accountant

Small Business ~ Do I Need An Accountant?

When many people first decide to make the jump into self employment, they often get so wrapped up in their exciting new business idea that boring things like tax preparation get pushed to the back their mind. It’s perfectly understandable because most of us go into business hoping to make money, not pay tax! Unfortunately the reality of self-employment soon hits home when you discover that all those receipts you’ve been saving and invoices you’ve been producing, need to be sorted out and collated onto a tax return at the end of the year!

When you finally take the time to sit down and sort through all that paperwork, you’ll probably realise it’s a lot more difficult and time consuming than you might have imagined. It’s at this point that people start to ask, ‘Do I Need An Accountant’?

Most people try and avoid hiring an accountant due to the costs involved but is that a wise decision? Let’s look at some of the positive things an accountant can do for your business.

Accountants Save You Money

Although you have to pay a fee for your business accounts to be prepared by a certified accountant, this fee often gets more than repaid by the amount of money an accountant can save you in tax. A good accountant will often know of many allowable business expenses and deductions that you might not even have thought of. I’m talking about things like using a room in your home as an office, claiming mileage allowance instead of claiming separate motor expenses and the list goes on. An accountant will also have an in depth knowledge of complex areas such as the depreciation of assets. Hiring a good accountant will usually result in you paying less money in tax than you would if you’d prepared your own accounts. If you do end up paying more in tax, then it will still have been a good investment to hire an accountant because you’ll avoid being hit with big future tax bills or fines for claiming things you weren’t entitled to claim.

Trusted Proof Of Earnings

You might have noticed that whenever you go for a loan, mortgage or any other form of lending, they always ask if you use a certified accountant to prepare your accounts. Lenders and other institutions like to be able to trust the financial figures you’re giving them. As soon as you say that your accounts have been prepared and submitted by a chartered or certified accountant, lenders and other organisations will take these figures as stated and no further proof of earnings is usually required. If you choose to prepare and submit your own accounts and tax return, this is not usually the case. In this situation lenders will often want further proof of income which may not be available or easily accessible.

Expert Advice On How To Grow Your Business

Good accountants are the financial lifeguards of a business. Accountants also have a lot of knowledge and experience they can share regarding the best way to structure your business and also great ways you can grow it.

How To Save Money On Accountancy Fees 

It’s surprising that many people spend much more on accountancy fees than they should. My advice to small business owners is to keep documented, accurate records and do as much of the leg work as possible yourself. Organise all of your own receipts and invoices, add them up and then separate these earnings & expenses onto a spreadsheet. It may take you some time to carry out these quite tedious tasks, but it’s better than paying an expensive qualified accountant to do it for you. Your aim should be to present all of your financial documents and figures to your accountant in a form that allows the accountant to simply do the job of submitting your tax return in as little time as possible. If you feel you need help in doing this there are some great software packages and online payroll programs available to help you keep your business finances organised.

On a final note don’t forget that you can also claim any accountancy fees as a business expense. I however wouldn’t view accountancy fees as an expense but more as an investment. Good investments repay your initial capital and more, a good accountant will often do the same!

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2 Responses to Small Business ~ Do I Need An Accountant?

  1. Sharon Voskamp says:

    Here in Canada, most accountants know squat about taxes. They know the numbers and where they go on a form, but they don’t know what’s allowed, what’s not allowed and how to handle a bunch of things. To be a Chartered Accountant, you take one income tax course in year one, it’s 90% corporate and 10% personal. Take your paperwork to a trusted income tax preparer. They know the ins and outs of the tax laws, not just the numbers. Unless a CA specializes in taxes, they should not be trusted with anything more than a basic return. I have worked for CA’s in the past and have corrected more returns than I care to count.

    • That’s a shame, the accountants I’ve dealt with here in the UK have been great but then I’ve always gone by recommendation from other business owners. As in any trade there are some bad accountants out there and I’ve heard some stories in the past of people being hit with big tax bills years down the line. As I said in the article make sure you use a ‘Good’ accountant or as you say a good income tax preparer.

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