When Should I Hire a Small Business Accountant?

Jordan Macey

April 21, 2021

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Small Business Accounting

Introduction

If you’re a self-employed person or small business owner, you might have already asked yourself the question, “Do I really need an accountant?”

When people ask that, they usually mean, “Can I justify the cost of an accountant?”

It seems simple: Hiring an accountant might seem like something you could do without, and if you handle the accounting yourself, you save money.

But that isn’t the best way to think about it. The reality is that there are hidden costs associated with DIY accounting, and you don’t want to come up short. So instead, ask yourself, “Will hiring an accountant add value to my business?”

The answer is yes.

Below, we’ll cover the key cases when you should hire an accountant:

Defining: Accounting and Bookkeeping

Before diving in further, it’s important that we run through the definitions of accounting and bookkeeping. That’s because these two terms are often used interchangeably—yet they refer to two distinct functions.

Accounting refers to the process or work of analysing and reporting financial transactions. It takes the financial data from your business, and ‘turns’ the information into useful insights.

Bookkeeping is more administrative, and refers to the process of recording and summarising financial transactions. Examples of bookkeeping tasks include data entry, completing payroll, generating reports and posting debits and credits.

When should I hire an accountant for my small business?

You’re starting a business

When you’re forming your business, there are many key decisions you need to make.

‘Should you set up as a sole trader or form a limited company? How do you know if your financial projections are realistic? And are there important tax deductions that you might have overlooked?’ are just some of the questions that may be running through your head. 

At this stage, an accountant is a valuable source of information, and can help you with the following:

  • Putting together a well-thought-out business plan
  • Deciding on the right business structure for your situation
  • Getting the required business licenses
  • Tax compliance and tax planning
  • Setting up your business accounting software

You want to save time on managing your business finances

According to the Federation of Small Businesses (FSB), British SMEs spend an average of 95 hours—each year on tax compliance alone.

It’s the equivalent of almost three working weeks—yet this isn’t taking into account the time that business owners spend on managing other aspects of their company finances. 

Some of the hurdles that these small business owners face include determining the tax rates at which they’re required to pay, figuring out tax exemptions or knowing which tax reliefs were available. 

An accountant can help you get around challenges that you’re unfamiliar with quickly. As such, it can be a worthwhile investment turning over these tasks to specialists, as it frees up more time for you to focus on more productive business activities.

You’re buying or selling a business

Buying or selling a business can be a stressful time—and it’s to your benefit when you have experts on your side to guide you through the process.

If you’re buying a business, an accountant can: 

  • Review the financial statements
  • Help with preparation of business plans
  • Help you assess the actual or perceived value of the company
  • Help you determine areas for growth through reviewing inventory management, cash flow patterns and more
  • Provide advice on financing the purchase

If you’re selling a business, an accountant can:

  • Provide an objective valuation
  • Help you organise and structure the deal
  • Help evaluate risk
  • Make sure that your financial statements are up to date
  • Help you with planning your next steps, whether that’s financing your next venture, start investing or plan for retirement

You’re applying for a small business loan

Applying for a business loan can be a tedious and time-consuming process. Lenders want to see a strong financial profile—and this is where many small businesses fall short.

Small business owners may lack the knowledge or time to put together a professional package for their loan application, and here’s where an accountant comes into the picture. 

They can help:

  • Determine how much you need to borrow
  • Introduce a wider variety of financing options
  • Identify repayment sources and solutions
  • Provide insight on how the loan can impact your finances 
  • Pull together the collateral you need for the loan application process

Small Business Accounting Guide

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Small Business Accounting Guide

Not sure where to start?

Visit our small business accounting hub for further information, or reach out to our team.

We understand small businesses, and do our best to give you everything you need to succeed.

