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When should you hire an accountant?

Accountants can handle much more than just your payroll and tax returns. They can also help out at various stages during the growth of your business. Gary Turner, UK co-founder and managing director of Xero, outlines key stages in the business lifecycle when owners should consider hiring an accountant.

Whether you’re taking your first steps into business or planning your exit strategy, hiring an accountant could help you make better financial decisions. As well as preparing statutory financial documents, accountants can also suggest ways to free up cashflow, save money and raise capital for expansion.

Delegating financial reporting requirements to your accountant could end up costing you less per hour than if you undertook the task yourself. You can hire an accountant on a monthly or retainer basis – some will also work on annual accounts and tax returns for a fixed fee.

Not convinced your business would benefit? Ask yourself the following questions:

  • Are you willing to learn about the latest tax regulations and how they apply to your business?
  • Do you possess the concentration and attention to detail required to prepare detailed financial documents such as tax returns?

Here are some of the key times in the business lifecycle when using the services of a qualified accountant could add real value to your business.

Before starting your business

An accountant can help explain the benefits and drawbacks of different legal structures and advise which is best for your business. If you work from home, they’ll help you offset a proportion of your living expenses against tax. Accountants can also provide realistic projections and reports, adding credibility to your business plan.

Buying a franchise or existing business are popular routes to becoming your own boss. An accountant can help you determine whether your new venture will make money. For example, they can estimate monthly income after deduction of franchise agreement fees.

Always consult an accountant before buying an existing business. They will examine the accounts, identify any discrepancies and check for outstanding debts. They’ll also verify whether assets such as vehicles or equipment are fully-owned, leased or part-paid for.

Helping you keep on top of small business accounting

If you’re losing control of who owes you money and how much, an accountant can help you get back on track. Accountants can use specialist software to produce tables and graphs providing an easily understandable illustration of your financial situation. Using cloud-based accounting software gives you and your accountant an up to date view  to see your financial situation at a glance.

Planning for growth

A big client win might mean you need to grow your business quicker than expected.

An accountant can help you handle the transition by handling details such as payroll, employee tax management, property tax and utility payments, leaving you to work on the bigger picture. They can also analyse your cashflow, stock management and pricing, providing useful insight into where your business could grow. This is particularly useful if you’re considering introducing a new product or service offering.

Complying with statutory paperwork

Many small business owners hire an accountant when their first tax return is due. Dealing with government paperwork can be daunting – a good accountant will help you to:

  • Complete and file legal and compliance documents
  • Keep your company up to date with the latest tax laws
  • Prepare statutory accounts
  • Keep your company status updated in the government’s company register
  • Maintain records of directors and other administrative personnel
  • Organise and record share/stock allocation, when the business is formed, when a partner leaves or a new partner joins
  • Handle your payroll and ensure employee tax codes and payments are recorded correctly.

If you are investigated, hire an accountant

Tax investigations are expensive, stressful and time-consuming.

An accountant will help you navigate the process and ensure you don’t violate any tax laws afterwards.

Some accountants offer tax investigation insurance which covers the fees you would have to pay if your business needed to respond to an official enquiry, review, or investigation. It also means your accountant won’t charge extra for additional work they’d have to carry out during the investigation process.

Making a business case for funding

Hiring an accountant can improve your chances of successfully applying for a loan or overdraft. They’ll help you choose the best loan available and answer any questions your bank may have on revenue projections.

Getting the best deal when you sell your business

As well as putting your company’s financial records in order, your accountant can produce information and charts to show to prospective buyers.

Your accountant can also liaise with potential buyers’ accountants during the due diligence process and structure your financial affairs so that you receive the best deal. For example, a lump sum might be less tax-efficient than monthly payments over a period of years.

Risk warning  

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A pension may not be right for everyone and tax rules may change in the future. Please note that during any transfer, your investments will be out of the market. If you are unsure if a pension is right for you, please seek financial advice.