Start-ups: Why your business needs an accountant
As a start-up or SME, you may not think that your business is big enough to need an accountant just yet. Or, you may feel like you could simply do without the added expense of hiring an accountant to do a job you think you can do on your own. But unless you happen to be a finance expert yourself, you could be missing out on the essential business support an accountant provides.
You may not necessarily need to hire an accountant full time or on an expensive retainer. A couple of hours here and there on a project by project basis could suffice. But a qualified accountant can help you at every stage of your business from forming your company to developing strategies to help you grow it, supporting you with tax issues to helping you manage your finances on a day to day basis. In this blog, we discuss the reasons all businesses need professional accountancy support, no matter their size.
Make the best use of your time
For those doubting whether their business can afford to outsource tasks to an accountant, or for those who think they can do it all themselves, it’s very important to understand the value of your own time.
If you place a value on an hour of your time and then multiply that by the number of hours you spend looking after financial matters, you’ll quickly see that accountancy support is less expensive than you think. You may be spending just a few hours a month looking after finance tasks such as recording expenses and invoicing. But what are those hours’ worth to you? Say for example you act as a self-employed consultant and charge an hourly rate of £75. If you spend 10 hours a month working on finance tasks, this is effectively costing you £750. You could be using that time to do billable work for clients or on growing the business.
Consider how much an accountant would charge to undertake these tasks. It is very likely that it would be considerably less than what it is currently costing you, plus you would have the added reassurance that everything is being done properly, so there will no nasty surprises when it comes to submitting your tax return. When you also take into account that in the long run, a good accountant can help save you money, or make you money, through effective finance strategy, their day rate suddenly seems pretty reasonable.
Poor planning leads to poor performance
Like all business owners, you will have a clear view of where you want your business to be in five years’ time. But do you know exactly how you’re going to get there? Do you know if you will need investment to help you grow your business or how pension contributions, financial regulations or tax implications will affect your revenue growth?
An accountant can help you create a thorough and detailed business plan that will take into account these issues and more. They can forecast your revenue growth in line with the added costs your business is likely to incur and help you understand, if and when, your business will need more funding for it to continue to grow. This will help you develop a business plan that is realistic and leaves no stone unturned. A strategic plan that will result in a better chance of you achieving your objectives. They will also work with you to develop the KPIs (Key Performance Indicators) needed for you to measure whether you are actually achieving them.
You’ll need advice, to help you choose the right legal entity
In our recent blog post, ‘How to select the right legal entity for your business’ we discussed the pros and cons of a variety of business entities. Choosing the right entity for your business can be complicated, especially when your needs may change over time.
An accountant can provide professional advice to help you choose a legal entity that fits you, that protects your interests and make the most of the tax regulations. Did you know for example that sole traders could be held liable for business-related obligations, such as failing to pay a supplier or losing a lawsuit? In cases like these, your assets, such as your property could be at risk. An accountant can help explain all the various legal obligations of different business entities to you so you are fully informed to make the right decision for your business. They are also on hand to help you register your business properly and keep you abreast of changes to legislation so you always have peace of mind.
Delegate finance tasks to help you manage your business more efficiently
In the early stages of a business, it is often quite easy to keep a track on the finances. You may only be receiving a few bills from suppliers and sending out a small number of invoices. This can quickly change, however. If you take your eye off the ball, because you are focussing on a new contract or day to day business activities, you can quickly lose sight of the financial responsibilities of being a business owner. Have you paid your supplier on time? Did you send that invoice? Do you have enough cash in the bank to cover your tax bill? It can very quickly become overwhelming.
You should look to hire an accountant to support you with day to day activities before it gets to the point where you are overwhelmed. They can help you keep track of who owes you money and what bills need to be paid. They can help you prioritise supplier invoices so your cash flow remains fluid. They can help you plan ahead for tax bills so you are not sprung with a nasty surprise you hadn’t budgeted for or manage payroll activities so your employees are always paid on time.
Accountants can help you grow your business safely
An accountant is there to help give you strategic advice, not just manage your day to day book-keeping. For example, they can help you understand how business costs are affecting your profit margins, and help you develop strategies to boost your profits. How do you know when it’s a good time to expand your business? How far can you stretch finances without putting your business at risk? Take all the guess work out by taking the professional advice of an accountant who will study your business performance and market trends to help you come to the right decision.
They will work with you throughout your relationship to help you manage the business effectively and help you put in place plans to help you grow your business in the future. This could involve helping you attract funding from investors or creating a solid business plan to secure funding from loans or grants. Whether you are looking for a bank loan or approaching a business angel for investment, you’ll need more than just a good pitch to secure what you need. They want cold hard facts. You’ll need accurate figures and detailed growth projections. An accountant is on hand to help you create thorough financial forecasts so you can demonstrate your company’s solvency and prospects for the future.
Support whenever you need it
Poor financial planning is one of the biggest reasons for business failure. By taking on an accountant you can sleep easy knowing that your finances are in safe hands and you have the professional advice you need to take your business forward. The right accountant is there to help you concentrate on the thing you love doing most, running your business.