Accountant looking for personal guarantee

[z107]

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.

 

[Pat Bateman]

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.

 

[z107]

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?

 

[Pat Bateman]

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?

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.

 

[z107]

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.

 

[Pat Bateman]

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.

 

[z107]

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.

 

[RIAD_BSC]

"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

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".

 

[Pat Bateman]

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.

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.

 

[simplyjoe]

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.

 

[z107]

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.

 

[Pat Bateman]

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.

 

[simplyjoe]

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.

 

[z107]

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.

 

[RichieRuin]

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.