Employment trends SMEs should be aware of Posted 12/11/2024 by AAT Comment & filed under Employer Videos, Employers, Members. The first of several videos from AAT’s Employer team, discussing the trends they’re seeing in the marketplace. Stephanie Sallows, Employer Development Executive at AAT, is a member of our Employer Team who assists small- and medium-size businesses with their apprenticeship, qualification and training requirements. In this video, she discusses how employers in the SME market are utilising the apprenticeship pathway to enhance their businesses, and talks about keeping staff knowledge up-to-date. Find the right apprentice for you We’ve launched the UK’s only dedicated accounting apprenticeship job board, where employers can connect with motivated career starters and changers. Find out more
Is the Fair Payment Code the answer to late payments? Posted 12/11/2024 by Annie Makoff & filed under Members, Prompt payment. Late payments and unfavourable payment terms are the scourge of small businesses, and have a significant knock-on effect for the UK economy. Small businesses have fewer resources to fall back on during lean times, so are more likely to experience cash flow issues due to payment problems. Intuit Quickbooks says late payments cost SMEs around £22,000 a year, along with 56m hours of lost productivity. FSB research has found it forces the closure of 50,000 businesses every year. Given that SMEs account for around 60% of UK employment and 48% of business turnover, according to official government statistics, late payments significantly impact the British economy and growth. The recently announced ‘New Fair Payment Code’ was proposed as part of a package of government measures, and is intended to address the big issue of late payments between businesses. The government has announced: New legislation which will require all large businesses to include payment reporting in their annual reports to highlight how they treat small firms. Tougher enforcement of existing late payment performance reporting regulations, which will see large companies report their payment performance twice a year. Consultation on these laws to help hold larger firms to account. But how effective is the new code likely to be? We spoke to accountants and bookkeepers with small business clients for their views. As members will be well aware, late payments are a long-standing problem for small businesses. AAT has been campaigning on the issue for a while now, so here’s how we reacted to news of the measures. Timely, fair and full payment remains a top priority for us. Build fair payment terms into regulatory frameworks Ellis Harris-Boulter MAAT, Founder and Director, FieCo Accountancy and Marketing, AAT Tutor The 2008 Prompt Payment Code was somewhat lacklustre until 2021 reforms strengthed the requirements for businesses. The Fair Payment Code is undoubtedly a more robust and ambitious attempt to curb late payments, and is a positive step from the government. However, I’m unconvinced that it’ll have any material effect on late payments. The code remains voluntary, even for the largest companies, which are some of the worst offenders. I don’t believe that the new law requiring large companies to report publicly on payment practices will inspire a revolution in the bureaucracy that seems to prevent them from paying suppliers reasonably. The small business commissioner states that there are “over 5,000 signatories to the existing code.” Compare this to 5.5m private sector businesses in the UK, and it’s not even a drop in the ocean. Whilst small businesses rely on their larger, late-paying customers, they’re not even enforcing their right to charge interest for fear of being replaced. So I find it unlikely that they’ll feel much more power if they’re a part of the 5% of suppliers outside of the Fair Payment Code tiers. Potential solutions could include: Mandate the Fair Payment Code for medium and large businesses, enforcing registration like registration to the Information Commissioner’s Office. Attach hefty fines and publicise companies in breach. The fines generated could be invested in free legal advice for sole traders and small businesses to support them through legal warning letters and credit recovery. Provide mechanisms for small businesses to report repeat late-payers. Build fair payment into regulatory requirements. For example, the FCA could require those with a banking licence to pay supplier invoices within X days, or accounting bodies could require licenced accountants to meet payment deadlines. Verdict: The Fair Payment Code won’t make a huge difference as it’s voluntary but attaching fines for late payers and building fair payment terms into regulatory requirements may help. I’m not hopeful about the Fair Payment Code Wendy Mitchell, Certified Bookkeeper and Finance Manager, School for CEOs For small companies with tight profit margins, having cash flow restricted due to late payers has a detrimental effect. It affects their suppliers (often also small or micro businesses), staff trust and morale, not to mention the business owner’s own stress levels. I have seen late payers cause: business owners delaying paying their suppliers resulting in damaged relationships and loss of reputation, late or part-paying staff salaries resulting in awful staff morale and loss of trust owners funding the business themselves to the point of taking on personal debt. I have worked with a client pushed to the brink of going under due to their large client taking months to pay. I’m not hopeful about the impact of the Fair Payment Code, after all the Prompt Payment Code which has been around for 15 or so years, hasn’t had a noticeable effect. Reporting on payment terms for large companies could be a solution; no one likes to be named and shamed. I feel there is a lack of publicity around the issue and the code. Why should people know and care about it? It needs to be better publicised. There could be a way for small businesses to ‘award’ larger businesses who pay promptly, similar to how TrustPilot works, like a review platform which indicates how businesses perform as a paying customer. Verdict: Implement a TrustPilot-style review platform to indicate how businesses perform when paying suppliers. Fair payment terms are a CSR issue and should be part of ESG reporting Helen Perry, Assistant Accountant, Lineview Solutions The main issue is definitely one of cash flow. I have worked with SMEs for several years now and late payments can have a massive impact. For service-related SMEs in particular, it is not as simple as putting the customer on stop/withdrawing services, as that can have a great impact on supplier-customer relations, as well as delaying projects and having staff free who should be working on those projects. In my position, I work for an SME with huge multinational customers, so the balance of power is such that the customer rather than the supplier dictates the payment terms. In some cases, alternatives are agreed in contract but this isn’t fed through to the payment team – which is usually highly automated and can’t make changes. I’m not convinced that the Fair Payment Code is going to make a big difference, at least not initially. I’d suggest that this is a Corporate Social Responsibility (CSR) issue, and should be part of ESG reports. If there is no incentive, then companies are likely to stick to current practices and those which best affect their own cash flow. Verdict: Fair payment terms are a CSR issue and should be part of ESG reporting.
