# Accountant looking for personal guarantee



## RichieRuin (9 Jun 2010)

I set up a limited company a year ago and engaged an accountant to help with registration etc. Now she's doing my accounts and she has asked me to sign a personal guarantee and indemnity to say that if for any reason my company cannot pay her fees, I will personally pay them. There is also other stuff about holding harmless and indemnifying the accountant against any liability blah blah blah -- isn't that what professional indemnity insurance is for?

I'm not overly bothered by it because the cost should not be much (I've done all the donkey work - receipts, VAT, etc.) and the company is solvent but I never heard of this before and I'm just wondering if it's standard procedure to ask for it. Isn't the whole point of a limited company that it's a separate legal entity and the directors are not personally liable for its debts?

On a side note, I'm also a bit ticked off about the way the accountant handled it -- it just came in the post without any explanation, just a compliments slip saying "please sign and return".

Should I just sign it and say nothing? Or refuse? Ignore? Get another accountant? She hasn't had to do much for me so far but what she has done has been on the ball to be fair.


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## mrblues (9 Jun 2010)

Personally I will never sign a PG again, I made the mistake once and it took a long time to sort through pain and suffering.
I can understand it from her point of view but business is business and looking to move a business liability onto a personal level isn't a runner in my world.
If your particularly happy with her services and price then offer to pay a period in advance but don't sign up to a PG.


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## papervalue (9 Jun 2010)

RichieRuin said:


> I set up a limited company a year ago and engaged an accountant to help with registration etc. Now she's doing my accounts and she has asked me to sign a personal guarantee and indemnity to say that if for any reason my company cannot pay her fees, I will personally pay them. There is also other stuff about holding harmless and indemnifying the accountant against any liability blah blah blah -- isn't that what professional indemnity insurance is for?
> 
> I'm not overly bothered by it because the cost should not be much (I've done all the donkey work - receipts, VAT, etc.) and the company is solvent but I never heard of this before and I'm just wondering if it's standard procedure to ask for it. Isn't the whole point of a limited company that it's a separate legal entity and the directors are not personally liable for its debts?
> 
> ...


 
Is it an engagement letter she sent out to you- Tells who is responsible for what eg doing vat, paye/prsi etc.

What type of accounts are you getting done- Audit or Non-Audit.

If their is a personal Guarantee looked for- I would not sign it. A lot of it works on good faith in regard to honour to pay fee.

Better off to get new accountant as asking client to sign a personal guarantee at this stage shows very little faith in client.

No reason to sign one. Just refuse and if she does not want to deal with you without it, just move on.


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## tenchi-fan (9 Jun 2010)

Tell her to take a hike. You're a limited company for a reason! 
Give her a personal guarantee for your personal tax return, by all means, but you're not going to be held liable for the company's debts.
Her fee is probably going to be high enough anyway - precisely because accountants expect a certain amount of bad debts.


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## RichieRuin (10 Jun 2010)

papervalue said:


> Is it an engagement letter she sent out to  you- Tells who is responsible for what eg doing vat, paye/prsi etc.



I got a letter but I don't recall it being called a letter of engagement, most of it was about my responsibilities. I just signed it and sent it back. Should have kept a copy but I never expected trust issues to arise with my accountant.



papervalue said:


> What type of accounts are you getting done- Audit or Non-Audit.



Audit, I think. She told me because it's my first year in business they have to be audited. Is that correct? Do I have a choice?



papervalue said:


> Better off to get new accountant as asking client to sign a personal  guarantee at this stage shows very little faith in client.



Something else was bugging me about this and I hadn't quite put my finger on it, but you have hit the nail on the head - it's not exactly a vote of confidence is it?



tenchi-fan said:


> Tell her to take a hike. You're a limited company for a reason!



That's what I thought too. 

To give a bit of context we are a startup IT company with 2 employees. For the few months in question there are less than 200 transactions (including sales, purchases, and expenses), all of which are supported by documentation and itemised on a detailed spreadsheet. There were no wages paid during the period, and I did the VAT returns myself. So it's not exactly Zoe Developments she has to unravel. How complicated can it be?


