When you start running your own business, it doesn’t take long to realise how crucial accountancy skills are. You need to pay careful attention to finances, tax rules, and compliance with government regulations, and these skills are some of the most difficult and alien to new business owners.
You may find yourself thinking: do I need an accountant to take care of everything?
Accountants are qualified finance professionals who can save you a significant amount of time and stress, but they come at a significant cost. This article explores when it makes the most sense to seek professional financial support.
Is an accountant a legal requirement for small businesses?
There is no legal obligation for sole traders or limited company directors to use an accountant. You can handle your own bookkeeping and tax returns if you wish. Many entrepreneurs use software like QuickBooks, Xero and FreeAgent to automate financial tasks, particularly during the early stages of their business.
However, managing your own accounts comes with risks. The UK tax system is complex and frequently changing, and missing deadlines or making mistakes can result in costly penalties.
What does an accountant actually do?
An accountant is a trained finance professional who can take on many financial reporting and taxation tasks. They can also offer guidance at every stage of running a business, from setup to expansion. This includes:
- Advising on the best business structure
- Registering your business
- Setting up and managing bookkeeping systems
- Handling payroll and pension contributions
- Preparing Value Added Tax (VAT) returns
- Completing and submitting Self Assessment and Corporation Tax returns
- Producing annual accounts
- Providing financial forecasting and tax planning advice
- Exploring opportunities for tax efficiency
This doesn’t mean you have to use an accountant for these tasks. For example, company formation agents like Quality Company Formations, can help you choose a business structure, formally register your company and register for VAT at a far more affordable cost than an accountancy service.
When should a small business hire an accountant?
The best time to hire an accountant varies depending on the nature of your business, how quickly it grows and how confidently you can handle financial responsibilities while managing your day-to-day operations.
In general, it may be worth bringing in professional help when you feel uncertain about new responsibilities. For example, when you hire employees and need to manage payroll, or when demand picks up to such a level that you need to devote more time to business development, rather than admin.
What are the benefits of hiring a chartered accountant?
Chartered accountants, a status awarded by professional bodies such as ACCA or ICAEW, are accountants that meet rigorous training and ethical standards.
Key benefits include:
- Ensuring your business stays compliant with UK tax law
- Keeping you informed about changes such as Making Tax Digital or dividend tax adjustments
- Reducing your tax bill by identifying reliefs, allowances, and deductions
- Preventing costly mistakes or missed deadlines
- Saving you hours of financial admin each month
- Offering insights to help you grow your business sustainably
If your business is growing rapidly and your accounts are becoming complex, a chartered accountant could become a key part of your support network.
Do I need an accountant if I run a limited company?
While hiring an accountant is optional, operating a limited company does involve significantly more administrative responsibility than working as a sole trader.
This is because directors are responsible for filing annual accounts, submitting Corporation Tax returns, preparing statutory financial statements and ensuring proper record-keeping and compliance.
These added complex responsibilities can be done by directors themselves, but in practice, an experienced accountant can offer significant peace of mind that everything will be handled professionally.
Can accounting software replace an accountant?
Modern software can certainly simplify some aspects of business finance. They can automate invoicing, track expenses, generate reports, and help you monitor cash flow.
However, software cannot offer tailored advice. Relying solely on technology carries the risk of having less understanding over your financial forecasts, and software cannot offer you strategic tax-saving opportunities.
In most cases, accounting software works best alongside professional support. The combination allows you to stay informed day-to-day, while your accountant handles the bigger picture.
How to choose the right accountant
When selecting an accountant for your business, consider looking for one with small business experience. They do not necessarily need to be a chartered accountant, but they should have experience working with similar businesses with similar needs to your own.
Also, ask about their fee structure up front. Fixed monthly rates are often more predictable and dependable than hourly billing.
Is hiring an accountant worth it?
While small business owners are not legally required to hire an accountant, you may benefit from doing so if you are a fast-growth company. They can save you time and ensure financial tasks are carried out accurately and on time.
However, for many tasks, it isn’t 100% necessary. Even the more complex compliance tasks, such as preparing and filing a confirmation statement and maintaining your company registers, can be handled by Quality Company Formations. The Full Company Secretary Service offers an affordable, straightforward solution, saving you plenty of money and stress completing these essential tasks.
Thinking of starting a business?
Quality Company Formations can help you set up your limited company in under 24 hours. Start your company today or speak to our team for friendly, expert advice.
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