AAT: 5 best practices for modern-day legislative compliance Posted 12/04/2024 by Xero & filed under Members. This content is brought to you by Xero. Compliance is tricky – not just because of tough rules or strict deadlines, but because legislation frequently changes. And accountants and bookkeepers have a responsibility to keep up. Here, we look at some of the best ways you can maintain compliance with tax laws and regulations. 1. Follow changing legislation Finding resources that keep you clued in on legislative change will help you adapt to new rules. You could try: Podcasts, webinars, and other resources from trusted accounting bodies Professional groups on LinkedIn Email newsletters Industry magazines and journals You can also sign up for HMRC’s email updates on the topics that matter most to you. This is a simple way to get the information you need in your inbox (without searching for it). The right accounting software can also help you keep up. Xero gives you real-time updates and automatic tax rate adjustments, so your software is always fit for the latest changes. 2. Automate tax preparation Traditionally, preparing tax returns and sets of accounts required multiple systems and disconnected processes. Data in one place needed to be manually typed into a separate system. Today, modern accounting software uses automation to speed up tax and accounts preparation. Bookkeeping data flows through to Xero Tax, so returns are populated with client information automatically. Xero also integrates with HMRC and Companies House, meaning you can make submissions directly from the software. Plus, our live testing feature lets you double-check the return with HMRC before submitting. 3. Centralise all data Storing data in multiple places makes it harder to complete compliance tasks. You might spend hours checking several systems to find information. Storing everything in a single piece of software means it’s easier to retrieve information, you have complete oversight, and a safe space for sensitive data. Plus, digitising client documents such as invoices and receipts can support compliance with MTD digital linking rules. Xero software keeps data secure, and provides everything you need to reconcile statement lines, draft returns, and submit them to HMRC or Companies House. 4. Monitor payroll updates Be sure to check for new HMRC guidance and government statements for updates to payroll legislation. Your accounting software can also help you keep up. New minimum rates of pay and National Insurance contributions are automatically updated in Xero. But you can also make adjustments manually in Xero – for example, setting a new rate of pay for your client’s team. Xero automatically calculates pay and deductions based on the rates in place. To save you time, Xero automates real-time information (RTI) submissions and sends details to HMRC after every pay run. 5. Audit your compliance approach A regular internal audit can uncover opportunities for improvement and processes that need adjusting before the next tax year. Gather information on your processes and systems, and the legislative guidance and industry best practices to follow. Evaluate processes and systems against this guidance, and build a plan of action. Use Xero to make your audit more reliable and comprehensive – draw on our vast range of practice and client reports and dashboards for bookkeeping, tax, payroll, and team productivity. Software for simple, effortless compliance Compliance is a fundamental part of running a practice, but it shouldn’t take up all of your time. Following these best practices, you can take care of compliance easily, and gain a few hours back. If you’re not yet a Xero partner, visit our Xero Partner Programme where you can find out more about becoming a partner and join over 200,000 accountants and bookkeepers using Xero in their practice. Get the tools and resources you need to succeed. This content is brought to you by Xero.
“Studying AAT gave us a career in finance we never thought we’d get” Posted 11/28/2024 by Christian Koch & filed under Apprenticeships, Career profiles, Members. Five AAT apprentices and trainees at Worcestershire County Council explain why they choose to learn on the job, and how they switched to finance after careers as varied as journalism and teaching. For the past four years, Worcestershire County Council (WCC) has run a successful apprenticeship scheme, which has helped them plug the accounting skills gap by building its own pipeline of AAT-educated apprentices. WCC attributes much of this success to recruiting apprentices from a wide range of backgrounds: not just school- or college-leavers, but also trainees in their 50s with vastly different experience. Here some of these apprenticeships talk about how they started their AAT apprenticeships, the challenges of balancing work and study, plus how working in accountancy makes them “feel like Miss Marple”. “If I’d known about apprenticeships at sixth form, I’d never have gone to university” Charlie Spain, Audit Assistant; AAT Level 4 apprentice Every lad my age wants to work in sport, which could explain why I ended up studying a sports, exercise and health science degree. However, I soon found out it wasn’t what I was looking for, dropping out halfway through. Having done some number work as part of my degree, I started thinking about working in finance/accountancy, went onto the government apprenticeships website and found WCC were offering AAT apprenticeships. I applied and got on the scheme. Fast-forward to now, being an AAT apprentice suits me down to the ground. I’m working full-time, getting a salary, plus gaining experience and qualifications. Some of my university friends are now doing two-week work experience placements, whereas I’m interacting with senior staff with 20-30 years’ experience. AAT is great: it covers a broad range of topics you’re likely to come across in the workplace. There’s also so much info on aat.org.uk that I never feel under-equipped entering exams. I joined WCC in May 2023, finished Level 3 just over a year later and am now about to start Level 4 this month [December]. As a young person coming into a big office like WCC, it can be intimidating. But WCC’s buddy scheme has been a big help: having somebody two years older than me give me insight/advice has been invaluable. It’s also taught me the best way to learn is to ask questions – there’s no such thing as a silly question. I now work in Audit, looking at financial controls at schools in Worcestershire, which covers everything from cybersecurity to treasury management. Looking back, if apprenticeships were pushed to me at sixth form, I might not have even gone to university. I’m really happy with how everything has panned out. “I’m an ex-journalist who studied AAT in my 50s” Claire Prescott, Senior Finance Officer In my late 40s, I found myself at a crossroads. Having worked for much of my career as a journalist for [national/regional newspaper publishers] Media Wales, I spent 10 years away from the profession when I had children. I returned to find journalism had moved on. It was now about blogging and vlogging, not the old-school printing presses I was used to! Most of the jobs out there were either in finance or IT. When I looked at finance roles, they all either required two years’ experience or… AAT. It seemed like such a recognised qualification that you couldn’t go anywhere [in finance] without it, so I bought five books for Level 2, signed up to become an AAT member and started teaching myself. What I really liked about Level 2 was that it wasn’t too difficult: the learning is in nice, incremental jumps. This knowledge helped me get my first finance role as an accounts assistant at a practice midway through Level 2. Not long after, I applied for a job at WCC, who funded me through Level 4. Today, I work in Service Finance, monitoring the budgets of WCC’s services and forecasting their expenditure/income. I’ve always had a little voice in the back of my head saying ‘I’m a words person! What am I doing in a numbers-based job?’ But having done my AAT qualifications, I realise it’s not just about the producing a perfect spreadsheet – you’ve also got to be able to analyse it too. AAT sets you up become this rounded professional – it’s even forcing me to learn about Excel modules and cloud software! The exams are hard though: I get butterflies walking into the assessment venue. One of my daughters is currently doing her A-levels. We end up revising at the same time, meeting for cups of tea in the kitchen. She told me, “If I’m still doing exams at 50, I won’t be happy!” But with AAT you know if you put the work in, you’ll do well. Just because somebody’s young, it doesn’t mean they’re the most ambitious person. I’m as enthusiastic as any 21-year-old: when you hit 50, there’s no reason your career should suddenly stop dead. “I didn’t want another degree, but something I could actively use in my career” Yen-Hua Tseng, Accountancy Assistant; AAT Level 4 apprentice I’m from Taiwan where we don’t have apprenticeships (or AAT!). When I found out about apprenticeships, I was impressed there was something available where you can study and apply the knowledge directly at work. Before joining WCC as a Level 2 apprentice, I graduated with a master’s degree in international business from the University of Birmingham. It included an accountancy module, where we learned about P&L and balance sheets, but I didn’t really know what to do with it. This isn’t a problem I have at WCC, where I’m constantly applying accounting knowledge. Since starting as an accountancy assistant in September, I find storytelling is an important part of my job too. Because we need to know whether a company is financially healthy or not, I look on Creditsafe and observe shareholders’ funds and P&L. In the next three years, I’d love to do my chartered qualifications, maybe CIPFA. I have two daughters and when I think about their future, it’s good knowing university isn’t the only option. For me, one of the best things about AAT is that it’s a meaningful qualification. I didn’t want to study another degree, another piece of paper, but something I could actively use in my career. If I had known AAT apprenticeships were an option 10 years ago, I probably wouldn’t have done my master’s. “I started my AAT apprenticeship after spending 22 years working at WCC” Sian Killoran, Senior Finance Office; AAT Level 4 apprentice I’ll be the first to admit I’m not a typical accounting apprentice. For a start, my degree was in psychology. Secondly, I’ve been working at WCC since 2001, mostly in assisting roles, but not accountancy. Last year, I was approaching my 50th year and went for a promotion. The job spec said I should have AAT, which I didn’t. Fortunately, WCC offered paid AAT apprenticeships, which is how I found myself studying Level 2 in May 2023. Suddenly, all the things I’d observed my colleagues doing over the previous 22 years, such as T-accounts and double-entry, made sense. The light really did click on. Since then, I’ve sped through the levels and am about to start Level 4 this month [December]. Working in accounting, there’s always a feeling of ‘Am I doing things right?’ but doing an AAT qualification gives me that reassurance. Initially I was worried about walking into the class [at training college] thinking I’d be the oldest person in the room. But you mix with people from different generations and get a different outlook. So never think you’ll be the oldest student! However, one big challenge has been juggling family life, studying and work. I’d often find myself studying on Sunday afternoons or in the evenings once my son had gone to bed. You just need to be good at organising your time and have a very understanding partner! As for my next steps, I’d love to work as a senior business partner. In fact, I’m currently shadowing my manager in that role. Sometimes, I wish I had the opportunities some of the younger people have now. Knowing what I know now, I would have done AAT years ago. “Working as an audit apprentice is like being Miss Marple!” Maria Regla Garcia-Bernal, Assistant Internal Auditor; AAT Level 4 apprentice “Until AAT, I’d assumed finance was the opposite of my comfort zone. I’m from Málaga, Spain, have a history of art degree and worked for many years as a teacher. In fact, my worst subjects at school were English and maths! And now here I am living in England working in a financial job! I joined WCC six years ago working as a PA for WCC’s finance team. During this job, I discovered more about auditing and decided to apply for an AAT apprenticeship. I love working in audit. With every project, you change teams and learn a new job. One day you could be working with a school, the next revising contracts for the motorways, the next visiting a warehouse. It means you’re constantly putting yourself in others’ shoes, finding solutions: I feel like Miss Marple! For a people person such as myself, it’s perfect. Working in audit you need to know what you’re talking about. AAT really helps me in this regard. The bookkeeping element has been indispensable, especially when looking into invoices/payments to see if everything has been done correctly. The Business Awareness unit is essential for auditors too. When I think back to starting Level 2, my knowledge of accounting was limited: my brain just wasn’t wired in that way. If you’d asked my course leader if I was likely to have mastered bookkeeping, she would have laughed! But AAT gives you confidence and makes you less stressed about situations. It teaches you what is right or wrong in the job. AAT’s content – the newsletters, webinars, the Facebook page – has also been great. When I attend college one day a week, I’m studying alongside people who work in factories or in family businesses. Seeing how accounting knowledge can be applied in these sectors really helps me understand the material better. Some people might be unsure about a finance career, but doing an apprenticeship gives you an opportunity to see if you like it. It’s a real win-win situation.” Read more about WCC A case study in running a successful AAT apprenticeship Why AAT is the perfect fit for our trainees Building a pipeline of talent The magic of mentoring trainees
Expert advice accountants can apply directly to their roles Posted 11/28/2024 by AAT Comment & filed under Events, Leadership, Members. AAT’s free Industry bootcamp, sponsored by Futrli, brought together experts to provide practical insights and real-world strategies attendees can actually use. Today, Thursday 28 November, AAT held a free online bootcamp designed for accountants working in industry. It was aimed at those looking to get a promotion, and managers and leaders looking for insight from their peers, but provided a good introduction to industry for those outside of it, too. The day included a panel discussion and two speaker-led sessions focusing on leadership and wellbeing. Attendees came away with insight into what leadership looks like in modern accounting and how to become the best leader possible. Leadership in finance Bootcamp kicked off with a panel of prominent industry figures discussing how leadership is changing in 2024. Becky Glover FMAAT became a Finance Director in her twenties, was a Finance Director of the Year 2023 Finalist and serves on AAT’s board. Bev Flanagan MAAT is a multi-award-winning accountant who founded and sold cloud-accounting practice Mind Your Assets in 2022. She now consults on building practices into saleable assets. Nicola Mason MAAT began Point Accounting in 2015, growing it to 450 clients through hard work and a merger. She works with SMEs throughout the UK. Glover, Flanagan and Mason joined AAT’s Product Support Coordinator Chris Holt in conversation. They discussed ways for non-managers to exhibit leadership qualities, the challenges and hurdles commonly faced in moving business forward, and what’s expected of industry leaders in the modern age. CFO bootcamp for business leaders Paul Redmond transforms accounting practices through his role as Chief Accountancy Strategist and Financial Innovation Advisor. He’s a frequent speaker at industry conferences and contributor to financial publications. Redmond led a deep dive into the value a CFO can bring to a company, and the tools and strategies used to create growth. The session was designed for CFOs, business owners and acting directors managing the financial and operational challenges of their businesses. Key topics included the CFO’s crucial role in shaping business for long-term stability, driving sustainable growth through financial management, and aligning financial strategy with overarching business goals. Wellbeing at work for accountants Yoga teacher Sylvie Ball gave tips on avoiding burnout in an increasingly hybrid work environment. She covered work/life balance, mindfulness and how to maintain focus – among other areas. Catch up now Worried you missed such a packed and useful agenda? Not to worry, you can watch On Demand here. Futrli made sense as event sponsor: it’s there to help you navigate the changing financial world. Futrli’s intelligent financial predictions and reporting deliver impactful insights about a business’s current, past and future performance. More than just monthly profit & loss figures, a Futrli budget creates smart predictions by reading your business data patterns. Power your business strategy and model scenarios with the most comprehensive three-way forecasting platform in the app-ecosystem.
Tackling AI head-on Posted 11/28/2024 by Christian Doherty & filed under Artificial intelligence, Events, Members. AAT Connect covered a wide range of issues and topics, and among the most popular was a pair of sessions focusing on the emergence of AI – as a threat and opportunity for those in accounting. From data entry automation and analysis, to fraud detection and forecasting and predictive analysis, a series of speakers explained how, in the next half-decade, AI will change the way many routine accounting tasks will be done – and what that means for the profession. Mid-tier perspective At the ‘Let’s reboot: where are we with AI’ panel session, John Joon gave the perspective of mid-tier firms grappling with how best to harness the opportunities AI presents. “The Big Four probably are a bit of an exception because they can spend a million pounds on dedicated chatbots that do tax advisory work and make it easy for them,” he told delegates. “And of course, we can’t do that, and probably most practices can’t do that. But equally, we can have access to tools that cost you $20 a month, and then you can do pretty much the same thing, even though you have to build some of the frameworks yourself. So I do think it levels the field.” There is, however, a flip side to that: “What we’re starting to see is the gap between the technology haves and have-nots, whether you’re on that adoption curve, or wherever you feel you are, is getting bigger and bigger with every revolution we have. And we’re having this long tail of people not adopting technology, with businesses out there not using cloud accounting, which is completely bonkers as far as I’m concerned.” Changing the game But for those grasping the nettle of change, a presentation by Chris Downing, Director of Product Management for Accountants and Bookkeepers at Sage, offered a vision of new technology creating time and space to rethink what accountants are for, who they serve, and how they deliver for clients. Downing pointed out that many accountants are already using AI, meaning that this debate is important now. “We’re all talking about AI as something in the future but if you’ve used Co-pilot or other similar tools, you’re already using it.” Downing also laid out some key insights that accountants must be aware of. First, AI will become widespread across the industry in the next five years. Then, since accountants and bookkeepers tend to be tech optimists, AI will have a positive impact on work-life balance. While practices that are leading the way on AI see it as a catalyst for growth and expect to hire more staff as a result an AI skills deficit will restrict the successful adoption of AI unless it’s dealt with. Believe the hype? As with every new technology, AI is currently wending its way along the Gartner hype cycle: excitement over a new innovation gives way to disillusionment before emerging into a healthier and more balanced picture where reality matches expectations. “We cannot miss the fact that these tools will be mainstream in our working lives on a day to day basis,” Downing explained. He was clear, though, that there will be an impact: “Digital assistants will impact the way we interact with technology, and in turn that will impact how we interact with our clients,” he said, pointing out that AI’s use in areas including audit automation and tax planning may well deliver genuine results to solve the looming labour and capacity shortages in the industry. Testing the limits At the top of the market, it’s already making a big impact. Tahir Gupta of KPMG pointed out that although AI is already speeding up certain tasks, there are limits on how certain tools can be rolled out into the marketplace. “I work in auditing specifically and our take on AI is that it’s very helpful in some respects: it makes things a lot quicker, speeds tasks up, and there’s so many tasks now which don’t actually require people to do them because AI can.” However, Tahir pointed out that in the accounting and auditing space, managers have noticed that AI can’t help with everything. “We work with clients’ data, and using AI for those kinds of tasks can be very challenging because we’re putting other people’s data at risk. “So there are limitations to how much we can use AI to help our work, and it’s really important to establish what we want to use AI for and what we can’t use it for, because we have a responsibility to deal with our clients’ data in a safe way and keep everything confidential. “Given that, I think the main thing with AI is to really understand how far we can really go with it and how much we need to keep away from it as well.” Ultimately, it takes bravery to adopt a new technology. But, as all the panelists agreed, accountants tend to be ready for any challenge that comes their way.