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## papervalue (10 Jun 2010)

If you are on time for Companies office you can get an non audit which is cheaper. 
It sounds what you need done is very straight forward. no need to give any type of guarantee for either company or personal work. They are plenty accountants out their now so you have an choice. If she is looking for a guarantee now I would nail down a quote for work now and future years and them get an quote from at least two more firms to see if much of a difference in price.


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## Gervan (10 Jun 2010)

The company does not necessarily need to be audited just because it is the first year of trading. If you were told that I would have doubts about your advisor's competence.
See CRO website for qualifying conditions for audit: [broken link removed]


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## RichieRuin (10 Jun 2010)

Gervan said:


> The company does not necessarily need to be  audited just because it is the first year of trading. If you were told  that I would have doubts about your advisor's competence.



Emboldened by the replies here, I spoke to the accountant this morning.  Apparently the PG is something the three accountancy bodies are  encouraging their members to ask all clients to sign. It has come about  because of the increasing number of people who are not paying their  bills, but if I don't want to sign it there is no problem. 

I asked her to clarify about the audit. I must have misunderstood what  she said earlier, I am exempt. Looking forward to the day when I have  enough turnover, assets, or employees to justify needing audited accounts


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## simplyjoe (11 Jun 2010)

I am an accountant. I ask for personal guarantees from the companies that I act for.The way I see it if the company's directors refuse to sign the personal guarantee it indicates to me that at some stage in the future it is very possible that I will be left with a large debt and no my prices do not reflect a provision for large bad debts. Better off without this type of client. The attitude that prevails on this topic is that it is ok to set up in business, fail and leave a pile of debts after you. This is what has crippled many profitable business who have fallen at the hands of these fly by nights. Ask the many thousands of construction industry subbies burned by the reckless developers. I know there are many genuine cases where companies have failed but business people cannot expect their suppliers to assume the risk of a particular debt not being paid when they themselves will not assume this risk by providing a PG.


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## Pat Bateman (11 Jun 2010)

mrblues said:


> Personally I will never sign a PG again, I made the mistake once and it took a long time to sort through pain and suffering.
> I can understand it from her point of view but business is business and looking to move a business liability onto a personal level isn't a runner in my world.
> If your particularly happy with her services and price then offer to pay a period in advance but don't sign up to a PG.


 


simplyjoe said:


> I am an accountant. I ask for personal guarantees from the companies that I act for.The way I see it if the company's directors refuse to sign the personal guarantee it indicates to me that at some stage in the future it is very possible that I will be left with a large debt and no my prices do not reflect a provision for large bad debts. Better off without this type of client. The attitude that prevails on this topic is that it is ok to set up in business, fail and leave a pile of debts after you. This is what has crippled many profitable business who have fallen at the hands of these fly by nights. Ask the many thousands of construction industry subbies burned by the reckless developers. I know there are many genuine cases where companies have failed but business people cannot expect their suppliers to assume the risk of a particular debt not being paid when they themselves will not assume this risk by providing a PG.


 
+1

I find mrblues' post particularly disturbing.


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## mrblues (11 Jun 2010)

Pat Bateman said:


> +1
> 
> I find mrblues' post particularly disturbing.



Any particular reason why? 
I've been there, partner in company deserted, left me with huge debts which we had both PG'd against, I lost my house, cars and pretty much everything of worth I owned - has taken me 8 years to rebuild my business and life but now i'm there and have it all again.
All I am saying is that there are other ways to be fair in business and i've stated paying a period in advance is fine once your happy with her work!


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## Pat Bateman (11 Jun 2010)

mrblues said:


> Any particular reason why?
> I've been there, partner in company deserted, left me with huge debts which we had both PG'd against, I lost my house, cars and pretty much everything of worth I owned - has taken me 8 years to rebuild my business and life but now i'm there and have it all again.
> All I am saying is that there are other ways to be fair in business and i've stated paying a period in advance is fine once your happy with her work!


 
I'm sorry to hear that you were "stitched up" by your former business partner. However, do you think it would have been fairer for the company's creditors to carry the can for the failure of your business?

