Top 10 FAQS: 3. When do I need an accountant and how do I pick a good one?

Top 10 Finance Questions Encountered By Every Entrepreneur: #3 When Do I need An Accountant And How Do I Pick A Good One?

As a small business owner, knowing the ‘when, what, who and how’ of navigating needing an accountant can be challenging.  So in this article we will uncover: when you might be able to handle the accounting tasks yourself, what you must do for a limited company, how to choose the right accountant, and what your options are  when you need more than just support with compliance based finances.

When Can You Handle The Accounting Obligations Yourself? 

Before you hire an accountant, you might first consider if  you actually need one… because there are situations when you can do it yourself.

If you’re set up as a sole trader (not limited company) then from a filing point of view, you’re only required to file an annual self-assessment tax return and maintain fairly basic records of your income and expenditure in order to do so.

You can do this yourself by using the HMRC online portal, and if you only have a few basic transactions that might work for you!

However a DIY approach does run the risk of you making errors or missing out on claiming all your relevant business expenses due to a  lack the knowledge and experience on these topics.

This is why many sole traders prefer to outsource their accounting and tax return preparation to a specialist. Firstly, it takes away the worry and hassle of having to tackle it yourself! By working with a qualified accountant you also gain peace of mind that your approach and claimed expenses are aligned with HMRC regulation. You may even find that you save some tax tax because an accountant can help you claim some commonly overlooked areas such as travel and use of home as office expenses.

And aside from the tax return an accountant is looking out for you in terms of thresholds and milestones, for example to help you with VAT registration, running a payroll if you decide to hire people, or perhaps to convert to a limited company structure.

Accounting obligations with a limited company – what ‘must’ you do?

If you are set up as a limited company then you, as the Director, must ensure the company meet its legal obligations each year. These include preparing and filing an annual:

  • Confirmation Statement, which confirms important details about your company.
  • Statutory Accounts, which provide an overview of the company’s financial position for that period.
  • Company Tax Return, to report the taxable profits and calculate taxes due.

The specific reporting requirement  involved in  the annual reporting for a limited company, including the need to adhere to the relevant accounting standards, means this is almost always prepared on behalf of a business owner by a suitability qualified and regulated accountant. 

Also, regardless of whether you are a soletrader or a limited company, if your business employs anyone you will need to run a payroll, usually monthly, and submit PAYE filings.  And if you are VAT registered (either by choice of because you have reached the VAT threshold, currently £85,000), you must submit VAT returns. Accountants will often advise you and manage PAYE and VAT on your behalf, though it is possible to manage this yourself with suitable knowledge and guidance.

Depending on the size of your company, hiring a bookkeeper, finance assistant and/or finance manager may also be beneficial for day-to-day financial activities of running a business and free up your time to work on areas you prefer and are more suited to.

How do I choose the ‘right’ accountant for my small business?

Don’t be tempted to simply go with the lowest cost accountancy services, because like anything in life, you get what you pay for! At a low cost, your accounting work might well be carried out by un-qualified or in-experienced people, which means it could well be less accurate and efficient for you.  Because did you know anyone can call themselves an accountant?

Also, the most ‘budget friendly’ priced accounting services, tend to be less responsive and helpful with your questions or concerns. Because you simply aren’t paying enough for them to give you that much time and expertise when they have maybe thousands of other clients on their books. This tends to leave business owners frustrated and unsure.

Whereas if you are spending a little more, you are more likely to have an accountant with the skills and capacity to look out for you and your business with the time to give you invaluable advice and support on wider topics. So you generally do get what you pay for!

Here are some other pointers to help you choose an accountants that will be a good fit:

  •  A good online presence, positive reviews and word of mouth recommendations from business friends is always a good sign!
  •  The practice is registered with a Chartered Institute, such as ICAEW, or in some cases AAT might be sufficient for you, as this will give you some assurance of quality, accurate work, with advice based on up to date and compliant knowledge.
  • An accountant who has experience with your specific industry or business type, so they can support the unique challenges with this and preempt your needs.
  • If you have plans to grow bigger than you are now, seek an accountant who can grow with you, for example one that can support your transition to a limited company, raising investment, or simply having the skill set to advise you on scaling profitably.
What if I grow and need more than just the compliance finance covered?

If you plan to grow and scale your venture profitably just having accounting services for ticking those compliance boxes isn’t going to cut it!

To achieve long-term success in the way you define it, you will likely also benefit from strategic and commercial financial support. Did you know as an outsourced CFO can help small businesses succeed with:

  • Business planning, forecasting and goal-setting
  • Tracking, reviewing and maximising your commercial performance
  • Having enough cash, dealing with growing pains and tax planning
  • Raising funds – securing grants, loans and investments
  • Decision making – when to hire staff, rent a new office or expand?
  • Setting up scalable ops and finance systems and processes
  • Personal finances – strategies for paying yourself sustainability, efficiently and aligned to your life goals
  • Act as a sounding board to bounce around ideas and problem solving
  • As a business mentor to finance professionals and business owners.

You see an outsourced CFO is a special kind of accountant that goes far beyond the minimum compliance and day-to-day accounting/finance needs. To help you grow your business aligned to your unique aspirations – sustainably and profitably. It isn’t all about big growth metrics, it could be about helping you earn more while working less, planning a more steady reliable income, or diversifying what you do.

And this is an affordable investment because you pay for just the time and activities you need the support with and a little insight can go a long way!

Hi, I’m Harriet Formby MA ACA, your trusted Small Business CFO, Business Growth Specialist, and Finance Educator.

I am the founder of Below The Line Finance and my mission is to financially empowering creative entrepreneurs to build aligned businesses  – with profit, purpose and healthy cashflows!  With my collaborative and supportive approach to finance and accountancy , I am dedicated to guiding you to greater confidence and success with your business numbers.

What could you accomplish with your very own Mini CFO?

Let’s stay in touch:

Together we can say goodbye to fear and confusion, build solid finance foundations and step into a supportive environment where you can turn your dreams into a reality through bespoke finance strategy.