PII: avoiding non-compliance sanctions and penalties Posted 11/26/2024 by AAT Comment & filed under Accountancy resources, Members, Run your business. Professional indemnity insurance (PII) is liability insurance that covers firms when a client or third party claims to have suffered a loss, usually due to professional negligence. Here, AAT’s Professional Standards team share their advice on AAT’s PII policy requirements, and why it matters. PII is a key part of managing risk and all our licensed members must have adequate cover in place. It is your responsibility to ensure that the amount of cover purchased is consistent with the nature of your practice and income, proportionate to the risks taken by the firm and consistent with AAT’s PII policy requirements (PDF). This year, a number of practice assurance reviews have found that a significant proportion of regulated firms are failing to comply with our basic requirements. We have identified licensed members trading with either no cover in place, or with coverage inadequate for the firm’s size. What are the risks of not having PII in place? If a claim is filed against you for professional negligence, you could be liable for significant damages, and you would not be insured for it. Not having appropriate insurance would undermine your professional reputation with clients or prospective clients. If you have a gap in cover, you are in breach of AAT’s PII policy and you will be subject to disciplinary action. Not only will this result in disciplinary sanctions being imposed, but it will also make any future attempts at getting PII extremely difficult. It is now mandatory for our members to confirm if they are compliant with all the requirements set out in AAT’s PII policy requirements in their annual licence return. So, if you haven’t got cover or you have had a gap in cover, please do not tell us you are compliant if you are not. We ask these questions so we can intervene and support your firm’s compliance. Submitting incorrect information to us is serious and misleading, and will be considered as part of any disciplinary action. Guidance on your terms of cover The level of cover you need depends on how much you collect in fees on an annual basis. It is important you consider your gross fee income when re-renewing your policy every year to determine if you require more coverage to ensure it aligns with the following minimum requirements: for sole traders, must be the greater of: 2.5 times the firm’s gross fee income, or £50,000 for partnerships, must be the greater of: 2.5 times the firm’s gross fee income, or £100,000 for limited companies, must be the greater of: 2.5 times the firm’s gross fee income, or £100,000 if the gross fee income of any firm is greater than £400,000 the maximum level of cover required by this policy is £1,000,000. Other important things to consider to ensure compliance with the policy requirements are: It should be fully retroactive and on an ‘any one claim’ basis. Your self-insured excess must be set at an amount which the licence holder is able to always meet. You must ensure your professional indemnity insurance specifically covers Limited Assurance Engagements and potential third-party claims if providing this service. Please check whether your existing policy automatically renews or not. This will prevent any gaps in coverage. You must secure run-off cover after you cease to provide services. This is to cover you for claims for work done while engaged in public practice but arising after your firm has ceased trading. We recommend a period of six years from the date of cessation, but check with your insurance provider for further advice. Case study 1 Licensed member A started trading in 2018, providing general bookkeeping services to a small number of clients. As the firm’s gross income was relatively small for the first two years, £50,000 in PII cover was satisfactory to meet AAT’s PII policy requirements. However, the business grew faster than anticipated and as they were not required to provide details of their gross fee income to the insurer on annual renewal of the policy, they forgot to increase coverage. This meant the firm incorrectly maintained their level of PII cover at £50,000 each year until AAT identified the shortfall (see table below) during their practice assurance review. Accounting periodPractice incomeMinimum cover required per AAT PII policyAmount of coverageExtent of shortfall2020£22,669£100,000£50,000£50,0002021£50,345£125,863£50,000£75,8632022£54,233£135,582£50,000£85,5822023£94,213£235,532£50,000£185,532 The member provided evidence that the firm has now increased their level of PII cover to £250,000 to meet the minimum requirements along with an undertaking that they will review the policy meets AAT’s requirements regularly, or when any changes need to take effect. Given the extent of the shortfall, the member was subject to disciplinary measures. Case study 2 Licensed member B had PII coverage with an insurer for over ten years but decided to change insurers to obtain a cheaper premium. As his previous insurer renewed the firm’s policy on an annual basis, he assumed the policy he had taken out with the new insurer would also renew automatically. However, this was not the case and consequently the firm had no cover in place for 11 months – until AAT identified the shortfall when they requested to see a copy during a sampling activity. Given the gap in coverage the member was subject to disciplinary measures, and it was stressed to the member the importance of checking whether an existing policy automatically renews or not to prevent any gaps in coverage. You can find full details on AAT’s Professional Indemnity Insurance here (PDF).
