What Questions Should You Ask Before You Choose an Agency Accountant?

Why Most Agency Founders Pick the Wrong Accountant

I see it every few months. A founder walks in, frustrated, having just switched from a general practice firm that "didn't get" their business. The accountant was perfectly competent for a plumber or a restaurant. But an agency? They didn't understand utilisation rates, retainer vs project revenue, or why a £200k profit with 40% gross margin tells a very different story to £200k profit with 65% gross margin.

When you choose an agency accountant, you are not just picking someone to file your CT600 and run payroll. You are picking a financial partner who should understand how your business actually makes money. That distinction matters.

Here are the questions to ask before you sign anything.

1. "How Many Agency Clients Do You Currently Work With?"

This is your first filter. A general practice accountant might have 200 clients but only 2 or 3 agencies. That is not enough exposure to understand the specific patterns agency businesses follow.

You want someone who works with at least 10-15 agencies. Ideally more. At Agency Founder Finance, we work exclusively with agency founders. That focus means we see the same patterns repeat across marketing, digital, creative, PR, and recruitment agencies. We know what a healthy retainer book looks like versus one that is about to unravel.

Ask for specifics. How many of their clients are agencies? What types? Do they work with agencies your size? A firm that handles a 50-person agency and a sole trader web designer will have a different perspective than one that only works with 5-15 person shops.

2. "What Is Your Experience With IR35?"

IR35 is not optional knowledge. If you use contractors, and most agencies do, your accountant needs to understand the off-payroll working rules inside out.

Ask them to explain the difference between inside IR35 and outside IR35. Ask how they handle Status Determination Statements (SDS). Ask what happens if HMRC challenges a determination you made using the CEST tool.

A good agency accountant will tell you that CEST is directional at best. They will explain that the Employment Status Manual provides better guidance for complex arrangements. They will know that your agency, as a medium or large business, is responsible for issuing SDS before the contractor starts work, not after.

If they look confused or say "we just leave that to the contractor's accountant," walk away. That answer will cost you money in back taxes and penalties.

Read our full guide on IR35 for agency contractors to understand what a competent accountant should be telling you.

3. "How Do You Help Agencies With Cash Flow Planning?"

Retainer income is predictable. Project income is not. A 12-person digital agency billing £800k per year with 60% retainer revenue has a very different cash flow profile to one where 80% comes from one-off projects.

Your accountant should ask about your revenue mix. They should want to see your management accounts, not just your year-end figures. They should understand that a big project win in January creates a VAT bill in March that needs to be planned for.

Ask how they help clients forecast cash flow. Do they recommend tools like Float or Spotlight Reporting? Do they review your monthly P&L and balance sheet, or just file your tax return once a year?

If the answer is "we do your year-end accounts and that's it," you are paying for compliance, not advice. That might be fine at £150 per month. But if you are paying £400+ per month, you should expect cash flow conversations as standard.

4. "What Is the Optimal Salary and Dividend Split for My Situation?"

Every agency founder should know the standard model: take a salary up to the primary NI threshold (£12,570 for 2025/26) and take the rest as dividends. But that is the starting point, not the answer.

The right answer depends on your profit level, whether you have other income, and your long-term plans. If you are a higher-rate taxpayer with £80k of profit, the optimal split is different from someone with £200k of profit who wants to extract every penny.

Ask your potential accountant to walk through the numbers for your specific situation. They should be able to tell you the dividend tax rates (8.75% basic, 33.75% higher, 39.35% additional) and the £500 dividend allowance without looking it up. They should know that the dividend allowance dropped from £2,000 to £1,000 to £500 over the last two tax years, and understand why that matters for your planning.

For more detail on this specific topic, see our guide on salary and dividends for agency founders.

5. "Do You Advise on Agency Structure?"

Most agency founders start as sole traders or single-director limited companies. That works fine until it doesn't. At some point, you might need to consider a holding company structure, especially if you plan to:

• Own multiple agencies under one group
• Bring in a co-founder or investor
• Extract profits tax-efficiently before an exit
• Protect intellectual property or brand assets

Ask your accountant if they have advised on holding company structures for agencies. Ask if they understand how to route dividends through a holding company to preserve BADR (Business Asset Disposal Relief) eligibility. Ask if they know that the 2-year holding period for BADR starts from the date you acquire the shares, not from incorporation.

A general accountant will say "you don't need a holding company yet." A good agency accountant will say "here is when you might need one, and here is what we would do when that time comes."

6. "How Do You Help Agencies Prepare for Exit?"

If you plan to sell your agency one day, your accountant needs to be thinking about that from year one, not year five. The decisions you make about profit extraction, asset ownership, and share structure in the early years can cost you tens of thousands in additional tax when you sell.

Ask your potential accountant about their experience with agency exits. Have they helped clients through a trade sale? Do they understand how earn-outs work? Can they explain the difference between a share sale and an asset sale from a tax perspective?

Ask specifically about BADR (Business Asset Disposal Relief). The lifetime limit is £1 million of gains at 14% CGT. To qualify, you must hold at least 5% of the shares and be an officer or employee of the company for at least 2 years before disposal. Your accountant should be able to tell you whether your current structure qualifies, and what changes might jeopardise that relief.

