It’s a conversation we’ve had more than once over the years:
“I wish I’d known that before the year-end.”
“I didn’t realise there was a way to reduce my tax bill.”
“Why didn’t my accountant tell me?”
The truth is, your accountant probably wasn’t trying to keep secrets. More often than not, it comes down to one simple thing: expectations.
Many business owners assume their accountant will automatically tell them about every tax-saving opportunity, forecast future tax bills, spot cash flow issues before they happen and regularly check in with advice. But in reality, different accountants (and different service packages) provide different levels of support.
That’s where the terms reactive and proactive accounting come in.
Neither approach is right or wrong; they simply serve different purposes. Understanding the difference can help you get the support your business really needs.
What business owners want
Most business owners want more than someone to file their tax returns.
They want an adviser. Someone who can help them make better decisions, answer questions and guide them through the ups and downs of running a business.
Clients often expect their accountant to:
- Warn them about upcoming tax bills
- Suggest ways to reduce tax
- Explain the best salary and dividend mix
- Advise on buying equipment or vehicles
- Recommend software and systems
- Help improve cash flow
- Explain confusing HMRC letters
- Highlight when profits are rising – or falling
- Be available to answer questions as they arise
And that’s completely understandable. Running a business is busy enough without having to become an expert in tax and accounting too.
What many accountancy services include
However, many accountancy packages focus primarily on compliance work, such as:
- Bookkeeping reviews
- VAT Returns
- Payroll and CIS
- Year-end accounts
- Corporation Tax Returns
- Self Assessment Tax Returns
- Companies House filings
These services are essential. They keep businesses compliant and ensure deadlines are met.
But there is one important thing they all have in common:
They are largely based on information from the past.
Year-end accounts, for example, tell the story of what has already happened. They are incredibly useful, but they can only show historical information.
It’s a bit like driving a car while only looking in the rear-view mirror – you can see where you’ve been, but not always what’s coming next.
What is reactive accounting?
Reactive accounting focuses on keeping businesses compliant and responding to events as they happen.
This might include:
- Preparing year-end accounts
- Filing tax returns
- Completing VAT Returns
- Processing payroll
- Meeting Companies House deadlines
- Correcting errors
- Answering occasional questions
There is absolutely nothing wrong with this approach. In fact, it is exactly what many businesses need.
Reactive accounting is often more cost-effective and provides peace of mind that legal obligations are being met.
The downside is that opportunities or issues are often identified after they have happened, rather than before.
What is proactive accounting?
Proactive accounting looks forward rather than backwards.
It involves regular conversations, planning and advice to help business owners make informed decisions before deadlines arrive.
Examples include:
- Management Accounts
- Tax estimates
- Pre-year-end tax planning meetings
- Cashflow forecasting
- Budgeting
- Profit reviews
- Business performance discussions
- Software and process advice
The aim is simple: fewer surprises and better decisions.
For example, knowing your estimated tax bill months in advance allows you to plan for it. Regularly reviewing management accounts can highlight trends before they become problems. Discussing a large purchase before committing may uncover tax opportunities that would otherwise be missed.
A five-minute conversation can make a big difference
One of the biggest misconceptions we come across is that accountants only become involved once the paperwork lands on our desk. By then, many decisions have already been made.
Here are just a few examples of where a quick conversation beforehand could have made a significant difference.
Example 1: Buying an electric car
A client purchased an electric company car during the year and was looking forward to claiming the generous tax relief they’d heard about.
When we prepared their year-end accounts, we discovered the vehicle had been bought second-hand.
Unfortunately, the 100% First Year Allowance is only available for new qualifying electric cars. While tax relief was still available through capital allowances, it wasn’t as generous as the client had expected.
Had they picked up the phone before making the purchase, a five-minute conversation could have explained the rules and potentially saved them thousands in Corporation Tax.
Example 2: Buying equipment at the wrong time
Another client invested in new machinery just a few weeks after their accounting year-end.
The purchase itself wasn’t a problem, but because of the timing, the tax relief wasn’t available until the following accounting period. As a result, their Corporation Tax bill was much higher than it needed to be that year.
If we’d known the purchase was being planned, we could have discussed whether bringing it forward by just a few weeks would have been more tax-efficient.
These situations aren’t unusual, and they certainly aren’t anyone’s fault.
Business owners make decisions every day, often without realising there could be tax implications. That’s exactly where proactive advice adds value.
Sometimes it isn’t about complicated tax planning at all—it really is just a quick conversation before you press “Buy Now” or sign on the dotted line.
Example 3: Director pension contributions
A company director wanted to reduce their Corporation Tax bill and build up their retirement savings. When we prepared the year-end accounts, they mentioned they had been planning to make an employer pension contribution – but hadn’t got around to it before the year-end.
Unfortunately, once the accounting period had ended, it was too late for that contribution to reduce the Corporation Tax bill for that year. The tax relief would instead fall into the following accounting period.
Had we spoken before the year-end, we could have calculated how much the company could afford to contribute, discussed the tax implications and ensured the contribution was made in time.
A short planning conversation could have reduced the company’s tax bill while also increasing the director’s pension pot – a win-win for both the business and the individual.
Why does proactive support cost more?
This is an important question.
Compliance work tends to follow a structured process and is often based on historic information.
Proactive support is different. It involves time spent reviewing figures, analysing trends, researching options, preparing forecasts and discussing strategies with clients.
In other words, you’re not just paying for forms to be filed – you’re paying for advice, planning and expertise.
Not every business needs this level of support, but for some businesses it can provide significant value.
Why do accountant-client relationships sometimes go wrong?
In many cases, neither the client nor the accountant has done anything wrong.
The client may think:
“My accountant will tell me everything I need to know.”
The accountant may think:
“The client only requires compliance services unless they ask for additional advice.”
Neither expectation is unreasonable.
The challenge comes when those expectations haven’t been discussed clearly.
Good communication is one of the most important parts of a successful accountant-client relationship.
How to get more value from your accountant
If you want more advice from your accountant, don’t be afraid to ask.
Instead of:
“What do I owe?”
Try asking:
“Can we estimate my tax bill before the year-end?”
Instead of:
“I’m buying a new van.”
Ask:
“Is there a tax-efficient way to do this before I commit?”
Instead of:
“Can you do my accounts?”
Ask:
“Can you help me plan for next year?”
The more information you share, the more your accountant can help.
After all, accountants aren’t mind readers – but they are problem solvers.
Where DNA fits in
At DNA, every client receives the compliance services they need to stay on the right side of HMRC and Companies House.
But we also recognise that many businesses want more than compliance.
That’s why we offer additional services such as:
- Management Accounts
- Pre-Year-End Tax Planning Meetings
- Tax Estimates
- Cashflow Support
These services aren’t automatically included in every package because not every business needs them, and they require dedicated time, analysis and planning.
The important thing is making sure the service you receive matches the support you expect.
If you’re unsure what’s included in your current package (or whether additional support could help your business), simply ask.
A good accountant will always be happy to explain the options available.
Because great accounting isn’t just about numbers – it’s about having the right support, at the right time, for your business.