How accounting helps your business
Behind every good business is a great entrepreneur. But behind them, you’ll usually find an expert accountant. People with the talent for running a business may not have the knowhow or the appetite for also handling the accounts – and they certainly won’t have the time. So that’s where your accountant comes in.
When your business has grown beyond a certain size, it is good sense to hire a specialist to handle the accounting, so that you can focus on running things. However, a good accountant can do far more than just free up your time. Businesses that hire good accountants often benefit from a wide range of other services too, which help to save money, reduce risk, comply with regulation, manage growth and plan ahead. As a business owner, most of your big decisions will have a financial dimension, so it only good sense to discuss them with your accountant first.
Here are some of the key ways in which an accountant can be a linchpin of your business.
Paying the right amount of tax
You don’t want to pay more tax than necessary, but underpaying will get you into trouble with HMRC. As a result you may err on the side of caution when it comes to your tax return. An accountant can calculate your expenses and allowances with much more confidence, and so should be able to find significant savings – while avoiding those costly mistakes.
Saving you tax
An accountant keeps up to speed with tax law, so knows all the ways you can legally reduce your tax bill. He or she can identify legitimate tax-efficient strategies such as the use of government incentives, allowances, expenses, offsetting losses, or changing the way you draw income from your business.
Setting up your business
Many business ventures fail because the figures and forecasts haven’t been rigorously tested. When you draw up your business plan, an accountant can help you put some solid foundations in place. They can offer an expert second opinion unclouded by emotional bias, and should also be able to offer constructive input into key areas. A business plan signed off by your accountant is one that’s ready to roll – and will be more attractive to investors too.
An accountant can also advise you on the best legal structure for your business – sole trader, limited company or something else. All have different financial implications and some will be more suitable for you than others.
Once your business really takes off, you’ll need all your time to run day-to-day operations, rather than be occupied with the finances. Similarly, as the business finances become more complex, you’ll almost certainly need a specialist to take charge of them.
Broadly speaking, larger businesses are subject to more government regulation. Compliance with these requirements can take up a huge amount of your time, and mistakes both easy and potentially very damaging. Once again, an accountant can take this burden off your hands.
Funding for growth
At some point most businesses will need additional funding in order to grow. Securing finance from a bank or other source is a major bridge to cross – lenders and investors want to know they’ll get a return on their money. Your accountant will prove vital in presenting a strong financial case to the relevant stakeholders.
Sudden growth that you haven’t planned for can be as problematic as too-slow growth, leading to all kinds of difficulties relating to cash flow, tax, employees or office space, for example. An unmanaged growth spurt can even knock you backwards. A good accountant can help you react quickly and effectively to unexpected growth and turn it into what it should be: an advantage.
Businesses over a certain size must undergo a statutory audit – in which case an accountant is a must-have. However, even for a smaller business a voluntary, internal audit can be an excellent way to keep your business goals on course. This kind of audit reassures you that everything is ticking over smoothly, and is also an excellent way to prepare you for a statutory audit.
Buying or selling a business
Mergers and acquisitions (M&A) can be the quickest way to grow your business or enter a new market. If you’re thinking of buying up a competitor or complementary business, an accountant should be your first port of call. They’ll assess the practicalities and also look into the target company’s accounts to ensure everything is satisfactory.
People forget that many accountants also serve as business advisers. They carry a wealth of knowledge that comes from working with clients from all walks of business, and an experienced accountant will have seen most of the problems and challenges that you may encounter. As a result, an accountant can provide an unbiased sounding-board for your ideas, warn you of potential risks and alert you to opportunities.
Remember too that every business is different, and different accountants will have their own specialism and distinctive strengths. When finding an accountant, talk through your needs and vision for your business to ensure you engage the best one for you.
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