When should a small business get an accountant? – Approved Accounting

For most business owners, the services of a professional chartered accountant is considered an essential. If you are just setting out on a self employed basis, you may be wondering at what point you should hire an accountant, or perhaps if you even need an accountant at all.

As a small business owner, you are not obliged to hire an accountant as long as you fulfil your statutory requirements with HMRC and Companies House. However, an accountant can add value to your business from day one, providing time saving services and professional advice to support your long term goals.

Whether you are a setting up as a sole trader or limited company, a good small business accountant can help with every financial aspect of your new business, including bookkeeping, tax filing and statutory accounts.

A great accountant will also ensure your company is tax efficient and help you to become more profitable.

Whatever stage you are at and whatever your future business plans may be, to hire an accountant could just be the best business decision you make.

Is it worth hiring an accountant for my small business?

To some small business owners, accountant services may appear like another unwanted cost. But it’s widely considered a false economy to avoid accountancy costs to save money.

The consequences can be costly if you make a mistake or run into trouble with HMRC.

There is a lot of value arising from the peace of mind that your accounts are being run well, and you have the support you need to guide you in an ever-changing business and tax environment.

If you’re on the fence about whether you need the service of accountants, perhaps consider these questions:

• Can you be sure that your company is entirely tax efficient?
• Do you have a completely accurate view of your cash flow at any given point?
• Can you afford to employ the same level of financial talent in house?
• Do you have clear financial data on which to base each business decision?

And if you are a sole trader managing your own accounts:

• Is your time more valuable per hour than an accountant’s fees? If so, then why not save yourself the considerable time and stress of accounting to focus on your business instead?

Can a small business do their own accounting?

While you are perfectly entitled to do your own accounts, there is no denying the value that a good accountant can provide in terms of support, guidance and services.

For example, day to day bookkeeping may not seem onerous, but it can soon escalate out of control once your company grows.

And when it comes to other aspects of accounting, such as preparing statutory financial statements and tax computations, the legislation and processes can be horribly confusing.

Without professional advice, it is all too easy to make mistakes and incur costly penalties.

It’s also important to consider how an accountant can help your business to become more profitable, by providing advice on tax efficiency, identifying cost savings and producing financial projections to support your future growth.

What records do I need to keep track of for my small business?

As a sole trader or limited company, it is necessary to record and keep documents to support all financial transactions that take place in your business, including:

• invoices to support all expenditure
• sales invoices (or other records, such as POS data)
• bank account activity
• cash transactions
• contracts and leases
• payroll/CIS records
• stock records

It’s easy to understand why keeping on top of the books can become a full time job in a growing company!

It has long been considered best practice is to keep records electronically, and for some small businesses, this is due to become a legal requirement with the introduction of Making Tax Digital from April 2024.

Approved Accounting recommend using cloud accounting software such as Xero to ensure that records are kept accurately and efficiently. Among the many benefits of online accounting software, Xero allows you to access your accounts on any device, wherever you happen to be.

At what point do I need an accountant for my small business?

From day one! Of course, we would say that, but the benefits really do speak for themselves.

Accounting has so many potential pitfalls that you can easily go wrong without the right advice and guidance.

Losing control of your finances at any point of your business journey can have devastating consequences, which is why it is wise to invest in accountancy services right from the beginning.

What can small business accountants do for me?

It’s true that your accounting requirements will depend on what stage of growth your business is at.

You may be comfortable to manage your own books in the early days, and use an accountant on an ad hoc basis. eg, for advice on your business plan, financing options and the various tax laws you need to be aware of.

Once you are up and running, you may consider a more structured accounting service, to keep you compliant and save you time and money.

For established businesses and those on the verge of growth, a fully outsourced accounts team could be the most beneficial route.

Whatever stage your business is at, a good chartered accountant can help lighten the load, provide advice on good practice and even help you to become more profitable.

Accountancy services for each stage of your business

Early stages of your business

Even before you begin trading, an accountant can offer valuable advice to your fledgling company on business planning, how to secure a business loan, and key decisions like adopting the right business structure.

There are three legal business structures for small businesses – you may decide to become a limited liability partnership, limited company, or sole trader.

It is important to get advice on the best legal structure for you, as each type has its own set of obligations and tax laws.

For example, while a limited company offers protection for your personal finances, sole traders are solely liable if the business fails, meaning their property and other possessions could be used to offset the debt.

Once you’ve decided on the best business structure, your accountant can also help to register your business with Companies House, to ensure regulatory compliance right from the get go.

When your business is up and running

There are many contrasting views on accounting, but the fact that it is time consuming is not one of them! As your business grows, daily accounting tasks become longer, and you can lose valuable hours to record keeping and endless data entry.

It may become insurmountable to stay on top of your accounts and successfully manage your company at the same time. It’s at that point you may consider hiring an accountant on a retainer basis to manage your business finances.

They can offer a comprehensive range of services to free up your time and provide you with the confidence to grow your business.

A good accountant will tailor an accounting package to your particular needs, which could include cloud accounting software, bookkeeping, corporation tax returns, payroll, VAT returns and filing your annual accounts with Companies House.

At this stage of the game it’s vital to keep a clear picture of your incomings and outgoings to ensure that your operations are not affected by negative cash flow.

Professional accountancy services will help with cash flow planning to keep your business running smoothly and ensure there are no nasty surprises come year end.

Planning for the future

As your business grows and becomes more successful, you may take on more employees and make plans to grow your business further.

That’s when it may be beneficial to consider a fully outsourced team of accountants, rather than incurring the cost of setting up an in house accounts department.

Your outsourced accountants will take responsibility for day to day accounting remotely, as well as supporting your business plan by producing regular management accounts and other reports.

This can provide you with insightful financial analysis on which to make sound business decisions.

Get in touch with Approved Accounting about small business accounting

At Approved Accounting, we excel in helping sole traders, limited companies and limited liability partnerships to establish a solid financial foundation from which to grow.

With us as your accountants, you can be confident that your finances are in expert hands, leaving you to concentrate on your small business.

Contact us at Approved Accounting today to discuss your small business accounting requirements and to discuss how we can help your company at every stage of development.