Small Business Accounting Guide

What's Inside:

  • When and why you may want to register a Limited Company
  • Advantages and disadvantages of a Limited company
  • Limited company alternatives
  • When to register for VAT
  • Advantages and disadvantages of VAT
  • How to take money out of your company
  • Dividend tax rates
  • Limited company expenses & corporation tax
  • Annual accounts and deadlines
  • Confirmation statements and deadlines
  • Self Assessment tax returns
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Small Business Accounting Guide

What's Inside:

  • When and why you may want to register a Limited Company
  • Advantages and disadvantages of a Limited company
  • Limited company alternatives
  • When to register for VAT
  • Advantages and disadvantages of VAT
  • How to take money out of your company
  • Dividend tax rates
  • Limited company expenses & corporation tax
  • Annual accounts and deadlines
  • Confirmation statements and deadlines
  • Self Assessment tax returns

Read More Guides below:

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Registering a Limited Company Guide Guide

Registering a Limited Company Guide

  • What is a Limited Company
  • 10 step process for setting up a Limited Company
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Small Business Accounting Guide Guide

Small Business Accounting Guide

  • When and why you may want to register a Limited Company
  • Advantages and disadvantages of a Limited company
  • Limited company alternatives
  • When to register for VAT
  • Advantages and disadvantages of VAT
  • How to take money out of your company
  • Dividend tax rates
  • Limited company expenses & corporation tax
  • Annual accounts and deadlines
  • Confirmation statements and deadlines
  • Self Assessment tax returns
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Are there any penalties for delivering Company Accounts late? Guide

Are there any penalties for delivering Company Accounts late?

The following penalties for private limited companies will be imposed if you fail to file your accounts with Companies House on time:

  • Up to 1 month late: £150
  • 1 - 3 months late: £375
  • 3 - 6 months late: £750
  • More than 6 months late: £1,500
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How do I register my business? Guide

How do I register my business?

To register a business as a sole trader, you need to:

Once you've registered, you need to fulfil your responsibilities as a sole trader. These include:

  • Keeping records of your sales and expenses
  • Submitting a Self Assessment tax return each year
  • Paying income tax and National Insurance Contributions

To set up a limited company, you need to:

  • Decide what type of limited company you need
  • Choose a business name
  • Choose how to set up your limited company
  • Complete the company formation process
  • Open a business bank account
  • Inform your stakeholders
  • Get your VAT registration or transfer sorted out
  • Set up your payroll
  • Update your company details
  • Get your books sorted out

To set up a business partnership, you need to:

  • Choose a business name
  • Choose a ‚Äònominated partner'
  • Register with HMRC
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5 Common Small Business Accounting Mistakes & How to Fix Them Guide

5 Common Small Business Accounting Mistakes & How to Fix Them

A broad swath of small business owners are tackling the myriad tasks required to pay bills, invoice customers, cut checks to employees and contend with past-due accounts, among other accounting tasks.

While that might work for very small businesses, it often opens the door for firms to make accounting mistakes that undermine their growth and siphon precious time and mental focus from other important areas of their business.

Here are five accounting mistakes that can derail growth for small businesses and how to avoid them.

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How to make and send an invoice for your clients Guide

How to make and send an invoice for your clients

You've delivered your work, and it's time to receive your payment.

Before that, you'll need to make an invoice. It's an important document: not only does it help you obtain money you're owed, it also serves as evidence of a transaction in the event that you need to seek legal action to handle non-paying clients.

If this is new to you, you might be wondering: How do I create an invoice, and what must I include? Are there best practices or tips I need to know?

We'll answer all of these questions below:

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How do I set up a Limited Company? Guide

How do I set up a Limited Company?

To set up a limited company, you need to take the following steps:

  • Decide what kind of limited company you need
  • Choose a business name
  • Choose how to set up your limited company
  • Complete the company formation process
  • Open a business bank account
  • Inform your stakeholders
  • Get your VAT registration or transfer sorted out
  • Set up your payroll
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When Should I Hire a Small Business Accountant? Guide

When Should I Hire a Small Business Accountant?

If you're a self-employed person or small business owner, you might have already asked yourself the question, "Do I really need an accountant?"

When people ask that, they usually mean, "Can I justify the cost of an accountant?"

It seems simple: Hiring an accountant might seem like something you could do without, and if you handle the accounting yourself, you save money.

