Accounting for the clients who go under

INSOLVENCY may be on the decline, but the personal tragedies involved are still putting accountants in a delicate position. When a small business fails, the first outsider turned to for help is often the accountant. The dilemma is this: it may not pay to continue working for a client who may be unable to meet the fees, but do you just walk away from somebody with whom you have built up a relationship.

The question has become so pressing that the Chartered Association of Certified Accountants is offering advice to its members in its magazine Certified Accountant. In the article, David Harvey, a technical officer at the association, stressed the importance of the accountant realising what kind of help he should be supplying. 'Anyone whose business has collapsed, whose home is threatened with repossession, and who cannot meet school fees is not approaching his accountant to ask for financial consultancy; he is looking for debt counselling,' he said.

This might involve advice on financial management, but it is as much about putting pressure on creditors to accept terms that the client can meet.

Certified accountants are authorised to give such advice, but the process can be time-consuming and largely unpaid. As a result, accountants and others serving businesses should be aware of the role of the voluntary sector in dispensing advice.

For instance, debt was the largest single category of advice handled by the Citizens Advice Bureaux last year. While people of low income accounted for the largest share of inquiries, increasing numbers of small company directors and self-employed people turned to the CAB.

The Child Poverty Action Group also plays a part. Its Debt Advice Handbook describes counselling as a series of tools and strategies that can be used to enable debtors to manage their incomes and come to terms with creditors.

The Money Advice Trust, established three years ago to promote growth in the number of trained debt counsellors, has been hindered by a lack of funds. It aims to raise pounds 3m a year but last year collected less than pounds 250,000, Mr Harvey said.

While noting that 'many debtors will not seek help until they are threatened with repossession', he added: 'Even the information that a professional is now advising them may be enough to achieve a stay of execution.'