We cover this in more detail in our growth and exit planning articles.

7. "What Software Do You Recommend and Why?"

Your accountant should have a view on accounting software. Not a vague "whatever you prefer" answer, but a reasoned recommendation based on your agency's size and complexity.

For most agencies under £2m turnover, Xero or FreeAgent are the right choices. Xero integrates well with Dext for receipt capture and Float for cash flow forecasting. FreeAgent is simpler and includes built-in time tracking, which can be useful for agencies that bill by the hour.

QuickBooks is also common but tends to be better for product-based businesses than service businesses. Sage is legacy software that many accountants still use but rarely recommend for new clients.

Ask what they use internally. If they are still on Sage 50 and don't use cloud-based tools, that is a red flag. You want an accountant who lives in the same digital world you do.

8. "How Do You Handle VAT for Agencies?"

VAT is straightforward for most agencies, but there are nuances. The VAT registration threshold is £90,000 turnover. Once you hit that, you must register. But many agencies choose to register voluntarily before that threshold because it allows them to reclaim VAT on their costs.

Ask about the Flat Rate Scheme. It is still available, but the rules changed significantly in 2017 with the introduction of the "limited cost trader" test. If you spend less than 2% of your VAT-inclusive turnover on relevant goods, you cannot use the flat rate. Most digital agencies fall into this category because their main costs are salaries and software, not physical goods.

Ask how they handle cross-border VAT if you have clients in the EU. Post-Brexit, the rules changed. If you sell digital services to EU consumers, you may need to register for VAT in each member state or use the VAT One Stop Shop (OSS) scheme.

9. "What Is Your Approach to R&D Tax Credits?"

Many agencies qualify for R&D tax credits and do not know it. If you build proprietary software, develop new algorithms, or create tools that improve your service delivery, you may have a claim.

Ask your potential accountant if they have experience with R&D claims for agencies. The SME scheme offers an enhanced deduction of 186% on qualifying costs (for expenditure after April 2023). That means a £10,000 qualifying cost becomes £28,600 in deductions, reducing your corporation tax bill significantly.

But be careful. There are many R&D claim mills that submit aggressive claims and leave clients exposed to HMRC enquiries. A good accountant will help you understand what qualifies and what does not, and will document the claim properly so it stands up to scrutiny.

10. "How Do You Charge, and What Is Included?"

This is the practical question. Most agency accountants charge a fixed monthly fee. That fee should cover:

• Monthly management accounts (P&L, balance sheet, cash flow)
• Quarterly VAT returns
• Payroll and RTI submissions
• Year-end accounts and corporation tax return (CT600)
• Personal tax return for the director (SA100)
• Ad-hoc advice via email or phone

Ask what is not included. Do they charge extra for R&D claims? For IR35 determinations? For HMRC enquiry support? For restructuring advice?

A typical fee for a growing agency with £300k-£800k turnover is £400-£700 per month. For larger agencies, expect £800-£1,500 per month. If someone is quoting £150 per month, they are doing compliance only. That might be fine if that is all you need. But if you want strategic advice, you need to pay for it.

11. "Who Will Be My Day-to-Day Contact?"

This is the question that trips up most founders. You meet the partner or director in the sales meeting. They are impressive, knowledgeable, and clearly understand agencies. You sign up. Then you find out your day-to-day contact is a junior bookkeeper who has never worked with an agency before.

Ask specifically: "If I have a question about IR35, who answers it? If I need to restructure my shareholding, who handles that? If HMRC opens an enquiry, who manages it?"

You want a named senior contact who understands your business. Not a call centre. Not a shared inbox. A real person who knows your name and your agency's numbers.

12. "Can You Introduce Me to Two or Three Agency Clients?"

This is the ultimate test. Any accountant worth hiring should be able to introduce you to existing clients who will give honest feedback. Ask those clients:

• How responsive is the accountant?
• Do they proactively flag issues or only react when asked?
• Have they saved you money or helped you avoid a costly mistake?
• Would you hire them again?

If the accountant cannot or will not provide references, that is a major red flag. Either their clients are unhappy, or they do not have enough agency clients to give you a relevant reference.

What a Good Answer Sounds Like

When you ask these questions, you are not looking for perfect answers. You are looking for confidence, specificity, and real experience. A good agency accountant will say things like:

• "We helped a 15-person creative agency restructure before exit and saved them £47,000 in CGT."
• "We spotted a cash flow issue in a digital agency's management accounts three months before they would have hit it."
• "We advised a PR agency founder not to take a dividend that quarter because of the dividend allowance reduction."

Those are real examples from real situations. That is what agency expertise sounds like.

What to Do Next

If you are currently looking for an accountant, write these questions down. Take them to your meetings. See how the accountant responds. Do they give you straight answers or dodge the question? Do they show genuine interest in your agency or treat you like another number on their client list?

At Agency Founder Finance, we are ICAEW qualified accountants who work exclusively with agency founders. We answer these questions every day. If you want to see how we stack up, book a call. We will walk through your situation, answer these questions directly, and let you decide if we are the right fit.

But more importantly, use these questions with whoever you interview. The right accountant will transform your business. The wrong one will just file your tax return and charge you for the privilege. Make sure you pick the right one.