But that isn't the best way to think about it. The reality is that there are hidden costs associated with DIY accounting, and you don't want to come up short. So instead, ask yourself, "Will hiring an accountant add value to my business?"

The answer is yes.

Below, we'll cover the key cases when you should hire an accountant:

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When do I need a Limited company as a contractor? Guide

When do I need a Limited company as a contractor?

There is no clear cut time as to when you should start working through your own limited company. With other routes available-such as operating as a sole trader, or working through an umbrella company-it is always worth weighing up what is best for you and your circumstances.

With that being said, if you plan to work as an independent contractor for the foreseeable future, opening your own limited company at the early stages can maximise your opportunities for reaping the benefits of having your own company straight away.

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How do I resell goods I have purchased? Guide

How do I resell goods I have purchased?

NA

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How do accountants charge contractors? Guide

How do accountants charge contractors?

Like with all service offerings, you can find contractor accountants at pretty much every price point. Some accountants will charge by the hour, some by piece of work or like ourselves, will offer a fixed monthly fee covering everything you will need in one clear package.

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Contractor Accounting Services Guide

Contractor Accounting Services

We pride ourselves on providing an unparalleled level of support that will make you feel valued, eliminate your admin and ensure you're being as tax efficient as possible.

VAT registration & filing

We'll registered your company for VAT, and ensure VAT is always filed well ahead of the deadline. We will ask you to confirm that you're happy for us to automatically file your VAT without having to approve it which will ensure that we can get this filed as soon as possible.

We'll also help you get setup with a Direct Debit for HMRC so that you can make your VATpayments automatically without having to manually do this every quarter. This saves you time and the stress of ensuring you've paid on time, and importantly will make sure you don't have to pay a penalty for a missed deadline.

Annual accounts

We aim to complete your annual accounts well ahead of schedule to ensure you have complete financial records.

Corporation tax

You should never have to guess how much corporation tax is due. We'll make sure you know how much is due and when it's due.

Confirmation statement

We'll make sure to keep your Companies House account up to date and ensure your confirmation statement is filed on time.

Self assessment

We include a Self Assessment with our operate and grow packages and this is also available as an additional £99+VAT one-off charge.

Tax efficiency

From your salary, dividends, pension, investments and company expenses, we'll help you optimise your tax.

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How do I depreciate an asset?

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5 disadvantages of a limited company Guide

5 disadvantages of a limited company

What are the advantages of a private limited company?

In the UK, the majority of self-employed people operate as sole traders. While there are many advantages to being a sole trader, you could take home more money and give your business a professional edge by setting up as a limited company.

In this article, we'll look at the advantages of operating as a private limited company to see how it could benefit you. If you're interested in seeing whether a limited company could be a good option for your business, check out our Business Structure guide. If you're already operating as a sole trader, making the jump to a limited company is more straight forward than you think.

Advantage 1 ‚- You pay less tax and National Insurance Contributions

Who can turn their nose up at the prospect of increased take-home pay? Well, that's the principle benefit of setting up a limited company and one of the main factors that drive people to switch from a sole trader.

As a director of a limited company, the way you pay tax is different from how you pay as a sole trader. As a sole trader, you'll pay 20% or more on everything you earn over the tax threshold. As a limited company, you typically pay yourself a small salary so you incur as little personal tax as possible. The majority of your income will come in the form of dividends that are taxed at a much smaller rate, meaning you're able to maximise your take-home pay.

As well as the tax benefits, paying the majority of your income through dividends means that you're able to pay less National Insurance Contributions (NICs) as these do not apply to dividend payments.

Example - Here's a quick comparison of the difference in take-home pay for a sole trader and a limited company.

  1. Sole Trader
    Revenue: £40,000
    Expenses: £1000
    Tax at 20%: £5,300
    Class 2 NIC: £158.60
    Class 4 NIC: £2,655
    Take-home pay: £30,886.40


  2. Limited Company
    Revenue: £40,000
    Expenses: £1000
    Corporation tax: £5741.04
    Dividend tax at 7.5%: 1,406.92
    Take-home pay: £ 31,852.04

As you can see, you save £965.64 as a limited company. What's not to like?

