You may hire a small business accountant to help you with your business for a number of reasons. Accountants are able to help you with the establishment of a legal structure for your business. They can also provide advice on how to access finance, and can assist in day-to-today record-keeping.
Many of these tasks can be performed in-house, depending on your team’s expertise.
When should you manage accounts yourself?
You are a sole-trader
The requirements for maintaining records are fairly straightforward if you operate as a sole-trader. Contrary to limited companies, sole traders are not required to file an annual statement of corporation tax with HMRC or annual accounts at Companies House.
They are instead required to submit a self assessment tax return. While not difficult, this can be time-consuming. If you are pressed for your time, it may be best to hire an accountant who specialises in these services.
You have a small volume of transactions
You may be able to do your own bookkeeping if you don’t have many transactions. It shouldn’t consume a lot of time. You may run a sole-trader business, which only requires you to produce one or two invoices per month, along with receipts for travel, subsistence and other expenses.
For simple record keeping
You can manage your daily finances if you have a business with predictable and simple bookkeeping categories. If you have an online store that sells goods on an ecommerce platform with well-defined and easily-understood categories, this may be applicable to you. E.g. Rent, stationary and postage are all costs that you have to pay each month.
Cloud accounting software is a great option
Software products like Xero Sage One Quickbooks and others can be a good middle ground between hiring a small business accountant and doing your own accounting. These monthly online subscription tools enable businesses to keep track of their daily records and submit their VAT return to HMRC.
Some companies prefer to perform their day-to-day bookkeeping on cloud software, and then pay their accountants separately on a quarterly or monthly basis (to align with VAT returns), to review the data and correct errors.
When do you need an accountant?
How to set up a company structure
Before you begin trading, you may want to consult an accountant about the legal structure of your company.
As a limited liability company, you can have more flexibility in terms of how much money you pay yourself and the tax implications that may arise. This will also ensure that you are recognised as an independent legal entity, ensuring that your assets are protected in the event of a business going into bad trading conditions.
Tax returns and statutory accounts
The preparation of an annual set for accounts and tax returns is a complicated process that needs the help of professionals. You must comply with all compliance requirements or you may face administrative and fines.
You can save money by hiring small business accountants to help you classify your tax-deductible expenses.
Cash flow forecasting
Cash flow is the backbone of any business and is often cited as the main reason for failure. A 12-month forward-looking forecast can help you plan and identify any shortfalls. It will also allow you to determine whether you need a loan or equity financing.
It can be useful to establish financial goals for your business.
Get access to finance
Start-ups have a variety of financing options, such as conventional loans, equity funding, and niche services, depending on their type of business.
A professional accountant can assist you in determining the best type of financing for your company. You can work with them to prepare an application, including any supporting documentation, to maximise your chances of obtaining growth finance.
You can complete the basic bookkeeping yourself if you are able to do so. It’s a good idea to periodically spend two hours with your accountant to ensure that you are in good hands.
Cloud software helps accountants become more advisory. Make sure your accountant can offer growth services, such as financial support and assistance with business planning.
Do you need help managing your cash flow as a retailer? Get advice from Account Ease.
