Do I Really Need an Accountant for my Small Business?

Entrepreneurs often fall into one of three categories when it comes to doing the books. There are those who would rather hand the whole lot over to someone else to take care of. Yes, this might mean hefty accountant’s bills each month – but it’s all worth it if it means less paperwork. Then there are the stoics: those who battle with absolutely everything in-house and who wouldn’t dream of paying for advice. Finally there’s the ‘ostrich’ approach: where paperwork is left to pile up until HMRC come knocking…

HMRC Accountant
photo credit: Alan Cleaver / Flickr

There is a sensible middle way through all of this. In an age of smart accounts software, online filing and auto-reminders delivered straight to your mobile, there’s no reason why, for the most part, your business can’t be an accountant-free zone. With the day-to-day legwork taken care of however, it’s time to think about the bigger picture. From tax efficiency through to considering how to attract investors, where strategy is involved, accountants still have a big role to play.

Here we separate the brawn from the brain: the things you can do yourself and the areas where a little help may be required…

Areas where you can go it alone

1. Bookkeeping

In the early days, it may seem deceptively easy to keep track of the limited number of invoices, receipts and statements trickling in. This soon changes. From day one, it’s worth getting into the habit of filing everything in date order, sub-divided into ‘incoming’ and ‘outgoing’. Dedicating a couple of hours to this each week should help you to keep on top of this.

At the beginning, you should be able to track all this using a simple spreadsheet. Once you find that an increasing amount of your valuable time is being taken up, it’s probably time to turn not necessarily to an accountant but to an accounts software package. Here, it’s a matter of trying before you buy. Can you find your way around the interface? Can you access it on your mobile? Does it give you what you need to keep track of expenses, invoices, estimates and billing all in one place? These are what you should be looking at to make sure you stay in control.

2. Tax Returns

Tax may be unavoidable, but a hefty bill from an accountant at the end of the tax year isn’t. You are taxed on your business profits less expenses and unless you’re trading under a company name, your business profits are taxed under Self-Assessment. As with everything red tape-related, the trick to hassle-free tax returns is not leaving it until the last minute. As well as helping you keep track of who owes you what, this is one of the reasons why good bookkeeping is so important.

Online filing helps to make this easy if you’re taking a DIY approach: not only do you get a longer deadline for filing (31 Jan as opposed to 31 Oct if you’re filing by post), an auto-calculation feature and the fact that you can stop, save it and come back to it also helps to make the process manageable. There’s also a simplified expenses procedure to streamline three commonly encountered areas of business expense: working from home, living in your business premises and vehicle costs.

3. Payroll

Taking on employees means putting PAYE into place as part of your payroll. As your team expands, you may wish to consider putting everything payroll-related into the hands of a payroll service provider. Otherwise, a fit-for-purpose payroll software package will help you keep track of this with automatic calculation of deductions and the ability to tie in with HMRC’s Real Time Information reporting procedure.

Max the Accountant Cat
photo credit: Found Animals Foundation / Flickr

Areas where you may need help

1. Business plan

Especially if you are compiling a plan to attract investors or secure funding from a lender, is your plan credible? The input from an accountant can be especially useful when it comes to putting forward realistically calculated and evidence-based projections for future growth, profit and cash-flow. The fact that you’ve sought professional advice on the plan by a regulated and insured accountant may in itself be seen as a crucial trust indicator.

2. Tax advice

Whereas keeping track of day-to-day transactions can be straightforward, different considerations apply when you are making major purchases. The rules on Capital Allowances can be complex and before you make any investment in plant and equipment, it’s worth seeking advice to make sure your purchase is timed to maximise tax efficiency.

There are other areas where the rules on allowances can be hard to grasp which may mean you are missing out on valuable tax breaks. Has your company found a new way of working that may qualify it for R&D Allowance, for instance?

Similarly with VAT, even though your turnover may not have reached the £82,000 revenue registration threshold yet, could registration nevertheless be advantageous?

3. Your business structure

A natural progression for a small business is often to move from sole trader status to a limited company. While the administrative process for setting up a company is straightforward, are you clear on the tax and other implications? Are you thinking of getting other people on board, and if so, do you have the right structure in place to accommodate this? Look for an accountant with specific expertise in offering strategic advice to small businesses to make sure you are on the right track.

As with all professional services, the question to ask is, “Does this advice add value?”. You may feel you have the basics covered. For the bigger picture though, specialist accountancy advice is still likely to be a shrewd investment.