Contractor accountants could receive an unexpected, but welcome, surprise when it comes to bonus time this year.

A recent survey of 500 businesses revealed that UK accountants and other professional finance workers are likely to get a Christmas bonus of around 10.8% of their annual base salary. As the average salary for accountants is £42,000, the average bonus will equal £4,536, which is nearly £900 more than they were expecting. The total bonus pot will be £1.3bn, based on the amount of private sector qualified accountants.

60% of businesses plan to give their finance staff a bonus this year and 80% say they will either award a bonus or increase salaries in 2011. Only 20% are not planning to offer some form of salary increase or performance related pay in the next 12 months.

However, accountants may not get everything they wish for. When questioned about their salary expectations in 2011, an average 5% salary increase was predicted. Businesses on the other hand said that if they did award a salary increase it would be an average of 2.6%.

An accountant’s life isn’t necessarily a happy one. Apparently, many turn to drink or drugs to help forget the
stress of office life.

The Chartered Accountants Benevolent Association exists to offer accountants assistance on a range of issues. Traditionally, older accountants availed of its services when they neared retirement but in recent years the CABA has seen an increase in calls from younger accountants with problems such as alcohol and substance abuse.

The CABA’s chief executive, Kath Haines, pointed out that many of the younger callers not only found the recession hard to cope with but also suffered family, health and financial problems. In a recent survey of 1,126 accountants, the majority of them said stress, the long working hours and resulting imbalance between work and social life were their main concerns. At least freelance accountants should be able to get a more suitable work/home life balance!

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Basic administrative tasks relating to bookkeeping, invoicing and billing and filling out timesheets take the average worker in the UK 37 days every year, according to Keboko, the cloud service provider.

The cost of all this red tape amounts to more than £100 billion and could encourage freelancers to get help from a contractor accountant in a bid to reduce the amount of time they spend carrying out administrative duties.

Charlie Cowan, the CEO of Keboko, commented that companies should be trying to rebuild after the recession but instead many workers are finding it hard to do this as they are bogged down with tasks such as data input and updating reports. UK businesses are basically throwing the money spent on these tasks down the drain.

The burden of dealing with the taxman is also costing businesses dear, the IoD reported earlier this week. The Institute surveyed its members and discovered that there is still considerable room for reform to reduce the administrative burden surrounding taxes. The survey also discovered that 30% of businessmen would actually advise someone not to start up their own business because of the weight of the tax burden.

An overwhelming number of directors want to see the regulations concerning PAYE and National Insurance simplified. Business people sometimes struggle to understand the tax rules and have difficulty finding out the correct information when they contact HMRC. Only 15% of respondents said it was easy to get the right information when they called the HMRC helpline while a third said it was very or fairly difficult.

HMRC’s website does not fair any better either. 16% said they could find the information they needed easily but again 33% struggled to find what they needed to know.

Since the PAYE coding errors earlier this year, businesses have found it increasingly difficult to get through to the Revenue’s helpline. 37% of the directors who did manage it feel that the majority of HMRC officials have a poor understanding of the nature of their business.

Half of the directors surveyed said they want the OTS to simplify the PAYE and NI system and 28% said the taxation of employee benefits was the area most in need of simplification.

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The recession has fuelled an increase in rainy day savings, according to Jonathan Davis, an economist at Jonathan Davis Wealth Management.

In fact a recent survey from Mintel found that around 43% of Britons have prioritised saving for a rainy day this year, up from just 15% last year.

Davis said the credit crisis was a wake-up call for a lot of people, who realised that for the last ten years they have based their life on debt.

This is a little like closing the stable door after the horse has bolted but it is still encouraging that people are now looking to give themselves a financial cushion in case of a disaster such as redundancy. Savers should have a reserve fund equal to at least six months average spending, to get them through unforeseen difficulties, advised Davis.

Although rainy day saving may be on the increase, few people are saving for their retirement and this is of paramount importance, the expert added.