Unfortunately, in the present climate it's easy for a professional to be a "busy fool". Like simplyjoe, I would view a reluctance on the part of a director to sign a PG as a fundamental lack of faith in the underlying strength of the business.


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## mrblues (11 Jun 2010)

Pat Bateman said:


> I'm sorry to hear that you were "stitched up" by your former business partner. However, do you think it would have been fairer for the company's creditors to carry the can for the failure of your business?



No, completely agree that the creditors shouldn't 'have' to carry the can but they do, its fact of doing business at this point in time. I also believe that where a business is doing its best to survive while more than likely being screwed by people not paying them that this should reside in the business and not move its way into personal lives.
Sadly many companies exist purely to make sure that their directors are protected while they recklessly trade paying no-one! The good guys shouldn't be punished or put into the same category.
I'll say it one more time, payment in advance for set work periods works and removes the need for anyone to have claim over the things that have zero to do with the business.


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## shinners (11 Jun 2010)

like simply joe & bateman, I too would would view a reluctance on the part of a director to sign a PG, esp for professional fees, as a fundamental lack of faith in the underlying strength of the business.  In my job we have to date not actually asked clients to sign them, looking back we probably should have. 
Limited liability is not there for people to set up companies, build up debt & walk away. it is important to note that *limited liability applies to you only as a shareholder not as a director *and _*in certain circumstances*_, trading recklessly or insolvently for e.g.,  d_*irectors can be made liable for some or all of the debts of the company. *_The ODCE has already taken some cases against directors of  companies. so tread carefully, the veil of incorporation is not iron clad.


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## z107 (11 Jun 2010)

Absolutely no way would I sign a personal guarantee for anything to do with my company. Certainly never so that an accountant can be sure of their money. We don't look for personal guarantees off of our clients.

There are plenty of accountants out there who are not looking for personal guarantees, go with one of them.

We've been in business over 10 years and we are profitable. If you sign away what little rights limited liability offers you, be prepared to lose everything in court cases etc.

No way.


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## RichieRuin (13 Jun 2010)

simplyjoe said:


> I am an accountant. I ask for personal  guarantees from the companies that I act for.



Can I ask, simplyjoe, if you provide personal guarantees to your  suppliers? Do you advise your clients to seek personal guarantees from  their suppliers?

If I asked one of my customers to sign a personal guarantee before I  undertook €2500 worth of work they would laugh at me. I can't imagine  what would happen if I asked them to guarantee to pay any fees I imposed  on them any time in the future, not to mention how they would respond  if I did like my accountant and sent them a PG in the post to sign with  no forewarning or explanation other than a note saying "please sign and  return".



simplyjoe said:


> The  attitude that prevails on this topic is that it is ok to set up in  business, fail and leave a pile of debts after you. This is what has  crippled many profitable business who have fallen at the hands of these  fly by nights.



In my own case I have invested a 20-year redundancy package in my  business and worked without pay for 9 months. My company owes nothing to  anybody. All I did on this topic was inquire as to whether it was  common for accountants to ask for a personal guarantee and if I should  sign it. I asked for advice because, being new to running my own  business, I wasn't sure what to do. The suggestion that I might be a  fly-by-night is a bit of an insult to be honest.


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## mtk (13 Jun 2010)

Interesting to see what are perfectly correct referecne to the directors responsibilites/exposure in a limited company yet look at the banks (most directors are still there and no-one sued by anyone or brought to book - so much for directors taking responsibility  ) Bit of thread i know


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## Moral Ethos (13 Jun 2010)

With every Tom, Dick and Harry having the gaul these days to seek PGs from their clients, what is the point of having limited liability if everyone else out there is seeking to undermine it by seeking PGs?


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## mrblues (13 Jun 2010)

moral ethos said:


> with every tom, dick and harry having the gaul these days to seek pgs from their clients, what is the point of having limited liability if everyone else out there is seeking to undermine it by seeking pgs?



+1


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## shinners (14 Jun 2010)

mtk totally agree with u about the banks. they have been seeking pgs for years and ppl have signed them with no thought to what they were actually signing. i bet the banks will call in every pg possible.


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## simplyjoe (14 Jun 2010)

RichieRuin said:


> The suggestion that I might be a fly-by-night is a bit of an insult to be honest.


