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If you’re a freelancer or a small business owner, you may question the need for an accountant. This is understandable and the thought of spending funds on something you cannot see rather than fun things like a new website or advertising that could potentially bring in funds, is a difficult one to swallow.
But when the rubber hits the road, it’s those that have invested in an accountant or financial advice that survive and go on to have a successful business, rather than those who have tried to manage everything themselves, often at the expense of making mistakes or missing something that costs more in the long run.
So let’s take a look at the different scenarios that may warrant hiring an accountant.
Company structureNot all business run with the same structure and depending on how you set up will determine what type of accounts you’ll need to produce. The differences include: limited company, sole trader, limited liability partnerships or corporation, freelancers. You should consider each structure before starting your business and which suits you best and when you know which direction you’re headed in, you’ll have an idea of what accounts need to be kept and submitted. An accountant can help explain the legal business structure available to you, and help you set up and get started.
Are you running a limited company?If you trade through a limited company, we highly recommend that you use an accountant from day one. In some cases it is ok for you to manage your own accountants and that is acceptable but the jump from sole trader to limited company means a different way of accounting that you need to be aware of. You can submit your own accounts for free through the Companies House website however ensure that you’ve covered all your bases and are submitting the correct information, including your corporation tax.
Do you understand bookkeeping?Can you read a set of accounts? Do you know what you’re looking for when you set your eyes on the books? Can you make sense of both sides of the ledger? If confusion comes upon you with this, it may be worth investing in an accountant! There’s no reason why you can’t carry on with your accounts once you’ve been in business for a while and the accountant has started you off correctly. It’s better to do it this way round than pay for an accountant to correct your mistakes further down the line. If you’re confident, go for it, but if there is any doubt, seek advice.
Accounting softwareOne big thing to maybe consider is the cost of accounting software. Do you have the means to afford the correct software that you need to run your business? Have you got time to learn how it runs and the skills or knowledge to understand its capability? An accountant will have all this ready to use for you. There is no additional software that they need to use and they are fully trained and up to date with latest legislation and laws. Accounting software has become more affordable in recent months with MTD coming into effect however learning time and effort costs money too - can you afford to make a mistake?
At the end of the day, if you’re running a small business it is totally up to you whether you hire an accountant or not and this will come down to many variables including time and expense. But whatever you choose, it is always worth obtaining financial advice from an accountant when starting a business to ensure that you are doing things correctly and in fact that you’ve made the right decision in starting a limited company.
Here at 2020 Accountancy, we’ve worked with many contractors, freelancers and limited company business owners to manage their accounts and keep them ticking along while they’ve focused on the main part of growing their business. If you’d like to speak to an accountant that understands your business, feel free to get in touch today.