Savers may not be so happy to learn that the Bank of England has forecast that inflation is going to stay above its 2% target well into next year. Currently the CPI is standing at an annual rate of 3.1%, meaning a basic rate taxpayer needs a savings account that pays at least 3.8% in order to protect the value of their investment.

Now could well be the time for contractors to sit down with their contractor accountant and take a good look at incomings and outgoings and decide how to maximise your assets.

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It’s not all doom and gloom in the business sector. In fact some firms believe that they will profit from the government austerity measures.

Admittedly many businesses are going to lose public sector contracts, but the job losses could well create outsourcing opportunities. Last week, the government announced that £236bn of public sector contracts would be made more accessible to SMEs. In a bid to ensure that 25% of public sector contracts do in fact go to smaller businesses and limited company contractors, all government departments will be required to publish details of all the contracts they award, and how many go to small firms.

The coalition is also looking into a more open framework to tackle the closed procurement system which generally means contracts are awarded to preferred bidders which are usually bigger organisations.

Other good news came recently when figures were released showing the economy grew at twice the expected rate in quarter 3. Experts say a double-dip recession is less likely as data from the ONS showed the economy is growing at the fastest rate for 10 years.

However, these figures do not take into account the public spending review and the impact it will have on the country.

Nevertheless, the better than expected picture could encourage investors to start thinking about expanding their portfolios. The stock market can seem to be contradictory in times of economic crisis. In 2009, the UK was in recession and yet the stock market rose by around 30%.

Before contractor accountants rush out and pile all their money into stocks and shares, they may want to consider talking to a specialist financial advisor.

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Specialist IT contractor accountants may consider relocating if they’re struggling to secure a decent remuneration. But before you make that decision, you should read the results of a new study.

A recent report from CV Screen shows there is now a very clear north-south divide in the IT market, with the south-east and the capital proving to be the most lucrative. IT professionals working in London earn 14% over and above the national average, whilst employees in the south-east benefit by an extra 10.1%.

However, the study also shows that a number of technology companies moving their offices away from London and setting up in other areas of the country. The MD of CV Screen, Matthew Iveson, commenting on the results said that in the last few years he has noticed that candidates show less inclination to look towards the capital for opportunities.

He also pointed out that the expansion of online recruitment has meant candidates can find local employment much easier, and as many technology companies are now avoiding London, the market has definitely shifted.

Meanwhile, the Ashdown Group Jobs Index for September showed that placement availability for professionals in the IT sector increased by just over 5%. The adoption of PHP software is strengthening the market for skilled contractors and web developers are still in big demand.

In more good news, 86% of IT managers intend to continue spending on IT despite the spending review cuts and the continuing threat of a double-dip recession, according to research from City Lifeline. Roger Keenan, City Lifeline’s MD said it was really encouraging to see a positive attitude with regards to IT spending for 2011.

Managers seem to recognise that investing in the latest IT technologies will ensure they remain competitive during these difficult times, he added.

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The August Insolvency Index from Experian shows that the amount of businesses going under has reached its lowest point in over three years.

The Index dropped to 0.07 and the average financial strength rating increased by 0.27 to 81.06 over the last 12 months.

Contractor accountants will be particularly interested to learn that smaller businesses did very well. Their strength rating stands above the average at 82.22, an increase of 0.9 on the previous year.

The managing principal of pH, one of Experian’s companies said this shows just how quickly business fortunes can change. The present picture is very different from that of six months ago when insolvencies were increasing.

The figures also reveal that things in the North East improved. In June the region had the highest rate of insolvencies but by August the North East shared a rate of just 0.06% with six other regions.

This welcome news for SMEs is all the more surprising when you consider that the banks are still reluctant to lend to small businesses.

On a less positive note, research published on Monday showed that individuals living in towns situated on the coast were more likely to be declared insolvent than their inland counterparts in 2008 and 2009.