 
Apologies but I was not talking about you specifically. As regards my own suppliers I am not limited so it does not apply to me but I still take your point. As regards my clients I do advise them to seek PGs. I know most local hardware shops and builders providers all seek PGs. Leasing companies, banks drink suppliers and solicitors all seek PGs. 

Unfortunately I am at the coal face of this particular problem. I am also a liquidator and see huge problems for both the liquidated and creditors. Some directors have behaved terribly and where this has happened my report will contain such conclusions. The debate arises due to the fact that payment by creditors is very poor with blatant refusal by many to pay for legitimate work done. My practice is no better or worse than others. The old style 'honour' system whereby the bills would be settled by a certain date is history. Builders used to pay before the Galway races, farmers and others used to always pay before xmas. Other countries have laws to protect suppliers. Ireland continues to refuse to take action. This system of credit must cease. Businesses should not be set up and funded by creditors. Businesses should not be set up without having prior proper capital in the shape of shareholder investment or short and long term bank borrowing.

I also have a system whereby if my work relates to the production of a tax or other return the return will not be submitted until I have been paid. Since I implemented these controls I have lost one client as a result of this policy and indeed my t/o has increased this year. 

You queried if this was common practice - it is becoming more common. As regards moving to an accountant who does not have these policies in place you would need to question their ability to advise you when they cannot take these simple precautions with their own business. BTW the best of luck. I hope you make millions and that you and yours are happy and healthy.


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## z107 (14 Jun 2010)

> As regards moving to an accountant who does not have these policies in place you would need to question their ability to advise you when they cannot take these simple precautions with their own business.


I would suggest running a mile from any accountant that 'advises' signing personel guarantees for business related activity.


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## simplyjoe (14 Jun 2010)

I would always advise my clients to avoid signing PGs wherever they can avoid them. Unfortunately it is becoming more the norm - especially with builders suppliers and leasing companies.


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## Pat Bateman (14 Jun 2010)

umop3p!sdn said:


> I would suggest running a mile from any accountant that 'advises' signing personel guarantees for business related activity.


 
I'd run a mile from an accountant who has an "ah sure pay me when you want" attitude. If they can't run their own business properly, what sort of advice are they going to give you?

A payment plan, partial advance payment or personal guarantee are a necessity nowadays.

I'd be sceptical about any company directors who feel they can use advisors as a source of credit.


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## Moral Ethos (14 Jun 2010)

Why not abolish limited liability then? It seems to be almost obsolete.


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## z107 (14 Jun 2010)

> I'd run a mile from an accountant who has an "ah sure pay me when you want" attitude. If they can't run their own business properly, what sort of advice are they going to give you?


My accountant doesn't have a "ah sure pay me when you want" attitute. They are a very reputable firm that respects limited liability. I pay them in full, and on time.



> I would always advise my clients to avoid signing PGs wherever they can avoid them.


It's interesting where some accountants will advise against signing personal guarantees, unless it's their own bill. I would avoid any company that adopts this attitute or creates this general air of distrust.


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## RichieRuin (14 Jun 2010)

simplyjoe said:


> As regards my clients I do advise them to seek PGs.





simplyjoe said:


> I would always advise my clients to avoid signing PGs wherever they can avoid them.



What would you do if you had two clients who were doing business with each other 

BTW thanks for your good wishes, much appreciated.


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## simplyjoe (15 Jun 2010)

Panic!!! Declare my conflict of interest and tell them to sort out themselves.


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## hhsolutions (15 Jun 2010)

it means accountants are being caught out in large PI actions and want to cover themselves and protect their insurance almost like a no claims protection

to ask you to PG fees and indemnify her work is effectively to say " i am suspect at my job and i am not of the belief that your business will survive" not exactly the type of people you want in your boat telling you to row this way or that

p


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## Pat Bateman (15 Jun 2010)

hhsolutions said:


> to ask you to PG fees and indemnify her work is effectively to say " i am suspect at my job


 
What is the above supposed to mean?


