You do not need an accountant for a small business, legally speaking – small business owners can take care of their finances themselves. However, it is very beneficial for many small businesses to work with an accountant; time is money for entrepreneurs. When an accountant takes care of bookkeeping, taxes, VAT etc., owners have more time to grow businesses.

Having an accountant on board can be the boost that many small businesses need to get them off the ground. And it will give you full confidence that you are meeting your financial obligations and submitting the correct information to Her Majesty’s Revenue and Customs (HMRC). Find out your obligations as a small business and decide whether you need an accountant to support you.

Small businesses and accountancy – the law

The law is strict when it comes to small businesses and meeting financial obligations. Whilst it isn’t the law that you need an accountant to take care of your finances, they do need to be in perfect order. And an accountant can help enormously with that. It’s important that you understand your legal obligations when you are making the decision about whether to work with an accountant.

These are just some of the laws, rules and regulations you will have to meet as a small business owner:

Registering your business. Your will need to register your business with Companies House in order to get set up. You must register as a sole trader or a limited company.
When your VAT taxable turnover reaches £85,000 (correct as of August 2019 – check the government website for up-to-date figures) you will need to register for VAT. You will then need to submit a VAT return quarterly.
Tax returns. Each financial year, you will need to complete a tax return to ensure you have paid the correct amount of tax. This will need to be filled out accurately and you will need to keep exact records of all income and expenses throughout the year.
Payroll and pensions. This might not affect you immediately, but as soon as you have employees or sub contractors working for your business, you need to be aware of your payroll and pension obligations. This is further complicated by the fact that auto enrolment has now come in, so everyone who is classed as an employee will be enrolled into a pension scheme.
Balance sheets and bookkeeping. Most people think of bookkeeping as a way of ensuring they submit the right tax information. This is an important function of bookkeeping, but you should also think of it as a way of knowing your net income, giving you a full picture of your outgoings and your profit. You can see all the information you need at a glance and use it to make important business decisions.

Many small business owners struggle with these obligations; why would you know the ins and outs of VAT, tax returns and tax-free allowances? The simple answer is, you wouldn’t – unless you were an accountant or similar financial professional whose job it is to understand them.

An accountant’s job is to understand the financial obligations of businesses. An accountant can tell you about any legalities you need to abide by, and process your accounts to make sure you are within the law. Many accountants, like us, can also help you with business set-up processes and can let you use their business address to register with Companies House. This saves you having to use your personal address, so it won’t be placed on a public register.

Can I really afford an accountant?

Many businesses are put off by perceived expenses, deciding that they won’t pay out for an accountant because they aren’t required to by law. But working with an accountant can be more cost effective than you might think.

Here are some of the factors to take on board when considering your budget and whether you can afford an accountant:

Accountancy fees are tax deductible. This means you won’t have to pay tax on the fees you pay to your accountant, in the way that you would have to for other business expenses.
A good accountant won’t charge by the hour. They will be happy to offer you advice and support as and when you need it, rather than charging you every time you call up or arrange a meeting. Look for inclusive accountancy packages when shopping around.
You will free up your own time. The more time you have available, the more work you can put into growing and expanding your business. Good business owners value their own time, delegating work wherever they can to make time to prioritise growth.

How can an accountant help your small business thrive?

An accountant can, of course, help you with the legal side of looking after your small business’s finances. They can make sure you are filing the right documents with HMRC, meeting your tax and VAT deadlines – but they can do so much more than that. A good accountant will be more like your business partner, giving you holistic advice and support to ensure that your business has all it needs to succeed.

If you meet the right accountant, they will help you in all areas of your business life. They can help you network with other businesses, give you financial advice (for example, letting you know if it might save you money to become VAT registered) and help you find new business contacts. It’s a win-win situation when you find the right accountant, who looks out for your business and your best interests.

Deciding whether you need an accountant for a small business

Making any decision about your small business is a big deal and you need to be confident and well informed before you take the plunge. If you would like to find out more about what it’s like working with an accountant, your financial obligations and how an accountant can help you, we have plenty of resources within our blog. Here are some of the topics you might want to explore further:

How to start a small business at home?

Are entertainment expenses tax deductible?

How to hire a good bookkeeper and accountant?

Your frequently asked VAT questions answered

Making Tax Digital bridging software

So should I work with an accountant? It’s your decision!

Deciding whether to work with an accountant is an entirely personal process. There will be many factors that will inform your decision, that will be totally unique to you. These are some of the factors that might affect your decision-making process:

The complexity of your financial situation
Whether you are looking for investment in your business
Your marketing strategy and whether a well-connected accountant could help
The money you are making and whether your business is profitable
Your business strategy and budget
The amount of time you need to free up to focus on building your business

‘Do I need an accountant for a small business’? As well-established accountants, we hear this question a lot! We are here to help every business make the right decision for them. We believe in offering personalised, tailored advice, face to face where possible – and there is absolutely no obligation to go ahead if you feel an accountancy service isn’t right for you. Talk to our team, ask for our advice, pick our brains and make use of our knowledge. We’re here to support you on your business journey.

Call us to get started: 020 8468 1087, email or fill in our form and we will get back to you ASAP: