Updated 31 August 2021
As a business owner or self-employed individual, navigating the complex world of finances alone can be tricky. And finding the right accountant for your unique needs isn't always simple. The sector you operate in, the services you need them to provide, their qualifications and your budget can all impact your choice. So here's a beginner's guide to finding the right accountant for you as a small business owner or freelancer.
Why do I need an accountant?
A good accountant can become a small business owner, freelancer or contractor's guardian angel. In short, their head for numbers will make it easier for you to stay on top of the money that's coming in and going out and stop you from getting into trouble with government regulators such as HMRC.
They'll help you tackle complex financial matters like invoicing, tax liabilities based on your legal status (e.g. sole trader or limited company), tax-deductible expenses and end of year reporting. Accountants can also help you secure funding to help grow your business, conduct audits, help with mergers and acquisitions and assist with the purchase or sale of a business.
Each accountant has a different area of specialism, which may include various services or sectors. Therefore, it's important to find one with previous experience and a current focus on areas relevant to what you do. You can find out more about how accounting helps your business in our previous article.
What's the difference between chartered and non-chartered accountants?
The title 'accountant' isn't a protected term, so, technically, anyone who’s good with numbers can operate in this capacity. Generally, though, they will have undergone training through a company such as AAT or gained practical experience by working within a finance department and will be bound by the Financial Reporting Council's (FRC) Corporate Governance and Stewardship Codes.
Chartered accountants, meanwhile, need to pass exams, gain at least three years of industry experience and pay an annual fee to join a recognised industry body (such as ICAEW or ACCA) to earn chartered status. They're also required to hold professional indemnity insurance and are bound by strict ethical codes.
It's not always necessary to use the potentially pricier services of a chartered accountant for simple matters, such as invoicing and basic tax questions. But for complex issues, such as pre-emptive tax planning ahead of passing your business on to your children may be a job for someone with more experience and qualifications.
Learn more about the difference between chartered and non-chartered accountants here.
How to choose the right accountant
On your hunt for the right accountant, you'll need to consider several things:
1. What services should my accountant provide?
Depending on their specialism, an accountant can provide a wide range of services, including:
Tax compliance and efficiency
Improving cash flow
Setting up your business
Helping to register with Companies House
Reducing your workload by handling tasks such as invoicing
Bookkeeping and financial reporting
Funding for growth
Buying or selling a business
Not every business will need all services. To begin with, sole traders and one-person limited companies may only need basic financial guidance, such as reporting and registration assistance. It's still good to understand the scope of your accountant's capabilities, though, particularly if you've got ambitions to grow.
If you're the sort of person who'd prefer to chat about your finances over coffee, make sure you find an accountant that's based locally. Using tools like Unbiased can help you narrow down your options based on location and guide you to an accountant within easy reach. But even if you're happy to consult with them virtually, working with an accountant that's based in the same country as you pay tax in, meaning they have an in-depth understanding of the dos and don'ts, is a sensible idea.
3. Sector specialism
Some sectors may be subject to additional reporting requirements or specific tax rules, so it's important to find an accountant who understands what this means for your business. Even if that's not the case, working with an accountant who has experience in your sector is preferrable.
Let's take an electrician and a graphic designer as two very different examples.
An electrician may not invoice their clients and instead ask for payment on the day work is completed. They may also accept payments in cash, meaning there isn't a digital paper trail they can trace back through if they forget to record income. The scope of their work may also mean they carry out a larger number of lower value jobs, which could make their finances difficult to track without someone to stay on top of it.
On the other hand, a graphic designer is likely to work with agencies and other third parties, invoicing once their project is complete or monthly if they are acting as a contractor. As a result, they'll need to deal with PO numbers, ensure clients pay on time, and, if their income is less predictable, may need a cash flow forecast or budgeting assistance to help them manage their money effectively.
Budget can be a constraining factor for small businesses or freelancers, particularly when working with skilled professionals. However, prioritising an accountant is crucial, especially when your business is in its infancy. Making an error on your self-assessment tax return, even if it is careless rather than malicious, can cost you up to 30% of the extra tax you're due.
If you have employees, it becomes even more crucial to find an accountant you can trust. Making an error that delays a supplier payment is one thing but messing up your payroll system and being the reason your employee(s) can't pay their rent or bills on time is far more serious.
Should I rely on personal recommendations?
If you have friends, family or fellow self-employed people within your personal or professional network, getting a personal recommendation can be very helpful. For example, their own accountant, who they trust with something as important as their finances, may be able to accept you as a client. It will give you peace of mind knowing that someone you know and trust has the first-hand experience with them. And even if they're not suitable for you, they may be able to recommend you to one of their colleagues or professional associates who specialises in a different sector or service.
Should I use accounting software?
As a small business owner, sole trader or freelancer, budgets can be tight, meaning self-reporting through accounting software may seem like an appealing way to manage your finances. However, it's always worth consulting with an accountant directly, even if you can only afford to do so infrequently, such as once every tax year. You can run complex tax questions past them, such as anything relating to the recent changes to IR35 regulations, and discuss subjects that are too nuanced for a programme to handle.
Finding the right accountant
Struggling to find the right accountant for you? Unbiased's handy search tools could help you narrow down the ideal person to whip your business's finances into shape.
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