How to Know When You Need to Hire an Accountant

How to Know When You Need to Hire an Accountant

Seeking help from professionals such as accountants can be a good idea no matter what stage of development your company is at. For start-ups, small businesses and those on tight budgets, however, it can seem like an additional expense that may be difficult to justify when it is possible to get by without. And, while 'getting by' may be sufficient for some, if you're spending significant amounts of time on your finances, your business is growing, or you're in the early stages of developing a business idea, an accountant can save you time and money, and make sure you're progressing in the best way to ensure long-term success.

So, what are the signs that your business would benefit from employing the services of an accountant?

1. Bookkeeping is distracting you from your business

When you first start out, managing your finances may be a relatively simple task, but as your business grows, you will likely discover that bookkeeping is taking you away from your day job. Even in this scenario, some people can be reluctant to invest in an accountant, but a simple calculation will clarify whether that decision makes good business sense. 

Firstly, add up how many hours you spend on bookkeeping and maintaining your finances. Then work out how much you spent that time on your business. Once you look at accountancy fees in that light, it'll be much easier to see the value you can create by employing an accountant. And, while it can be hard to let go of your finances, if your accountant uses cloud-based accounting software, they'll be able to share your accounts with you quickly and easily. Most tools include simple to follow charts and graphs, which mean you'll stay on top of your financial situation without the time investment.

2. Your business is growing

No matter how much you plan, business growth is rarely consistent. You may have to deal with an unexpectedly large project or quickly gain a host of new clients. This will impact every area of your business. You may need to hire new staff, invest in more office space and more inventory and adapt internal systems. All of this will have a significant impact on finances; creating more paperwork and more complexity. Having an accountant on hand shouldn't just make the process smoother, you'll also be better informed when it comes to making business decisions as they'll be able to offer more insight and analysis on your financial situation.

3. Your profit isn't what you expected

The insight that accountants can provide is also beneficial at other times. Say, for example, that you gained new clients, revenue grew significantly, but your profit didn't grow at the same pace. An accountant will be able to analyse key metrics, delve deeper into the figures and potentially highlight issues and solutions in a way that a non-professional would be unlikely to do.

4. You're looking for investment

There are also crucial times in a company's existence when employing an accountant makes even more sense. This includes if you're applying for a loan or overdraft or if you're looking to bring in additional investment. Merely showing that you have professional financial reporting could benefit when dealing with banks and other investors. It shows you're organised, you're investing in your business, and understand the importance of thorough financial reporting. To gain any funding, you'll also need to access your company's financial history and provide a wide range of documentation. An accountant will ensure this is done in a thorough and timely manner while also creating documents such as realistic financial projections and responding to any queries that potential investors may have.

This isn't the only business milestone an accountant can be useful for, however. From the moment you have an idea for a business, an accountant can add value. From creating financial projections to include in your business plan, to advising on the financial implications of the legal structures available to your business and ensuring the necessary compliance documents are filed, having an accountant can help business processes run much more smoothly from the start.

5. Regulatory and tax reasons

Of course, there are times when the benefits of employing an accountant are much clearer to see, and dealing with the tax authorities or fulfilling government requirements are undoubtedly important. A simple example is making sure you're up-to-date with Making Tax Digital, or making sure that you're up to date with the latest Brexit regulations. Or, suppose you end up being reviewed or investigated by HMRC - the knowledge and expertise of an accountant will make the process much less stressful and time-consuming as they'll be clear on the process and will be able to advise on ways to ensure compliance going forward. As your accountant will likely utilise accounting software, you'll also have the added benefit of the audit trail this provides, ensuring it'll be relatively easy to access and collate all the information HMRC will require.

An accountant can also help ensure you are kept up to speed on any changes to tax laws, keep your Companies House listing up to date, handle payroll, ensure employee tax codes are correct and prepare your statutory accounts, along with a host of other activities that are essential to the proper running of a business.

6. When buying or selling a business 

If the opportunity arises to purchase another business, an accountant should be consulted. They will be able to take an in-depth look at the company's accounts to ensure everything is in order and highlight potential issues, such as if the company has outstanding debt or if crucial assets are owned or leased, both of which could impact the purchase price. This is called "due diligence", and having an accountant on your side is critical.

Similarly, if the time comes to sell your business, having an accountant standardise your financial records and produce statements of accounts will mean you have professional, structured documents ready to show prospective buyers. An accountant can also highlight key metrics and generally display important information that shows your business in the best and most accurate light. They will also be able to talk to any potential buyers' accountants during the due diligence process, which is often a legal requirement when a business is being taken over.

Further Reading

Hospitality VAT rate set to rise to 12.5%: How to manage the change in AccountsPortal

A Guide to Capital Gains Tax for Small Businesses

How To Manage Out Of Pocket Expenses