Streamlining Compliance: The Power of Automated KYB Checks for Accountants Posted 11/21/2024 by SmartSearch & filed under Members. This content is brought to you by SmartSearch. In the evolving landscape of financial regulation, accountants play a critical role in ensuring businesses adhere to anti-money laundering laws (AML). One of the most powerful tools available to accountants today is Know Your Business (KYB) checks. These checks allow accountants to verify the legitimacy of their clients, safeguarding their firms from financial crime risks. Here’s why KYB checks should be a priority for accountants, and how automated systems can make the process more efficient, reliable and smooth for all involved. What Are KYC and KYB Checks? Know Your Customer (KYC) and Know Your Business (KYB) checks are essential components of compliance processes aimed at preventing financial crime KYC focuses on verifying the identity of individual clients, ensuring they are who they say they are by checking documents such as IDs, proof of address, and running risk assessments against PEP (Politically Exposed Person) and sanctions lists. KYB, on the other hand, ensures a business is legitimate by verifying its registration details, identifying its beneficial owners, and screening for risks linked to fraud, money laundering, or terrorism financing. For accountants, conducting thorough KYB checks is critical, as failure to do so can expose their practice to serious legal and financial risks. Why Are KYB Checks Important for Accountants to Conduct? Money laundering and financial crime are ever-growing threats to businesses across the world. A recent report conducted by SmartSearch found that nearly 40% of firms saw an increase in such activities, with many accounting firms unknowingly caught in the crossfire. Criminals often use accountants to help set up fraudulent businesses, conceal ownership, or move illicit funds via false accounting. Without proper KYB checks, accountants might unknowingly facilitate these illegal activities, risking fines, reputational damage, and legal consequences. However, by conducting robust KYB checks, accountants can ensure they are working with legitimate businesses and prevent becoming inadvertent enablers of financial crime. The Challenges of Manual KYB Checks Traditionally, many firms have relied on manual KYB checks, which involve verifying business documents, cross-referencing ownership information, and screening against PEP and sanctions lists. But this approach is not only time-consuming, it’s also prone to human error. Manual verification can be difficult, especially when dealing with complex business structures or international entities. Moreover, identifying fake documents or flagging potential risks through manual methods is often hit-or-miss, with research showing that only a small percentage of professionals are confident they can spot fake IDs. The biggest drawback of manual checks, however, is the problem of false positives. When using manual methods, accountants often encounter numerous false matches during screening, making it impossible to discern genuine risks. As a result, many firms end up ignoring potential red flags or skipping the checks entirely—a dangerous practice. The Solution: Automated KYB Checks The solution to these challenges lies in automated KYB checks. Modern compliance platforms, like SmartSearch, leverage cloud-based technology to provide fast, reliable, and comprehensive KYB verification in minutes. By automating the process, these platforms eliminate the margin for human error and reduce the risk of overlooking crucial red flags. Here’s why automated KYB checks are a game-changer for accountants: 1. Speed and Efficiency Automated KYB checks are completed within minutes, enabling accountants to onboard new clients quickly and efficiently. This can significantly reduce the time spent on manual research and verification, improving overall productivity. 2. Accuracy and Reliability Unlike manual checks, automated platforms use advanced algorithms to screen businesses and individuals against a wide range of global and domestic data sources, including credit reference agencies and the Dow Jones Watchlist. These systems have an accuracy rate of 97%, ensuring that false positives are minimized, and suspicious activities are correctly flagged. 3. Comprehensive Risk Assessment Automated KYB checks provide a thorough analysis of a business’s ownership structure, shareholders, and ultimate beneficial owners (UBOs). This level of scrutiny is essential to uncovering shell companies or fraudulent enterprises designed to launder money. Additionally, the ability to cross-check director and beneficial owner details against PEP and sanctions lists ensures businesses meet regulatory standards. 4. Ongoing Monitoring Once the initial KYB check is completed, automated platforms can provide ongoing monitoring. Any changes in the ownership structure or risk profile of a business will trigger alerts, ensuring that accountants are kept up-to-date and compliant with regulations. This feature is particularly important for firms that need to stay audit-ready at all times. 5. Simplified Client Onboarding With automated KYB checks, accountants can streamline the client onboarding process, ensuring that every new business relationship has undergone rigorous due diligence. This reduces the chances of onboarding clients with questionable backgrounds and strengthens the overall compliance framework. 6. SmartSearch Helps Accountants to Stay Compliant SmartSearch’s cloud-based platform offers one of the most comprehensive KYB checks available on the market. With access to industry-leading data partners and global sanctions and PEP lists, accountants can verify companies and individuals in over 200 countries. SmartSearch’s platform delivers business identification data, ownership details, and full screening of directors and beneficial owners. Moreover, the system’s integration with Companies House (UK) and other industry-leading global data sources ensures that accountants receive the most up-to-date and accurate information available. With ongoing monitoring capabilities, SmartSearch ensures that accountants are always compliant and prepared for any audit or investigation. Best Practices for Conducting KYB Checks While automation is a key part of modern compliance, it’s important to remember that KYB checks should be part of a broader compliance strategy. Accountants should: Integrate automated KYB checks into their onboarding process to ensure all new clients are thoroughly vetted before engagement. Routinely monitor existing clients for any changes in their business structure, ownership, or risk status. Stay informed of local and international regulatory changes to ensure ongoing compliance with AML laws. By adopting these best practices, accountants can not only protect their firms from financial crime, but also build trust with clients and maintain a strong reputation for compliance. Embracing KYB In the face of increasing financial crime, KYB checks are no longer just a regulatory obligation—they are a powerful tool that can help accountants safeguard their business, streamline operations, and maintain client trust. By embracing automated solutions, accountants can perform faster, more accurate checks, reduce the risk of compliance failures, and ultimately contribute to a safer, more transparent financial ecosystem. To learn more about how SmartSearch can support your compliance efforts, visit smartsearch.com *This is a sponsored post by SmartSearch. We are pleased to bring these products to your attention, which we believe may assist with your AML compliance, but please note that this does not constitute a recommendation from AAT. Liability for AML compliance ultimately remains with you when it comes to your firm demonstrating that any customer due diligence conducted by a third party meets anti-money laundering legislation.
