One of the most frequently asked self searching questions of individuals and small business owners are ‘Do I really need an accountant?”. Fortunately, this happens to be one of the easiest to answer. It does not have a blanket ‘yes’ or ‘no’ for a reply, but a careful consideration of many factors will easily help one to find an answer if accounting firms can add value to your business or professional needs. Lets take a good look at the factors that you need to consider to understand if you need an accountant.
To begin with, you need to self assess the nature of your business and your contribution to it. On a very generic manner, you need to see if your input and time is crucial for the success of your business or venture. If your time is vital for the day to day functioning of your business or venture, then you need to go about choosing your accountant. A business will certainly require year end accounts, corporation tax remittance, dividend administration, liaison with HMRC and Companies House, VAT and annual returns filing. To complete these formalities and compliance, you need to set aside considerable time and effort, on the assumption that you are fully aware of and competent of completing the formalities to the satisfaction of the regulatory bodies.
This is a consideration which will override every other consideration if your response is in the negative. If you do not have adequate knowledge or the resources to perform basic bookkeeping, or if your knowledge of relevant taxation laws, in a personal or professional capacity are inadequate, then you need to go about choosing your accountant. Accounting is a specialised domain and requires knowledge of certain standards and the regulations that are in force, applicable to you. And regulations, worldwide, change periodically, and if you do not remain updated with the changes, the chances of being levied with a stiff penalty may be higher. Therefore, if you do not possess adequate knowledge and competency to fulfill the obligatory requirements, you better look at accounting firms for assistance.
Depending on the business profile or your professional profile, your requirements will vary. Therefore, by understanding the exact nature of requirements, you will be in a better position to decide. Here is a little cheat sheet that you can use to identify your needs.
If you are an employee and your taxes are deducted at source and you have nothing else to declare, then you do not need an accountant. However, if you are required to submit a self assessment tax return to HMRC, then you may need to local accountant.
Some businesses need not be registered for VAT, if the volume or nature of business makes it exempt. If your business falls in the category where you need to file the periodic VAT returns and make remittances, then you need to find a local accountant to help you.
If you are not a sole trader, then you need to be registered with Companies House. Post registration, there are possibilities where you may be required to liaise with Companies House. It would be a prudent decision to hire an accountant to do it on your behalf.
If your company is active and trading, it is liable to pay corporation tax, and to do so, it would be a good idea to take tax assist services from accountants. You need to remit the taxes and file returns at the end of every year, and without expert tax assist services, you may find yourself missing deadlines or making mistakes that can prove to be costly.
Submission of year end accounts requires compilation of information, financial statements and maintaining records of all financial transactions in a manner that helps in the compilation. Are you up to it? Would you rather spend your time trying your hand at something you are not an expert at, or would you focus your energies on what you do best? Spare yourself the trouble and hire an accountant, it makes more business sense.
Before you go about looking for an accountant, it pays to understand the nature of services that you will receive and how those services will help you. Here is a brief of relevant services that an accountant is expected to provide to small businesses or individuals.
After having decided on opting for an accountant, you need to next start looking for the most suitable firm or individual who can meet your requirements. This search will more or less depend on the nature of services that you will require. However, it is important to understand that an accounting firm with a qualified team of certified accountants and the right infrastructure and resources would be better placed to help you fulfill your obligations on time and smoothly. And perhaps the biggest advantage would be the cost factor. Obviously, as a small business owner or an individual your primary requirement would be to keep costs low. With the right firm, you can benefit immensely from the economies of scale and receive superior services at reasonable prices.
Another benefit of hiring an accounting firm is the advantage of getting financial planning advice from accountants with credentials. Many factors contribute to the success of a business, and one of the most important and sometimes the most ignored is the financial planning aspect. With an accountant, you can be sure of getting the right tips, based on factual information and statistics taken from your cash flow and other financial statements.
If your small business progresses to a level where you hire employees and you begin to deduct tax at source for onward remittance, you will require an efficient payroll system. The payroll application needs to factor in the tax deducted at source. When you make the remittances to Inland Revenue, your financial statements need to reflect the same. Doing this by yourself, or with a small team will be a cost intensive exercise for a relatively smaller requirement. It would be a better option to hire the services of an accounting firm to handle the PAYE and payroll management efficiently.
Time is money and your invaluable time spent on activities that are not your areas of specialisation are actually counterproductive. This is regardless of your engagement in the business activity at that time. For instance, if you were free for a particular stretch of time, you may find it tempting to perform the accounting related tasks yourself. But, there are two reasons that prove, why this is not a good idea. One, you may not necessarily find the time always to discharge additional accounting responsibilities, and when you fail to do it on time, you may end up as a defaulter, facing the prospect of paying a fine. Two, the same amount of time, if invested in core business activities, such as marketing, analyzing competition, improving deliverables or processes, would most likely fetch better-operating margins. A comparison of the amount saved by not employing an accountant and the amount that could have been earned by focusing on main business activity, would certainly favour the former. Your business has been established for the purpose of growing, earning margins or creating value. Accounting or other allied activities are certainly not the mainstay of a business or venture. Another important aspect of outsourcing your accounting is the fact that you will get the benefits of advanced resources used by the accounting outsourcing firm. When you attempt to perform accounting related activities yourself, you will be constrained by low budgets to hunt for cheaper resources. And with resources that do not offer complete flexibility, you are more likely to make errors. The advanced resources of accounting firms will give you access to the very latest applications, in addition to on-demand and location independent access across devices, which will give you real time updates.