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## Graham_07 (16 Jun 2010)

papervalue said:


> If their is a personal Guarantee looked for- I would not sign it. A lot of it works on good faith in regard to honour to pay fee.
> 
> Better off to get new accountant as asking client to sign a personal guarantee at this stage shows very little faith in client.
> 
> No reason to sign one. Just refuse and if she does not want to deal with you without it, just move on.



I think, after some 21 years in sole practice , that I am a fair judge of people commencing in business, or transferring from other accountants. I have not, as yet, ever requested PG's. However I fail to see who anyone should be expected to take on work "on good faith" when the company's owners can simply walk away in event of failure. Accountants, like anyone, are in business to make money, to cover their practice costs and, like everyone else, to meet their own personal commitments . ( we have families too you know ). Honour is admirable and I do place a lot, a great deal in fact on the client's honour, but at the end of the day,it alone does not pay the grocery bill. If the client has both faith and commitment in their business venture they should have no reason to object, should they?  I mean they shouldn't expect others to have faith in them if they, themselves, don't?


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## simplyjoe (17 Jun 2010)

Agreed. By not signing the PG the client is effectively saying I dont have faith in the ability of my company to pay. Why should I have faith when the client doesn't?


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## dahamsta (17 Jun 2010)

I'd sign a PG for a bank loan no problem, but for me books? I'd laugh at my accountant if he suggested it. Not that he would in the first place.


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## Graham_07 (17 Jun 2010)

Forget about the banks, try opening a company  account with a builders merchants in the last few years without a PG. ( even before the slowdown in construction )


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## z107 (17 Jun 2010)

> Agreed. By not signing the PG the client is effectively saying I dont have faith in the ability of my company to pay. Why should I have faith when the client doesn't?


If an accountant asked me for a personal guarantee, I'd immediately believe that they were some kind of amateur operation. It would not instil confidence in the service they offer, and it would create an air of distrust.
I would not do business under such circumstances.

We pay our accountants on time and in full, without ever signing a personal guarantee. We have the ability to pay, so that disproves the above quote.


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## RIAD_BSC (17 Jun 2010)

Graham_07 said:


> I think, after some 21 years in sole practice , that I am a fair judge of people commencing in business, or transferring from other accountants. I have not, as yet, ever requested PG's. However I fail to see who anyone should be expected to take on work "on good faith" when the company's owners can simply walk away in event of failure. Accountants, like anyone, are in business to make money, to cover their practice costs and, like everyone else, to meet their own personal commitments . ( we have families too you know ). Honour is admirable and I do place a lot, a great deal in fact on the client's honour, but at the end of the day,it alone does not pay the grocery bill. If the client has both faith and commitment in their business venture they should have no reason to object, should they? I mean they shouldn't expect others to have faith in them if they, themselves, don't?


 
Everyone takes on work in "good faith" when the owners can walk away - that's the nature of the Ltd system we have. Why should accountants get special treatment?

It has nothing to do with what the accountant deserves or what is right and wrong - the accountant is just another supplier of services to the business (should the director sign a PG for every single supplier?). It has only to do with what the market will bear in relation to PGs.

In the boom, everyone signed PGs for bank loans etc and that became the culture of the day. Recently, everyone has been getting in on the act. But the mere fact that this debate is taking place shows that there is a backlash against PGs gaining strength. The market is deciding that PGs are becoming less acceptable, and rightly so.

Just because a director refuses to sign a PG, it doesn't mean s/he has "no faith" in their business. It just means they are smart - why bother with a Ltd company if you are going to give away this legal protection to every Tom, Dick and Harry who asks you to? For what it is worth, try asking a director of an American company for a PG, and see how long he remains your customer. The culture is completely different over there.

To the OP - there are plenty of accountants out there looking for work. Ditch the PG-seeking accountant and get a new one. Remember, you are the accountant's client/customer. If you aren't happy with the situation, sack him and move on - there's loads of accountants out there......


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## mf1 (17 Jun 2010)

"But the mere fact that this debate is taking place shows that there is a backlash against PGs gaining strength. The market is deciding that PGs are becoming less acceptable, and rightly so."

Umm. Having very considerable difficulty in following the tortuous logic at work there. 