How salary overpayments can impact accounting and bookkeeping Posted 11/14/2024 by Annie Makoff & filed under Bookkeepers, Members, Pensions and payroll. Unidentified monthly salary overpayments cause headaches for payroll departments and accountants alike. Here’s how to mitigate such errors. New research from Global Payroll Association (GPA), which surveyed nearly 7,000 UK office workers, found that a relatively small number of employees (one in 10) say they’ve been accidentally overpaid in the past. A quarter of those respondents admitted that they didn’t tell their employer, while 77% decided to flag the issue to their employer or HR department as soon as possible. Employers’ reactions varied too: 63% deducted any salary overpayments from monthly salaries going forward, but 37% chose to take no action at all, deciding to write the error off altogether. Meanwhile, some employers identified the errors themselves (28%) while 1% took an entire year to notice. From an accounting perspective, salary overpayments can cause big issues, such as: Inflated payroll costs. Skewed balance sheets and anomalies in reporting. Inaccurate forecasting. Inaccurate deductions for tax and benefits. Cash flow issues. We spoke to accountants and those in specialist payroll departments to talk through exactly how salary overpayments are likely to impact both the accounting function and the business itself – and advise how such errors can be mitigated. Some overpayments require complex adjustments to address errors Ben Rose MAAT, Partner, Martin Seitler & Co Smaller clients who don’t produce management accounts or monthly budgets will not usually be affected if they accidentally overpay staff. However, if the employer allows the member of staff to keep the overpayment, it will cause discrepancies in the books at year-end. Smaller businesses would usually be able to sort out any overpayment errors with a simple adjustment the following month. Saying that, depending on the reason for the overpayment, the adjustment could be more complex than just a NET pay adjustment and essentially the entire error needs to be reversed so that tax and NI, if applicable, are taken into account otherwise the client may overpay PAYE to HMRC. I try and encourage our clients to amend the payroll within the month we are dealing with, if that’s possible, but some clients leave their payroll to the last minute and it’s the next month by the time the issue is spotted. I think employers need to have procedures in place that enable errors to be flagged up sooner rather than later so that the adjustments can be done without skewing the figures too much. Verdict: Some overpayments may require complex adjustments to address errors. Consequences can be far-reaching Yasmine Thompson, Payroll Clerk, The Accountancy Partnership Generally, salary overpayments fall into two categories: those where the overpayment is processed through payroll, and those where the payslip is correct but the payment is made for the wrong amount. Overpayments processed through payroll tend to be more common and can happen for many reasons – sickness, for example, or an employee leaving and this not being reported to payroll in time. Overpayments can mean deductions are incorrect, which can impact things like benefits or other entitlements. For example, an employee might be entitled to Statutory Sick Pay, but not receive it if absence is reported incorrectly. Overpayments can even affect the remaining balance of an employer’s Employment Allowance, so the consequences can be far-reaching. We recommend making the deduction the following month if staff have already been paid or received their payslip. HMRC does not recommend adjusting the figures for previous months if the RTI has been filled. If the payslip hasn’t been sent to the employee, we can adjust the payslip and year-to-date figures will be corrected with the next submission. Clients are well within their rights to recover overpayments, but a tactful approach can help them get the money back without affecting their relationship with their employees. Verdict: Consequences can be far-reaching – deductions should be made the following month, but always maintain a tactful approach. Overpayments can add costs, cash flow issues and reconciliation issues Kerrie Given, Associate Director, Prime Accountants Group Salary overpayments can make payroll costs look higher than they are. There will be a control account on a business’s balance sheet and when everyone is paid, it should balance. If it doesn’t, a bookkeeper or accountant needs to take action to balance it back to zero, which takes time and knowledge. Taxes and benefits are calculated based on an employee’s salary, so overpayment leads to inaccurate deductions for tax and benefits and a huge amount of backtracking. From an accounting side, knowledge and training is especially important, particularly if they are only checking the figures against payroll. Overpayment can cause cash flow issues and make reconciliation harder. Aside from the numbers, it can also harm the employer/employee relationship if the latter hasn’t been honest about the overpayment. Also, from April next year when employers’ National Insurance increases to 15%, any overpayment not corrected will be even more expensive. Salary overpayments can come down to human error. For example, if a business still relies on manual timesheets. It can also be an issue with leavers who aren’t taken off the payroll, so, again, knowledge of the company and passing that information on is important. I’ve seen situations where staff have similar names and are paid each other’s salaries. In one case, two brothers were on the same payroll and one was paid the other’s salary. Salary overpayments can be avoided by implementing better payroll controls, audits, multiple touchpoints and professionals who can cross-check. Automation can also help, where technology and modern systems can take away the need for manual inputting. But sometimes, it’s a feeling! For example, if you regularly check a payroll and you know someone always does five hours’ overtime, and then one month that goes up to 500, you will know that’s down to an error. It can be down to just knowing your staff and clients well. Verdict: Salary overpayments can increase payroll costs, create cash flow issues and make reconciliation harder – building in multiple controls, audits and automation can help.
