When Should I Hire a Small Business Accountant?

Jordan Macey

December 28, 2020

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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
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
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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Create a free account. Talk to an accountant.
Explore hundreds of guides. No Credit Card Needed.

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