Director’s Loan Accounts

It’s really important to start everything with the end in mind – both good and bad.

If you’ve purchased my new book, you’ll have read about the referral agreements insolvency practitioners have in place to guide you nicely down their sales funnel into an insolvency.

Accountants are a crucial part of their network – and particularly with regard to Director’s Loan Accounts.

And that leads me nicely into today’s topic…

Director’s Loan Accounts

A common theme we see is Directors taking advice from someone just because of their perceived “expertise”, even though the “expert” has never actually proven it.

Particularly with regards to accountants. For some reason, logic entirely goes out the window when your accountant recommends something.

I swear half of you would shoot your dog if your accountant told you it was the best thing to do.

It’s also important to realise the level of accountant you have. The business gurus who tell you to always listen to your accountant have access to the top % of real smart ones.

Your roofing business does not. You likely have access to the bottom 30%. The others are doing international mergers in the private dining section of SexyFish.

I just want to be crystal clear here – your accountant works for YOU.

If only you knew how much your accountants documentation will be used against you should anything go wrong in your business.

The first thing an Insolvency Practitioner will ask for is your books – and they will often interview your accountant. The accountant is going to be retained throughout the Insolvency process – and so he’s going to tell them whatever they want to hear (more investigatory work the better).

He is likely not on your side. He will sell you out quicker than he can shut the door on his Volvo.

Unless you have a long term relationship (>10 years, and multiple businesses) with your accountant, they – and their advice – should be treated with the utmost suspicion.

You should think of accountants as filling in a colouring book. Yes, they must stay within the lines but you have to tell them what colours go where.

Imagine a scene where a man is holding a knife in the air and smiling from ear to ear.

The colour on the end of a knife could be chocolate cake or blood – one is a pleasant Christmas scene and the other is the aftermath of a brutal murder.

Same picture, different colours.

You do not work for him. He should be interviewed thoroughly. His performance should be reviewed monthly. He should be fired if he does not do what you want him to do.

If you do not know what he should be doing, regularly fire him and pick another just to review his advice.

Your accountant works for YOU.

If he suggests that you put on paper that you owe the company £50,000 on a Director’s Loan Account, when you’ve paid yourself peanuts all year – you have my permission to not only fire him, but beat him mercilessly.

If your company goes to the wall (which unfortunately most do) the first thing the Insolvency Practitioners looks at is an overdrawn Directors Loan Account.

They lick their weird lizard lips at the prospect.

Child’s play for them.

They ring their lizard wives on the way home cackling at the stupidity of another Directors Loan Account.

I can hear the call now…

“Baby, book Sandy Lane– another mug put down on paper he owed his own company 50 thousand pounds… yeah I know…. apparently he googled accountants near me 4 years ago and just picked the top link, believed everything the guy ever said and now his life is over..”

They will have a charge on your house SO fast you’ll get dizzy.

Repeat after me – we do not put down an overdrawn DLA on paper for a business that is young, unstable or is not making much money.

We find another way to represent it. If your accountant will not do that – your fire him and get another one.

I have NEVER seen an overdrawn Loan Account EVER be the correct solution to ANY problem.

If you’re struggling with an overdrawn DLA – or anything else – please give our office a call.

If I’m around I’ll personally call you back as soon as I can and we can have a personal chat about your situation.

Cheers!

Patrick