Last year in Hull, 51 out of every 10,000 adults were declared insolvent compared to just 20 per 10,000 in London whilst insolvency rates in Blackpool, Plymouth and Eastbourne were not far behind.

Despite more people taking staycations during the recession, coastal towns have never really recovered from the days when they were thriving fishing ports or shipbuilding centres. And a lot of people who live in these towns have to rely on seasonal or part-time employment so their income is more erratic then full-time employees.

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Retention of staff could become a headache for bosses in accountancy companies and finance departments, according to a study.

The online job board CareersinAudit.com found that 50% of the accountants they surveyed were actively seeking a new position and within 12 months that figure will have risen to 75% of all accountants.

59% of the survey’s respondents are networking weekly and a third of them make new contacts on a daily basis. 46% admitted that their primary reason for networking was to help them secure new employment.

It also appears that the majority of accountants (80%) could easily be tempted to spread their wings and move abroad to work. The preferred destination is still Western Europe although the Middle East is gaining in popularity. The main reason cited for moving abroad was a better balance between work and home life, whilst better pay ranked second.

38% of accountants feel that the recession caused them to miss out on promotion and they now want to make inroads into improving their career prospects.

77% of accountants feel that their company does not motivate employees or provide sufficient training and support for career development. A lot of them also feel this situation is unlikely to change in the near future.

Around 20% of accountants are actually planning to set up their own business or change career path entirely whilst the remaining 80% intend to remain in the profession for life or at the very least for the next 5 to 10 years.

Max Williamson from CareersinAudit.com points out that employers should be aware that the market is recovering, demand is rising and counter offers are making a comeback.

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Professional advisers, including online accountants, have witnessed a massive rise in the number of negligence claims filed against them since the start of the recession.

Research by Syscap showed a rise of 125% in the number of High Court negligence cases launched between 2008 and 2009. In 2008, for example, there were 80 high court negligence claims against law firms. By 2009, the number had leapt to 210.

No claims were brought against accountants in either 2007 or 2008 according to law firm Reynolds Porter Chamberlain. However, last year accountants faced 13 large High Court negligence suits including claims that auditors failed to spot a fraud or negligently overvalued company assets. Deloitte Touché and PwC were among the well known accountancy firms cited for negligence in 2009.

Claims against professional advisers have now reached the highest level for 11 years and as a direct result, some professional firms are having to borrow money to pay increased professional indemnity insurance rates. PI insurance is a compulsory requirement for lawyers and accountants and it pays for the cost of defending negligence claims and for damages.

Syscap also claims that the steep increase has been triggered by lenders and investors trying to recover falling asset values by suing their advisers. They hope to win damages from the professional advisers they claim gave negligent advice regarding transactions that involved those assets.

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The August Inflation Report from the Bank of England, which was published yesterday, was not as optimistic as contractor accountants might have hoped.

Mervyn King, the Governor of the Bank of England, warned that the economy faces a choppy recovery over the next couple of years. The Bank has said they expect inflation will remain higher for longer than they had previously anticipated and this has led to a lowering of the economic growth forecast. The report also suggests that interest rates will remain at their historic low in the immediate future.

Previously, the Bank had expected to see growth of around 3.4% in 2011 but this has now been revised to around 2.5%. The main reason for the revision is the coalition’s decision to increase the VAT rate to 20% as from the beginning of next year.

Mr King pointed out that the continuing economic stimulus measures along with the drop in value of the pound were helping the economy to expand but this is being offset by the lack of lending from the banks, something that affects contractors.

However, King did stress that the cost cutting plans put in place by the government have reduced the risk of a double dip recession.

Economists were quick to comment with some saying the report was more ‘dovish’ than had been anticipated. Howard Archer, from IHS Global Insight, said the report reinforced their view that interest rates will remain at 0.5% until early in 2011. He forecasts that we will not the first rise in rates will until the summer next year.

