing Your AML policy
AAT licensed members are required to have written policies, controls and procedures in place to manage and mitigate the risk of money laundering, terrorist financing and proliferating financing, as well as data protection requirements. Customer due diligence must be performed and documented at the point of onboarding, and a whole-firm AML risk assessment must be performed regularly. The annual AAT AML risk assessment is one of the most important of these tasks, says CompleteHQ founder Andy Sullivan FMAAT: “When I first set up, I used a checklist that AAT provides, but you can also use it as part of an annual review of your practice to ensure you have the correct policies in place and they are understood by your team as it grows.”
CLIENTS
Handling clients
Defining your relationship with your clients clearly is crucial to both success and avoiding potential issues.
What to do at the beginning
AAT’s client care policy includes requirements such as undertaking steps to check whether you should accept a new client, providing letters of engagement to all clients, having a complaints policy and procedure in place and informing clients of relevant PII details. Well-constructed letters of engagement are extremely important to licensed members as they set out the policies and parameters of the relationship and the scope of the work. Hannah Campbell FMAAT (pictured) is director of four TaxAssist branches in the Edinburgh area: “Engagement letters are your chance to outline the fee that’s been agreed and what exactly you’re going to do for it. It prevents scope creep.”
What to do with client money
AAT requires licensed members to only use a client account or receive or make payments that relate to accountancy and/or bookkeeping services the firm is performing, has performed or has been engaged to perform for the client. It also requires members to obtain and hold sufficient information to ensure that the client bank account is being used for a legitimate purpose. Members must ensure clients’ money is never put into the firm’s business account and instead hold clients’ money in a client bank account. Withdrawals should only occur in instances specified in the engagement letter.
What to do at the end
Just as client engagement letters set the parameters of the relationship with your clients, disengagement letters tie up any loose ends and set out any final work that will be completed, handover information and any documents to be retained or disposed of.
“It’s important to have disengagement procedures in place, so everyone is clear leaving that business relationship where they are at the end of it,” explains Helen Barrett, professional standards manager at AAT.