Business is business. Any of us who are in  business are doing our very best to stay in business. One way of making sure  you stay in business is by getting paid. I would have no hesitation in asking a limited company director for a personal guarantee. If the director would not give it, then I would rather not do business with him or her. 

And I would rather stay with my trusted advisers who have served me well over the years than go to someone I don't  know on the basis of an issue such as this. 

mf


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## Pat Bateman (17 Jun 2010)

mf1 said:


> "But the mere fact that this debate is taking place shows that there is a backlash against PGs gaining strength. The market is deciding that PGs are becoming less acceptable, and rightly so."
> 
> Umm. Having very considerable difficulty in following the tortuous logic at work there.
> 
> ...


 
+1

Let's not forget that the OP's company is a startup...a startup which kicked off in the middle of the recession. I don't think it's unreasonable at all for the accountant in question to look for a PG. As other posters have alluded to, many suppliers (e.g. breweries, builders providers) insist on PG's from directors. 

Instead of directing their ire at the advisors looking for PG's, people should look at the root of the problem which is directors who trade recklessly. Looking for PG's means the company/individual has clearly been stitched up in the past. 

Like others within this thread, I would be wary of a director who kicked up a fuss about having to sign a PG or pay some money in advance. In my view, it betrays a fundamental lack of faith in their own business and an unhealthy view in relation to the veil of limited liability.


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## z107 (17 Jun 2010)

Accountants are free to ask for personal guarantees, and business owners are also free to chose a different accountant.

*Business owners should not sign a personal guarantee for their accountant.* Instead they should select a different accountant.

Simple.


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## Pat Bateman (17 Jun 2010)

umop3p!sdn said:


> Accountants are free to ask for personal guarantees, and business owners are also free to chose a different accountant.
> 
> *Business owners should not sign a personal guarantee for their accountant.* Instead they should select a different accountant.
> 
> Simple.


 
Not necessarily.

What if the accountant in question has particular expertise that the business owner requires?

And as previously mentioned, personal guarantees are the norm in quite a few sectors.

The salient point is that the directors of a company are best placed to judge the creditworthiness of the business. Why should an accountant or solicitor be expected to take a leap of faith with a new business in the middle of a recession? Especially if they've been stung before. If the directors are unwilling to sign a PG (or pay in advance for the advice/service), why should anyone else have faith in the business? It's all about information...the directors have it while others do not.


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## z107 (17 Jun 2010)

Pat, if accountants were in short supply, then they might be in a position to dictate such terms. However, they are not in short supply.
It's simple market forces. Business owners do have a choice, and should go elsewhere if an accountant asks for a personal guarantee.

Your self-centred view of whether you are going to get paid does not concern me. I'm only interested in my own business, and I prefer to protect my limited liability.

I don't ask for personal guarantees from my clients, nor do I give them to my suppliers. As I've mentioned more than once in this thread, we pay our accountant, along with our other suppliers, in full and on time.

If an accountant asks for a personal guarantee, find another accountant. There are plenty out there.


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## Pat Bateman (17 Jun 2010)

umop3p!sdn said:


> Your self-centred view of whether you are going to get paid does not concern me. I'm only interested in my own business, and I prefer to protect my limited liability.


 
Charming.

Given your attitude in relation to the veil of incorporation, I worry for the creditors of your business if anything goes wrong.


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## z107 (17 Jun 2010)

What do you mean, 'charming'?

There's, no need for you to worry about my creditors. If things did go wrong, I'll be pleased that I set up a limited company, and I won't lose my house and personal possessions. In the meantime, I pay my creditors in full and on time. 

You should have enough to worry about when you start losing clients to accountants not looking for personal guarantees.

Do you sign personal guarantees for every one that you do business with? If not, why not?


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## Pat Bateman (17 Jun 2010)

umop3p!sdn said:


> What do you mean, 'charming'?
> 
> There's, no need for you to worry about my creditors. If things did go wrong, I'll be pleased that I set up a limited company, and I won't lose my house and personal possessions. In the meantime, I pay my creditors in full and on time.
> 
> ...


 
I find your use of the term "self-centred" quite offensive.