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Contractor accountants should take note that the CBI warned recently that although the economy has been showing signs of improvement, challenges and uncertainty still lie ahead.

The comment came after the Bank of England decided to maintain the historically low interest rates at 0.5% last week.

The head of economic analysis at the CBI, Lai Wah Co, said that although the move was widely expected, there is growing disparity amongst members of the Monetary Policy Committee over the strength of the economic recovery.

GDP has increased by 1.1% in the past three months according to government figures but this is expected to slow down during the second half of 2010. The recovery is being supported by an exceptionally loose monetary policy and it may be sensible to move towards gradually withdrawing this monetary stimulus, the CBI expert remarked.

Meanwhile, the majority of the UK’s small businesses and limited company contractors have still not returned to pre-recession levels of profitability. 70% of British entrepreneurs have not seen their profits return to normal after the credit crisis, according to RSM Tenon’s Business Barometer.

9% of entrepreneurs believe they will have to wait for at least another 3 years before their business returns to normal, 20% think between 2 and 3 years and 27% say 1 to 2 years.

Over 40% of entrepreneurs have had to review their business through fears of a double dip recession and 22% think that a lack of cash flow could seriously threaten their operation in the coming 12 months.

The head of recovery at RSM Tenon said that they are expecting to see corporate insolvency levels remaining the same as over the past two years as business owners still struggle to secure additional funding.

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Contractor accountants may be interested in the warning from the CEO of BDO Global, Jeremy Newman. He has cautioned that auditors may be cutting corners because of increased competition and cost pressures.

In his blog, Newman pointed out that extreme pressure to reduce costs could encourage auditors to cut corners and less stringent audits have the potential to lead to more fraud.

He says that whilst there has been a drop in demand for audit services, this should be offset by changing accounting standards, additional regulation and high quality audits.

Recruitment levels have fallen by more than the demand for audit services and the economic law of supply and demand should have led to a price increase and yet that has not happened and costs are decreasing.

The potential for an increase in company fraud should cause concern as research, also from BDO, reveals that the value of fraud in the first half of 2010 has risen to more than £1bn.

The head of BDO’s fraud services, Simon Bevan, said that during the recession there was a rise in the number of managers setting up companies within companies and diverting lucrative contracts to third parties. Insider dealing also rose.

Internal management originates 16% of reported fraud whilst another 17% is instigated by suppliers and third party customers. The finance and insurance sectors are the worst offenders with almost 50% of all fraud cases being committed by those 2 industries.

In the past year the average fraud has risen by almost £1m to £6m. Bevan said that fraud is now as prevalent as it has ever been and companies need to be even more vigilant during recessionary times.

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Restraint should be the name of the game if we want to avoid another economic recession. That’s the message accountants are sending to George Osborne in advance of the June 22nd budget.

Although VAT and CGT rises are anticipated, members of MGI UK and Ireland hope there will be some assistance made available to counter any damaging consequences of these rises.

An interesting idea put forward by Andy White of Carter Backer Winter is bound to gain widespread support from employers. He wants to see employers’ national insurance contributions abolished completely; a move he says which would encourage companies to take on more staff. The resulting loss of revenue would be compensated for by an increase in income tax collections and the reduction in the amount of state benefits paid to the unemployed.

Other online accountants say they would like to see a cut in corporation tax rates and an overhaul of IR35.

Meanwhile, government departments are going to have their work cut out in the run up to the summer recess. They need to outline spending plans, which will then be checked against tough criteria, if they want to have funding approved. One of the new criteria that must be met is that projects are essential to help meet government priorities.

Small firms and limited company contractors could benefit from this rule as outsourcing the work could prove the most efficient means of getting projects completed.

George Osborne has said that we face a great national challenge. Government must rethink the way they spend money. Gone are the days of debt, irresponsibility, and waste and we must now find ways to get the country living within its means.

We inherited this terrible economic crisis but if we all work together we can put it right, he added.

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