Accountants are another business expense, but are they worth it?
If you’re a contractor, freelance or small business without an accountant, you might wonder, what are the advantages of having an accountant, what does an accountant actually do? Can the expense of hiring an accountant be justified against the benefits? Does a freelancer, contractor, or small business really benefit from having the services of an accountant?
What does an accountant do?
A good qualified accountant will keep his or her expert eye on the bigger picture while you remain focused on the minutia of your business; s/he will use the big picture to plan your year, in this sense principally to ensure you pay the least tax possible within the law and claim all allowable allowances and benefits.
However, modern-day accountants should do much more than ensuring you pay the least tax; they should be able to advise you on pretty well any issue to do with business growth, business law, and taxation, and be able to both recommend and refer you to strategic partners among the insurance, pensions, investment, and mortgage industries. A qualified accountant is able to certify your accounts and other legal documents, audit your accounts, offer you a registered business address, write references, offer impartial advice on any financial matter, and a lot more.
Can the expense be justified?
A good accountant can be your financial partner for life: an expert eye, trained on your business, with knowledge of what is coming in and what is going out and a realistic forecast for the following year based on knowledge of the previous year. Modern accountants offer far more comprehensive services than accountants of twenty or even ten years ago. For example, within the UK’s complex tax system are some good incentives—i.e. becoming a limited company, becoming VAT registered, buying a company vehicle, paying into a pension, starting a charity, and so on—this is called tax planning, and an expert eye is essential.
Does a freelancer or a contractor really need an accountant?
While many taxpayers will think that all they want from their accountant is to ensure they pay the least tax, few realise until they are benefitting from a good accountant how much more there is to the business-accountant partnership beyond mere number crunching.
Your accountant can help you set up the business and register it with Companies House; and might have a facility whereby you can use their offices as your registered business address. Your accountant should be able to produce all the relevant paperwork for your business, act as company secretary and assist you with setting up a business bank account if this is what your require. Your accountant should be as interested as you are in the growth of your business. An accountant should be able to produce financial statements you will need for a loan and offer insights into how certain estimates could be recalculated to get a more favourable outcome to your loan application. Your accountant should be able to offer references and provide seamless professional expertise in all areas of business and accounting.
How do you find a good accountant?
To find a good accountant, often the best way is to get a referral, from a business colleague, family member, or friend, or someone in the same industry. Online business forums may offer reviews, which could provide insight.
Make sure that the firm not only offers the services you need but also has experience with your industry.
The importance of hiring a qualified chartered accountant cannot be over-stressed, the title is only awarded to people who have passed rigorous exams and been practising for a period.
Price will almost certainly be part of the equation: it is up to you to decide how much you can afford, and it is important to clear with the accountancy firm that there are no hidden fees.
Many accountants offer a free meeting to discuss your requirements, here the following questions should be asked:
Most accounting firms offer tax and auditing services, but do you want help with bookkeeping; does the firm have online accounting, what might the firm offer you, over and above their competitors. Do you have a named individual looking after your accounts?
Ask the accountant how they would handle situations relevant to you; for example, how does it protect contractors against legislation such as IR35; or how does it manage CIS legislation against accounting for workers in the construction industry?
You should ask whether certain services are charged by the hour, or whether there is a fee structure that would include all the services you require. You should ask about payment terms and even whether there are incentives for referrals.
You should be asking for evidence of qualifications and for references from other clients in the same industry as yours.
Some accountants offer a month or more free, which can be a good way of evaluating, before you sign a contract, whether the firm’s likely to live up to your expectations. You and your accountant should be clear about expectations on either side.
Making the most of having an accountant
If you hand your accountant a shoebox full of receipts it is unlikely to give the right impression! Professionalism works both ways and the better you maintain your records, the better the impression you create. The less time your accountant has to spend on rudimentary tasks, the better the service you receive will be. Ideally, your accountant will spend less time number crunching than suggesting alternative ways of cutting costs and earning more.
Is it worth hiring an accountant?
The advantages of hiring an accountant stack up well against the prospect of the additional business expense for their services. Accountancy fees are tax deductable, in the long run probably at the root of business success, and can protect you against the many pitfalls of running a business.
Finding the right accountant is a case of finding a professional, with the right expertise, who shares your vision of growing your business.