Personally, I wouldn't look for a personal guarantee. However, for a new client with a newly incorporated entity I might request some form of payment on account (especially given the present climate). I also wouldn't allow too much "WIP" to accrue before issuing a fee (which would be payable immediately). That would help minimise any exposure.

However, I wouldn't be critical of anyone who did look for a PG. They've more than likely been stung in the past and certain sectors are more risky than others.


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## z107 (17 Jun 2010)

> I find your use of the term "self-centred" quite offensive.


Well you're easily offended.

What other way should I describe it when accountants are looking for a personal guarantee to ensure that they get paid, regardless of limited liability? They are not asking for a personal guarantee for the benefit of their clients.

This certainly is self-centred.

I too could get offended if an accountant asked me for a personal guarantee. I would think that they didn't trust me. However, in this hypothetical example I wouldn't get offended, I'd just get another accountant.


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## Pat Bateman (17 Jun 2010)

umop3p!sdn said:


> However, in this hypothetical example I wouldn't get offended, I'd just get another accountant.


 
If you were a director of a startup company with no previous connection to me, would you refuse to make a payment on account of (say) 50% of the estimated fee for the engagement?

That's what I'd look for and I don't believe it's an unreasonable request.

If you wouldn't acquiesce to my request, to be honest I wouldn't be interested in the assignment. It's very easy to be a busy fool, especially nowadays.


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## z107 (17 Jun 2010)

> If you were a director of a startup company with no previous connection to me, would you refuse to make a payment on account of (say) 50% of the estimated fee for the engagement?


Yes, I would refuse.

I was a director of a start up company, and I had no prior connection to my accountant. They did not ask for any payments before they did any work.

This scenario would cause me concern, because I would be wondering if I was being scammed.

Like it or not, if you are going to go into business you have to have some trust in people. I have found it's the people that start looking for contracts, personal guarantees etc, are the ones to avoid. However, this is just my experience.


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## RIAD_BSC (17 Jun 2010)

mf1 said:


> "But the mere fact that this debate is taking place shows that there is a backlash against PGs gaining strength. The market is deciding that PGs are becoming less acceptable, and rightly so."
> 
> Umm. Having very considerable difficulty in following the tortuous logic at work there.
> 
> ...


 

If you are unable to understand it, mf1, I'll happily make it a little more simple for you.

PGs work only in favour of the service supplier/accountant/lawyer/whoever. There is nothing in it for the OP. There are plenty of accountants around looking for work, so the OP should sack their accountant and find one who doesn't insist on a PG.

You would have no hesitation in asking a director for a guarantee, and if I was that director, I would have no hesitation in sacking you for it. There are also plenty of lawyers around, you may have noticed, so I am fairly sure that I would have no problem finding another one who didn't require a PG.

Eventually, the lawyers/accountants who work without PGs will get all the new work. The PG-loving ones will end up with less new work.

As for losing a long-trusted advisor - if I had a long-term professional relationship with a trusted advisor, and suddenly s/he came along and demanded a PG from me, the trust would be gone. So that's a moot point.

As a lawyer, if a client came to you and asked you for your professional advice about a supplier who wanted a PG, what would you advise your client? If I was your client, and you advised me to voluntarily give up my Ltd legal protection and sign a PG that was of absolutely no benefit to me, then I'd be straight on to the Law Society.

The only way a PG can be justified from a business director's point of view is if it is necessary to sign one to get something, and the other side holds all the cards. Maybe if it was a requirement for an essential overdraft or something, and there was no other way of getting that credit from another bank. Then, you'd have to be pragmatic.

But in a commercial situation where most everyone is screaming for business - especially in professions like law and accountancy - I would never, ever give a PG. I'm the customer and that's what I want. I'll go to whatever supplier satisfies my requirements, not the other way round.

As you say yourself, mf1, "business is business".


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## Pat Bateman (17 Jun 2010)

umop3p!sdn said:


> Yes, I would refuse.
> 
> I was a director of a start up company, and I had no prior connection to my accountant. They did not ask for any payments before they did any work.
> 
> ...


 
Did you sign an engagement letter?

Trusting people with no form or history is a good way to end up in the poor house in my view.

