If you are just starting out in business, and with an endless list of tasks to complete and costs to cover, you might well be wondering how necessary an accountant is. It’s not a ridiculous question either as every cost incurred at this point in your journey needs careful consideration. The problem with accountancy is that its just not as exciting as some of the other projects you might have in mind, such as a shiny new website or the latest equipment in your industry.
And it’s not just the glamour factor either. Spending valuable cash on an accountant in the early stages of business might not feel like good value. Other small business owners or freelancers might have suggested that they look after their own accounts, which of course is possible, so why should your business be different. However, businesses by nature are all different and just because some are managing without professional support doesn’t mean that a similar approach would work for another business or even that their accounts are operating as efficiently as they could.
Let’s consider some of the key ways in which an accountant could help your business.
It’s unlikely that you are an expert in all aspects of running a business. Most business owners set out with a specific goal in mind and that usually doesn’t centre on the administration and financial management of the company. In which case, you should consider how well spent your time is on aspects such as managing your accounts. Could your time be better spent in other areas of the business, specifically those which drive revenue?
One simple way of looking at this would be to place a value on your time. If your time is worth £100 per hour and it takes you 10 hours to complete your business taxes, then you are effectively spending £1000 to do the job yourself, and that assumes you haven’t made any mistakes which might result in a penalty. On the other hand, if you hired an accountant to take care of the task for you, it’s likely to cost less and your time can be prioritised elsewhere.
There are various points throughout a company’s life span when specialist advice could be invaluable. In the early stages of development, you may benefit from support and advice to write a business plan. By incorporating the financial reports and projections that an accountant can provide, you will have a much clearer and more accurate business plan which is more likely to succeed in the longer term. Equally, if you are looking secure financial funding, then this information may be needed to demonstrate to banks or other lenders the stability of the company and its ability to repay any loan that is secured. In this scenario an accountant could also answer any specific questions from the lender around revenue projections or expenses.
You may also need advice regarding the most effective legal structure for your company. Not all businesses have the same structure and the factors influencing any decision on legal structure are complex. An accountant can help you to navigate your options, advise on the most tax efficient solution and even put in place the legal changes on your behalf. A number of business entity options will be open to you, including limited companies, limited liability partnerships or corporations, as well as sole traders or proprietors. Each has its own tax implications, and the most appropriate structure will be entirely dependent on your specific business, but with a clear understanding of the various options, an accountant can suggest the best option for your business.
Finances and Cashflow
Once your business is established, keeping track of your finances is essential, but not always straightforward. Every payment needs to be accounted for, debtors need to be carefully tracked and importantly, all of this needs to documented to meet HMRC obligations under Making Tax Digital.
Beyond tracking of the essential information, you may also want to measure other key business metrics such as sales across different locations or salaries in different departments. These aspects often fall under the term of Management Accounts and give valuable business insights and demonstrate trends that might not have otherwise been so obvious. Armed with this information, you can be better prepared to make key day-to-day and strategic business decisions which affect the future success of your business.
Cashflow is perhaps the most important aspect you will need to understand when managing the finances of your business. Without cashflow, even the most profitable business will be unable to grow, or at worst eventually collapse. However, an accountant who understands your business and your priorities can maximise your chances of success by keeping a close eye on your cashflow, as well as advising you on changes you could make to improve your cashflow efficiency.
Dealing with HRMC
For many small businesses the trigger to looking for or hiring an accountant is when that first tax filing deadline approaches. Working the numbers for your own purposes is one thing, but the prospect of compiling that information for HMRC can be much more daunting.
A trusted accountant can liaise with HMRC and Companies House on your behalf, resolving any issues that may arise along the way.
Tasks that an accountant could support you with include:
- Completion and filing of legally required documents for your business
- Preparation of statutory accounts on your behalf
- Maintaining records of directors and other administrative personnel with Companies House
- Ensuring that you have a current understanding of the latest tax laws
Tax investigations are another area for consideration and something which a good accountant could handle on your behalf. Assuming that you are operating your business as lawfully as possible, it is quite unlikely that you will ever be faced with a tax investigation. However, unlikely does not mean impossible, and you would certainly welcome the reassurance and advice of an expert if this were to happen. They will be able to advise on the investigation process and ensure that you don’t fall foul of any filing errors in future. It is even more beneficial if the accountant can offer tax investigation insurance, which covers the fees you would be liable to if your business needed to deal with an HMRC enquiry or investigation. The insurance ensures that you won’t be charged any additional costs for the work required during the investigation process.
The list goes on
Further down the line, there are likely to be other points at which an accountant can provide advice and support. This could be during a period of business growth, or if you are considering buying an additional business, or even if you decide to sell the business.
Should you decide that you would like to seek the support of an accountant, Kingston Burrowes would be pleased to discuss your requirements and suggest how we might be able to support your business.