Being a business owner, regardless of size, demands careful financial management. This involves money coming in and out, including the tax obligations and compliances required for running an enterprise.
For someone with little or no experience, handling these financial affairs can be intimidating—and understandably. Not to mention time-consuming, even for someone with decades of experience.
That said, if you’re an SME (small and midsize enterprise) owner operating in the UK, you’re likely wondering if you need to hire an accountant. So, what exactly does the law say about it? Are there practical benefits to having an accountant for your company?
Let’s answer all your questions and more below.
What Does An Accountant Do?
Simply put, an accountant is someone who monitors financial health. It can be for an individual, a business, a government sector, a non-profit group, or a corporation.
Accountants can perform multiple duties and shoulder several crucial responsibilities depending on where they work. Generally, they’ll work on tax preparations, financial management, and investment strategies.
Some of the most common tasks of accountants include account diagnosis, financial statement review, annual audits, tax return preparation, risk analysis, and finance forecasting.
Do You Need An Accountant For A Small Business?
UK law doesn’t require small business owners to have or hire an accountant. So, those confident enough to manage and deal with their company’s financial affairs can do so freely. You can save money and have complete control over your finances.
However, if you choose to prepare and file accounts by yourself, you must ensure to do so on time and consistently. For reference, company accounts are due annually, regardless of your business status (active or dormant).
Another caveat is ensuring your accounts are accurate and up-to-date. That means you’ll have to comply with Companies House and HMRC’s long list of policies and reporting obligations. Failing to do so will result in hefty fines or legal action.
Some companies may get away with cleaning up their books once every month or quarter. But that’s not the case for everyone. Even a small business, with a few staff and fewer business transactions, could require you to clean books frequently.
Sure, weekly or day-to-day bookkeeping may not sound as daunting to an SME owner, but it can quickly spin out of control as your company grows. Not to mention it’s easier to make mistakes (i.e. mixing personal and business finances) as you juggle between commitments.
More importantly, are you confident in your accounting and bookkeeping knowledge? Accounting tasks like preparing statutory financial statements, dealing with irregular cash flows, or bank reconciliations can be confusing without a workable background.
An accountant can offer effective long-term solutions to these issues SME owners typically face. They can handle many tasks, from minute chores such as bookkeeping, payroll, and tax regulation compliance to huge responsibilities like financial analysis and data management.
9 Benefits Of Having An Accountant For Small Businesses
You already know that accountants do tax and compliance work. However, the best accountants can do so much more for your company.
1. Saving Time
One of the most advantageous benefits of having an accountant as a business owner is more time. As you likely know, tracking and recording your financial data for filing can be time-consuming, taking away precious time you could spend growing your business.
By taking responsibility for your books and keeping up with tax commitments, an accountant can free up your schedule and let you focus on what you do best: running the business.
Besides bookkeeping and complying with tax requirements, having a skilled accountant can provide valuable insight into your business operations. With their keen understanding of managing money, they’ll help you make better financial decisions faster to keep the gig running.
2. Assisting Startups
We understand that starting a business, no matter the size, can be an exciting experience. But it takes more than a good startup idea to become successful in the industry. For one, you’ll want to know if your venture has the potential to earn money—a task accountants are capable of.
If you have an accountant, they can help test your business ideas, provide rough operating costs, and present practical revenue forecasts. This way, you can get a sense of where your business is heading, and whether it’s viable conceptually and financially.
This case applies to businesses that are already up and running as well. Even if you’ve already built your SME from the ground up, you’ll still need an accountant to plan for your company’s growth and set contingencies for the worst-case scenario.
3. Managing Cash Flow
An irregular cash flow is a small-business owner’s worst nightmare. Cash is every business’s lifeblood. Without it, your company may fail to cover essential expenses, such as employee payroll and supplies.
Many businesses crash because of problematic cash flow and running out of money to pay suppliers and staff. Even a highly active company won’t be able to survive issues like slow payments paired with high expenses.
Having a skilled accountant prevents problems like these from occurring. Understanding the ebbs and flows of your business’s revenue and expenditures, accountants can help formulate strategies to manage your finances. They can create forecasts and savings plans to help you stay afloat amid lean times.
4. Controlling Debt
Debt is another small business killer. Still, borrowing money isn’t necessarily harmful to a company. The trick is understanding the difference between good and bad debt—a task your accountant can certainly help you with.
Accounting experts can find affordable borrowing strategies for your company. They’ll help you decide the best mix of repayment flexibility with the lowest interest rate. If your business needs refinancing, they can assist with that, too.
Moreover, an accountant can help your case for a “Time to Pay” arrangement with HMRC if you’re having difficulties paying your tax debts. This way, you can work with HMRC experts and negotiate a manageable payment plan for your tax debt.
5. Organising Financial Data
It’s natural to want to spend most of your time and efforts on operating and growing your business. But if you have to juggle your personal and professional commitments, it’s easy to make mistakes like mixing your business and personal documents.