I would be very sceptical about a director who wasn't happy to make a payment on account of (say) 50% of the estimated fee for an assignment.

Too many professionals are "busy fools" because of unscrupulous directors.


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## simplyjoe (17 Jun 2010)

RIAD. Good post but I disagree with you on two points. An accountant looking for a PG in the current climate is an indication of a logical thinking person whereby an accountant not looking for a PG needs to be looked at sceptically - they are showing extremely poor judgement and if they show poor judgement here they will probably show poor judgement elsewhere when advising you. To accountants out there I do not give any credit, submit no tax return before I get payment and insist on PGs from limited companies. I have lost only one client (they were subsequently liquidated!) and my t/o has increased. I have a very low level of bad debt. In comparison to these some of my colleagues have been left with hundreds of thousands of bad debts. So whilst the OP has there opinion my opinion is do not do business with companies without having a PG. Umop might be a model client but many are not and when the pressure is on people do bad things.


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## z107 (17 Jun 2010)

> When the pressure is on people do bad things.


Including accountants.



> In comparison to these some of my colleagues have been left with hundreds of thousands of bad debts.


 How much do accountants make if this is the bad debts?

Maybe people should be looking to reduce the amount of money they pay their accountants, as well as making sure they not signing any dodgy agreements.


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## Pat Bateman (17 Jun 2010)

umop3p!sdn said:


> How much do accountants make if this is the bad debts?
> 
> Maybe people should be looking to reduce the amount of money they pay their accountants, as well as making sure they not signing any dodgy agreements.


 
It's fairly obvious that you've something against accountants.

How much they're turning over is irrelevant...only a fraction of that filters down into the professional's pocket (much like any business).

Most practices outside the Big 4 would struggle to deal with hundreds of thousands of bad debts.

Fair play to you simplyjoe...interesting that the only director who wouldn't entertain a PG was captaining a sinking ship. Like simplyjoe, I would view caution on the part of an advisor as a positive attribute. And I'd be sceptical about a director who was unwilling to go some of the way towards offering comfort to an advisor.


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## simplyjoe (17 Jun 2010)

How does bad debts make accountants wealthy. These bad debts are losses probably financed by increased bank borrowings. When a client does not pay this is not coming of the accountants bottom line. Most of it is money that would have been used to pay wages, premises and other costs. This is really how serious it is.

I will take your comment about accountants doing bad things in jest but I suppose we are up there with the other groups that people love to hate. Where we differ is that we are seriously supervised by our institutes and other bodies. Final word.


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## z107 (17 Jun 2010)

> It's fairly obvious that you've something against accountants


Why are attacking me personally? All my arguments have been general.

I do not have anything against accountants, the profession is open to everyone who wants to put the work in. I don't even have anything against accountants seeking personal guarantees. I simply would not want them as my accountant.



> I will take you comment about accountants doing bad things in jest but I suppose we are up there with the other groups that people love to hate


It wasn't in jest. Neither did I generalise like you are implying I did.
It was in response to your suggestion that "when the pressure is on people do bad things. " Well this includes accountants.

I've said all I want to say about this topic.

In summary, if an accountant asks you for a personal guarantee, refuse and look for another accountant.


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## RichieRuin (18 Jun 2010)

I'm not qualified to comment on the detail of the previous posts but I'm  grateful for the advice and clearly there are two schools of thought  when it comes to PGs. 

In my case I thought asking for a PG to cover such a small amount of money was a bit ridiculous but I had no great objection to signing it. Some other arrangement  such as payment in advance would be no problem either. I do have a  problem with the high-handedness involved in sending out a legal  document with fine print telling me to get legal advice, but a  compliments slip saying "please sign and return" - as if the legal advice is a foregone conclusion. No other explanation  was given, and it wasn't mentioned in any of my previous dealings with  the accountant. If I treated my customers that way they would show me  the door.

In that sense I have to say that some of the replies here live up to the stereotype, not of accountants specifically, but the professions in Ireland generally, i.e. that your customers are fortunate to have the benefit of your services, whereas I and people like me consider ourselves fortunate to have the benefit of our customers' business.


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