Connecting with you, and the future Posted 11/13/2024 by Christian Doherty & filed under Community, Events, Members. Last week’s AAT Connect offered the chance to strengthen bonds with a new range of contacts in the heart of London. On Friday 8 November, AAT held AAT Connect at the Brewery, in the heart of the City. The event brought together members in business and practice, academics, tech experts and more. As AAT’s first hybrid event, AAT Connect was a test of whether it was possible to combine online and in-person events into a seamless whole. And evidence from the day suggests that, with the right balance of compelling sessions and enough time for networking, you can. Delegates arriving at the Brewery had already had the chance to make connections via various LinkedIn groups and chats. The idea was simple; allow members the chance to forge connections prior to the in-person part to ensure they could make the most of the day, deepening the relationships already struck up online. Delegates got to enjoy the buzz of a packed venue and grab the chance to bring connections to life. Once at the venue, those in attendance were able to attend a series of sessions aimed at offering a broad perspective on the challenges facing those in the profession. While one stream dealt with advice on pursuing a rewarding career through developing a personal brand and better work/life balance, the other focused on the challenges – and enormous opportunities – presented by the growing use of AI. Delegates heard from a range of experts including practice owners, technology gurus and high flyers within growing businesses, in a friendly and relaxed setting. As one delegate put it, “Today’s been a great opportunity to meet new contacts and hear from some experts on how they’re navigating the next challenges to come.” AAT Impact Awards 2024 Once the morning sessions were done and dusted, the AAT Impact Awards 2024 were presented over a Gala lunch. These awards aim to recognise the incredible strength, talent and diversity within the profession by highlighting the great work of AAT members in a whole variety of ways. Opening the ceremony was the AAT Excellence Award, presented to an individual who has been hugely impactful in their career to date. 2024’s winner was Jessica Brindle FMAAT, who embodied the award’s credo of influencing change within an organisation. “I’m super proud, super excited to have won the award. I didn’t think I was going to win, but it’s the icing on the cake of a great day.” Jessica Brindle FMAAT Sponsored by Intuit Quickbooks, the AAT One to Watch Award acknowledged and celebrated individuals early in their careers who have already shown exceptional progress in their skills development and studies. This year’s winner was Julie Spence AATQB. “I am so overwhelmed right now. It really does mean everything to me to win, I’ve overcome so many challenges in the past year. We’re breaking down the barrier of what it means to be an accountant, and what an accountant looks like.” Julie Spence AATQB It’s fair to say that everyone starting out in the profession needs role models. That’s why the AAT Inspiration Award is so important – it recognises someone who has inspired others to level-up in their careers. It will be someone who goes above and beyond their remit with passion – supporting peers, colleagues, students or mentees and encouraging them to achieve their best. It was fitting, therefore, that William Boardman MAAT was this year’s recipient. “Within my role as AAT Tutor it’s less about me and more about my students – it’s not necessarily my achievement but that of all the people I’ve helped over the years. I’m a bit surprised actually as there were some great candidates, so I’m honoured to receive the award.” Will Boardman MAAT Other members to receive awards included AAT Influence Award Rosie Berridge FMAAT “I’m honoured and thrilled to be recognised by AAT, it’s been such a big thing in my life and AAT has given me such an opportunity. I use the opportunities I’ve had from AAT to advocate for others. In the practice I support a lot of apprentices and I’m keen on the qualification so it’s a really easy thing to shout about and encourage people on that same pathway. It’s amazing to have that recognition, it’s really overwhelming.” AAT Triumph Award David Bennett MAAT AAT Global Champion Award Paul Lyn FMAAT “I’m elated, this means the world to me. AAT has been the foundation of my development from the early 80s. I’ve been in accounting for 30 years and I’ve put a lot of work in. AAT has been the driving force, this has been a long time coming and I’m very proud. The long flight from Jamaica was worth it.” AAT Professional Member of the Year (MAAT/FMAAT) Award, sponsored by Capium Ellis Harris-Boulter MAAT AATQB “I’m so honoured to receive this award, I can’t quite believe it, I’m so so grateful. Winning the award means everything – I’m absolutely over the moon.” AAT Professional Member of the Year (AATQB) Award Zara Farr AATQB “I’m shaking. You never expect to win, it’s amazing. I’ve worked really hard over the past year – I made the leap from paid employment to starting my own bookkeeping practice in October 2023 and I’ve had so much support from AAT to do that. It feels really, really good, I’m so grateful.” AAT Licensed Member of the Year Award, sponsored by Sage Andrew Smith FMAAT “I’m elated, I’m looking forward to telling my wife and kids, and my team – it’s a team award. Practice doesn’t run without them and it’s shared between us. I’m chuffed to bits with the team, it’s nice for them to be recognised. I’m a big advocate of the apprenticeship role, my apprentices have gone on to bigger and better things and I’m really proud of what they do.” Finally, the AAT Past President Award was presented to Carbolic Moroka MAAT. This award, among the most prestigious handed out by AAT, celebrates outstanding commitment and contribution to AAT’s strategy by a professional member. Carbolic said, “I am deeply honoured and humbled to receive the AAT Past President Award. To stand here today, reflecting on a journey that began in 2006 when I joined the branch as treasurer, brings such a mix of pride, gratitude, and nostalgia. Those early years were a period of growth and learning, where I was fortunate to work with some truly remarkable individuals who demonstrated what it means to serve with dedication and integrity.” Carbolic, who was appointed Vice Chair and eventually Chairman from 2016 to 2024, said “Together, we navigated challenges, celebrated milestones, and continued to build a strong community for our members. I owe so much of this honour to my colleagues, mentors, and friends at the AAT branch. Your support, encouragement and hard work have been essential to everything we’ve achieved. To the team members and volunteers who shared in the work and joy of serving our community, this recognition is just as much yours as it is mine. “As I look back on these years, I am filled with a sense of pride in what we have built together and hope for a brighter future. I am confident that, as the next generation of leaders takes the reigns, they will continue to elevate our branch and create even greater impacts.” Wrapping up AAT President Michael Steed said, “AAT Connect brings our member community together to learn from each other, share expertise, and celebrate success. It was fantastic to see members from right across the profession so thoroughly engaged. “We can learn so much from each other, from those at the coalface. The quality of member-led sessions show exactly why AAT’s dynamic and diverse membership is at the heart of everything we do. “Accountancy professionals are under growing pressure to stay relevant with modern ways of working and changes in technology and regulation. The reaction from members who attended tells me we’ve helped them keep their practice relevant, and much more. AAT CEO Sarah Beale said, “Based on the terrific, enthusiastic support from those in attendance and from those who wish they’d come, we can confirm that AAT Connect will be back next year. The response has blown us away, quite frankly. “We noticed a gap in what our members and most professionals were missing. To support networking, an event needs to have opportunities for downtime and moments of fun. They can be just as important as the serious stuff – and the evidence shows they’re actually more important when it comes to growing attendees’ confidence and professional networks”.