Starting a business involves balancing the books from the off. Correct business decisions from the start are crucial for success. Ironically, many small businesses obsess with costs and deem accountancy fees as an unnecessary expense. The question has to be asked, are small business savings on accountancy fees a false economy?
Accountants are experts in all of the financial aspects of business, including everything you need to do when you set up. Big companies have the luxury of whole departments devoted to getting taxes paid on time, evaluating profit and forecasting for success.
Good accounting is equally important to the small business. Ultimately, the cost of an accountant could save your small business money, and here’s 8 good reasons why:
Doing the books yourself without experience could hurt your business further down the line. Incomplete or inexperienced bookkeeping could at the very least mean you overpay taxes. Get things wrong and you could even face a fine. You’ll need to log every expense and know which business expenses you can claim on your annual tax return. Using an accountant gives you peace of mind that all of your business transactions are legally recorded and you are paying exactly the right amount of tax.
2. Forecasting cash flow
This is an essential part of business growth. Get this wrong and you could find your business is in trouble. Underestimating costs or overestimating income could be catastrophic. Not being able to pay creditors on time could even lead to insolvency.
3. Industry specialised experience
An accountant with experience in your industry will prove invaluable to your financial planning and decision-making. The early days of business are tough and not only bad businesses fail, so the more advice you can get the better.
4. Understanding your accounts
It’s one thing starting a basic spreadsheet, but as your business grows, you’ll need accountancy software to suit your business and you’ll need to know how to access and understand your accounts. An accountant will be able to give you advice on the type of accountancy software that is right for your business. He or she will also be able to give you training in accessing the financial information you need to understand your accounts and run your business.
As you take on more employees, you’ll need to keep up with paying them and managing a pay roll system. Employing someone to do this can be expensive. Accounting firms, like Numeric Accounting, offer different levels of accounting packages to small businesses, including payroll. It’s another headache you won’t have to worry about.
When it comes to investors, your accountant will be able to make sure you have all the information you need to present to an investor. They’ll be experienced in understanding exactly what investors are looking for.
Your accountant will be up to date on all of the latest tax legislation. They’ll make sure you don’t pay more than is necessary.
8. Peace of mind
If you employ an accountant you’ll be sure that all of your financial matters are being handled correctly, leaving you free to get on with the job of making your business a success.
4 Common accounting mistakes small businesses make
Accounting processes in your business aren’t just for tax purposes. They are an important system for preventing waste, theft and fraud. Accounting mistakes really do cost business A LOT. Here are some of the most common mistakes small businesses make when it comes to doing the books themselves:
1. Not keeping receipts for all expenses
It’s easy to pick up small items for your business without getting a receipt. Ultimately, this hurts your business. It’s an expense you can’t process and these soon add up.
2. Inputting errors
This could have an impact on your finances. Simple mistakes are inevitable, which is why having an accountant can be a godsend in bringing corrections to your books, especially where the errors are significantly not in your favour.
3. Not keeping up with the paperwork
This is perhaps the most common mistake most small businesses make when they’ve opted to do their own accounts. Big mistake. Not invoicing customers on time is costing you money and affecting your cash flow. Not keeping on top of cash flow has all sorts of ramifications. Bounced payments and bank interest are costly consequences. Getting behind with bill payments could hurt your business and at the very least earn you a reputation.
4. Employing the wrong people
Most business owners aren’t qualified accountants, so employing an accounts person to work for you would seem like a reasonable strategy. The staff you employ, from bookkeepers to financial controllers won’t be invested in your business in the same way an independent accounting firm would be.
In monetary terms small businesses do need to recognise areas where they can cut costs. Of course they do. Accountancy isn’t one of them.