Remember, organising financial data isn’t merely for convenience but a necessity for businesses. It helps you track expenditures, income, and other crucial information. Without proper data management, you won’t even know if you’re making any profit or losing money!
This is one of the areas where you need accountants most. A professional accountant or bookkeeper can review your accounting system, prepare your balance sheets, collect supporting documents, and create comprehensive summaries. You won’t even have to worry about receipts.
6. Offering Business Strategies
Your accountant can be a key partner in formulating effective business strategies. More than someone who completes tax returns in your stead, professional accountants have numerous tricks up their sleeve to make your business succeed.
There are plenty of cogs and gears to worry about when running a business. The complexity of the industry sometimes makes it hard to know where to focus. Accounting experts can help you identify what’s important and what’s not.
They’ll work with you in setting realistic goals and how to achieve them on time. Accountants can also pinpoint your most valuable clients, monitor your growth, and provide tools to measure your progress.
7. Increasing Business Profitability
For those unaware, there’s an entire aspect of accounting dedicated to a business’s production costs. We call this segment cost accounting. It analyses every expense of making your products or services, from fixed and variable to direct costs.
Cost accountants will help you identify which product or service is most profitable, including which is easiest to sell. This way, you can implement optimal production strategies and bolster your profits. For SME owners, cost analysis is crucial for making informed business decisions.
Besides production costs, accountants can provide a clear picture of your business’s financial situation. This way, you can better understand your needs and allocate resources effectively to maximise revenue.
8. Measuring Financial Performance
What do you think success looks like? That’s a question some business owners would find difficult to answer. It’s not that they don’t have a goal they strive toward. Typically, the problem is they lack resources to measure their successes properly.
Marketing and finances quickly devolve into guesswork without rigorous performance measurement. You may occasionally implement marketing strategies, but you won’t know what your business will gain (or lose) afterwards. It’s a spell for business disasters.
Most successful companies understand the crucial role of measuring performance. However, they don’t do it themselves but with an expert accountant. By monitoring the right metrics, accountants can set clear and sensible expectations for your company’s performance.
9. Incorporating Accounting Technology
One of the most important things an account can do for you is implement smart technologies to boost business efficiency. As experts, they’re equipped with up-to-date knowledge about modern accounting tools to automate your business transactions.
If you’re struggling with unpaid invoices, your accountant can eliminate the need to chase clients down. They can help set invoice systems that let you know what’s paid and unpaid, and even send notifications to clients, reducing your headaches.
There are several smart accounting resources an accountant can implement for your business. From cash flow dashboards, KPI tracking software, automated accounts payable, stocks management approaches, and accounting apps for convenient financial tracking.
Finding The Right Accountant
Now comes the most difficult part: choosing the right accountant for your growing SME business. To help you decide, here’s a quick checklist you can use to help you select the best person for the job:
✓ Business Goals
Before hunting for an accountant, don’t forget to take a quick step back and examine what you want to achieve. Are you a startup seeking financial growth? Or do you need coaching to increase capital? Knowing what you need is important when navigating through your options.
✓ Accounting Certifications
Look for a chartered accountant that demonstrates expertise above degree-level education. These qualified accounting professionals can provide a wealth of knowledge you can use for your business. Particularly look for ATTQB, CGMA, CIMA, and FCA certifications!
✓ Firm Experience
It sounds obvious, but it’s important to choose an accountant from firms specialising in business accounting. This way, you can be certain they’re proficient in bookkeeping and accounting management. Look into their area of expertise and whether their experiences suit your needs.
✓ Meet Your Prospects
Lastly, don’t forget to meet your accountant in person. Your relationship is key here, as you’ll work closely together to manage your business. Take note of their personality, the transparency of service they’ll provide, and whether their rate matches your budget.
FAQs
Do you need an accountant as a self-employed individual?
You won’t legally need an accountant if you’re self-employed. However, it also means everything about managing your business finances will rest on your shoulders.
In short, how smoothly your business operates (including profitability) will depend on your financial decisions and how much work you put in. Consider hiring an accountant to help with time-consuming tasks, such as organising finances, bookkeeping, and filing tax returns.
Does a limited company need an accountant?
As with SMEs, limited companies (LC) don’t have a legal obligation to hire an accountant. Nevertheless, having an accounting expert offers plenty of benefits for LCs.
For one, you still have to submit statutory year-end accounts to Companies House and HMRC, which takes considerable effort and time. If you want to focus on managing your business, having someone to look after your finances can help.
Final Thoughts: Is Hiring an Accountant Worth It?
Running a company is stressful enough without worrying about tax compliance and financial management. An accountant on your team can take care of it all. So, you can relax knowing your business finances are in expert hands.
Effort aside, tax laws change constantly, making it hard for business owners to remain up to date to make sound financial judgments. It may feel like an unnecessary expense at first, but having an accountant does provide many advantages to a growing business.
Are you ready to sort your business finances and pave the road to success? Reach out to us!