Choosing and Using an Accountant for Your Small Business

Hiring the right accountant can save your business serious money in the long run – here’s how to do it...

Choosing and Using an Accountant for Your Small Business

When running a business for the first time, it can be tempting to think you can go it alone – as an enthusiastic advocate of lean techniques, you may have taken the view that an accountant represents an unnecessary expense.

But the opposite is almost always the case; a small outlay on an accountant can save your business untold costs in the long run.

In this article, you will find an introduction to accountants from the point of view of a small business. We cover what services they can provide, where to find one, and how to save on accountancy fees.

What services can an accountant offer my small business?

Accountancy is a broad term, and different accountants will offer different kinds of service.

There are a number of such services.

Helping you file annual accounts.

Whether you are a sole trader, partnership or limited company, you have to prepare and file annual accounts with HMRC for tax purposes. An accountant can help you collate the supporting evidence and make sure you tick all the boxes, although it is perfectly possible to do this yourself.

Offering business advice and assistance.

An accountant can advise on the legal form your business should take (sole trader, partnership, limited liability partnership or limited company) as well as drafting a business plan and general business advice.

Setting up bookkeeping systems.

Accountants can navigate the complex maze of ledgers you need to keep as a business, like sales and purchase ledgers, petty cash books, and so on.

Setting up management accounts, financial statements and payroll.

The rules on pay-as-you-earn (PAYE) recently changed – you now have to report PAYE information to HMRC each time you pay an employee. An accountant can help you get set up with the new rules.

Helping you meet your tax requirements.

An accountant can help you ensure your tax bill is as low as possible and help you complete and file your tax returns.

Offering advice on sources of finance.

Accountants can give you information about sources of finance, and advise on the most appropriate finance method for your start-up.

Helping you with buying or selling a business. 

If you are thinking of buying a franchise or pre-existing business, accountants can do the detective work and find out about the true state of a company’s finances. They can also help you manage an exit.

Assisting with pensions and personal finance.

Accountants can help you plan your personal future as a business owner.

Where do I find an accountant?

Compile a list of accountancy firms and use offline and online sources of information to get recommendations for specific firms. In particular, you should ask your business contacts who they use. Similarly, you could ask your bank manager for recommendations as they’ll obviously be in the know.

Finally, use an accreditation body such as ICAEW or ACCA to search for registered accountants.

How do I explain the needs of my business?

When meeting an accountant for the first time, you need to have a clear idea of your business’ needs and where it is going.

Ask yourself what exactly do you need the accountant for?

To help the accountant understand the needs of your business, you should do a number of things.

Firstly, give the accountant a copy of your business plan as this should provide them with all they need to know about your business and where you expect it to go. For help in drafting a business plan, click here.

If you haven’t finished your business plan yet, you need to put together a sheet of key information and estimates about your business.

This key information sheet should include:

  • Sales forecasts (broken down by product and divided by month)
  • The number of your customers and expected purchases as well as your product range
  • Number of staff – and the number of staff that could help with administration
  • Any accounting or payroll software you use
  • Specific areas you need an accountant’s help with.

What information do I need to know about the accountant?

Ask the right questions in the initial meeting and you will get a much better idea of whether the accountant will meet your needs.

Find out about the number of partners in the firm and what each one’s specialty is.

Similarly, find out what kind of clients the firm has.

Investigate whether the accountant regularly deals with businesses of your size and sector.

Although your initial meeting may be with someone senior, the actual work will normally be conducted by someone more junior. Ask about the level of experience this person has, and how easy it will be to reach the expertise of a partner.

Finally, listen to how the accountant assesses your business and see whether their view rings true.

What fees will an accountant charge?

In general, accountancy fees are charged on one of three bases:

  1. Hourly fees. These will be different according to who is actually carrying out the work – a partner’s time will cost considerably more than a newly-qualified junior’s will.
  2. One-off fees. Some accountants will charge flat fees for certain work, such as completing a tax return.
  3. Annual fees. These normally represent the most cost-effective option for start-ups. The accountant will offer a range of services (such as auditing, tax returns and PAYE) for a fixed annual fee, sometimes with an amount of complimentary advice thrown in.

How do I keep accountancy fees down?

Whilst accountancy fees are normally a good investment, unchecked fees can quickly spiral out of control. Here are some tips for saving on fees:

Use software.

You can use accounting and payroll software to automate many of the processes an accountant would have to do manually.

Always ask for costs in advance.

If necessary, ask for estimates, and get them in writing. Failing to do so could see hourly fees mount up to staggering levels.

Shop around.

Ask two or three firms for an estimate of costs covering the first three years of your business, and pick the one which represents the best value for money.

Keep an eye on costs.

Going forward, continually compare how much you are currently spending on an accountant versus how much you expected to pay.

Foster a good relationship with your accountant.

If they understand your needs and motivations, they will be able to deliver a more cost-effective and personalised service.

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