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5 invoice template tools to help you invoice when self employed Guide

5 invoice template tools to help you invoice when self employed

An invoicing problem is a good problem to have.

It means that you have too many clients or too much work to properly charge for it. The good news is that it's an easy problem to fix.

Invoicing is essential for any self-employed person individual. It's how you collect revenue, and, done correctly, it's also how you can avoid tax issues.

I know how important this is because I've been there as a small business owner - and I searched for a long time to solve this problem and make it painless.

Besides hiring a personal assistant or part-time accountant (which is impractical for most smaller-time, one-person-show contractors), there's the option of using invoicing software that makes the process easy.

Below, I break down the difference between five popular invoicing tools to help you get started on making a decision.

Your decision will ultimately depend on what your business really looks like.

These are some questions you can ask yourself:

  • Do you only have a handful of regular clients?
  • How do your clients prefer to pay you in a certain way?
  • Are late payments a recurring problem for you?
  • Do you send out invoices, or does somebody else?
  • Do you already have accounting software in place, or are subscribed to an accounting package that includes the use of an accounting software?
  • What other applications and tools do you use for your business?
zoho invoicing tool
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How do I register a limited company? Guide

How do I register a limited company?

There are a couple of ways to go about registering a limited company:

  • Register directly through Companies House
  • Go through a third party: An accountant or company formation service can help you process your application, significantly lessening your admin burden. Beyond the application, a good third-party service can also provide accounting advice, help you fulfil your filing obligations and assist with other admin tasks.

We've included further details in our guide on setting up a limited company.

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What are the advantages of a Limited Company? Guide

What are the advantages of a Limited Company?

The advantages to setting up a limited company are:

  • Owners aren't fully liable
  • Tax savings
  • Using a limited company structure lends credibility to your business
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How to find an accountant Guide

How to find an accountant

If you have a company, or are starting one, then you will need an accountant.

Though you could do all your accounts yourself, in practice few business owners have the time.

An accountant also checks that you are doing everything correctly, and is a useful reference for both HMRC and financial institutions should you ever need to apply for a loan.

The trouble is that finding the accountant who is right for you is never easy.

You do not want to pay more than you have to, but are low-cost, self-service, internet-based accountancy packages really the best fit for your business needs?

In this article we shall break down that option and its alternatives for you, as we answer the key questions that are occupying your mind right now:

  • Do I need an accountant?
  • What should I look for in an accountant?
  • How do I find the best accountant for me?

The purpose of this article is to give you the context and background you need to ask the right questions-especially when you may not yet know what those questions are.

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Bookkeeping vs Accounting Differences Guide

Bookkeeping vs Accounting Differences

As a small business owner, having a good grasp of your business financials is key-even if you've hired an accountant.

While you can delegate your accounting tasks, understanding the basics will place you in a better position when it comes to discussing your business finances with your team members, financial professionals or potential investors.

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Previously, we've explained about the top accounting terms and concepts you need to know. In today's post, we'll explain the differences between bookkeeping and accounting. While these two terms are often used interchangeably, they refer to two vastly distinct functions and roles.

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How to set up a Limited Company Guide

How to set up a Limited Company

When you set up a limited company, you'll enjoy many advantages you don't get as a sole trader. Not only is it a tax-efficient way to run your business, it's also a great way to limit your personal liability and increase your credibility with customers. Additionally, it could open new avenues of work that wouldn't be open to you if you were operating as a sole trader, especially some contractor roles.

One of the disadvantages of running a limited company is that it involves a lot of paperwork, but with the help of this guide, we'll clear away the jargon and tell you exactly what you need.

If you're unsure about whether a limited company is right for you, check out our handy article comparing the differences between Limited companies and Sole Traders to see which business entity is right for you.

If you've got more important things to do than dealing with extra admin, you can always take advantage of one of our accountancy packages and we'll do all the forms and applications for you.

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