10 reasons to love your accountant
First published on 04 of April 2017 • Updated 25 of July 2017
Behind every great entrepreneur is an equally clever accountant. But it’s not just business owners who need them now. With more and more people making money from multiple sources and potentially paying too much tax, isn’t it about time you found a hot-shot accountant of your own?
If you only pay tax through your employer’s payroll (PAYE), then you may not ever need an accountant. But these days many of us are finding that earning has become more complex than that. The internet has made freelancing increasingly viable, creating a ‘gig economy’ in which even the non-entrepreneur may have multiple income streams.
Sites such as Uber, AirB&B and Fiverr mean that a full-time office worker can easily moonlight as a cab driver, hotelier, designer, musician, programmer, or virtually any job that can be conducted remotely. And the same advances in technology mean it’s now even easier for individuals to set up their own businesses or micro-enterprises, even while still in permanent employment. Meanwhile, many property owners (especially those who are retired) may be looking to generate extra income by offering accommodation for rent. When it comes to earning money in the modern world, there are as many opportunities as ideas.
Where this world of opportunity gets more complicated is when tax enters the equation. Unlike working for an employer (where tax is deducted at source), paying tax from self-employed income is your responsibility. Online self-assessment makes this easier than it used to be, but the process remains complicated and potentially confusing, especially if your earnings are irregular or from many different sources. Make a mistake and you could end up paying more tax than you need to – or even worse, paying too little and being penalised by HMRC. Consequently, many freelancers hire an accountant to guard against these risks.
If you’ve gone beyond gigging to actually running your own business, then an accountant moves from being a ‘nice-to-have’ to being essential. Yet even if you already make use of an accountant, you may not be fully aware of all that they can do to help you achieve your business goals.
1. Paying the right amount of tax
You want to. HMRC insists you do. But fear of putting a foot wrong means that many people who file their own tax returns end up overpaying. It’s hard to be sure what allowances you’re entitled to and what expenses you can deduct against tax, and so you may err on the side of caution. An accountant can file your return with much more confidence, and should be able to save you more than their fee. Even better, they will prevent you making costly or silly mistakes (such as filing late!).
2. Saving you tax
An accountant keeps up to speed with the complex and ever-changing tax laws, so knows all the ways you can legally reduce your tax bill. This doesn’t mean complex tax-avoidance arrangements, just sensible use of legitimate methods such as allowances, expenses and offsetting losses, or changing the way you draw income from your business.
3. Setting up your business
A depressing number of business plans fall to bits at the first kick – because they’re not build on a firm foundation of figures. If you’re putting together a business plan, an accountant can help turn your vision into a solid prospect. Even if you’re brilliant with figures yourself, your accountant can offer an expert second opinion unclouded by emotion or bias, and may also be able to offer valuable input to enhance your own ideas. A business plan signed off by your accountant is one that’s ready to roll.
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.
A simple point, but a major one: once your business really takes off, you’ll need all your time to run day-to-day operations, rather than be occupied with the financial side of things. Similarly, the business finances will become more complex as the business grows, meaning you’ll almost certainly need to have expert help on hand.
A growing business is a like a growing child – initially simple needs very quickly become more complicated. Government regulation and compliance requirements can take up a huge amount of your time, and if it’s not your specialist area then mistakes are very easily made. Once again, an accountant can take this burden off your hands.
6. Funding for growth
At some point most businesses will need additional funding in order to grow. Securing finance from a bank or other source can be a daunting challenge – 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.
7. Growth management
Like that growing child, a business can also suffer growing pains. Sudden growth 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; your accountant can serve as an effective shock absorber.
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. Like a regular engine service, it keeps everything ticking over smoothly – and is an excellent habit to prepare you for an eventual statutory audit.
9. 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.
10. Business advice
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 a business 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 that you may have missed.
That’s ten reasons to love your accountant – there are many more. Discover those for yourself when you find your accountant using the Unbiased search.
If you're planning on starting your own business, consult our Step-by-Step Guide.