For many small business owners, keeping track of their business accounting can be a difficult undertaking. It might be difficult to determine what kind of small business accounting advice you might require that will cost you less money.
Regardless of whether a corporation is active or dormant, you need to file the annual accounts, but the best part is you can prepare and file your own accounts if you're confident in your abilities to manage your company's finances and have a little idea about basic accounting requirements.
There are several compelling reasons to hire an accountant at various phases of your company's development. An accountant can help you with everything from small business accounting advice to how to do accounting for small businesses. That doesn't mean you have to hire an accountant full-time or on a retainer basis all of the time. Sometimes a couple of hours of their time is all that is required.
But if you’re like the owners who want to minimize small business accounting costs or cannot afford an accountant, you can also complete some business accounting tasks.
So, let's see as a small business owner, when do you need an accountant, or for what function.
When you can manage your accounts as a small business
When you're a sole trader
If you run a sole trader business, the business accounting requirements are pretty straightforward. Sole traders, unlike limited companies, are not required to file yearly accounts with Companies House or a corporation tax statement with HMRC. In its place, they must complete a self-assessment tax return. While this isn't particularly difficult, it does take time.
When you have a low transaction volume
You may choose to do your own bookkeeping if you have a limited volume of transactions because the associated activity should not take up much time. For example, if you run a sole trader business, you may only need to send out one or two invoices each month to clients, together with travel and subsistence receipts.
To preserve simple records
If you run a firm with straightforward and predictable bookkeeping categories, taking care of small business accounting is pretty simple.
When do you need the accountant?
To establish a business structure
Before you begin trading based on its complexity and your goals, you should engage an accountant to determine your firm's legal structure and take their accounting advice for small businesses.
As a limited business, you'll have more flexibility when it comes to paying yourself and any tax ramifications. Furthermore, this will ensure that the company is recognized as a separate legal entity from you, ensuring that your personal assets are not jeopardized if the firm encounters difficulties.
For statutory accounts and tax returns
Putting together a limited company's annual set of accounts and the tax return that goes with it is a complicated procedure requiring professionals' assistance. It's critical to stay on top of compliance obligations; otherwise, you risk facing fines and an administrative headache.
If you do your own accounting for your small business, it can rapidly get complicated. If you're worried about who owes you money and how much they owe you, an accountant can help you get back on track. It would help if you also tracked crucial business tasks like the salary and other employee payments to the ratio of the total sales. An accountant can assist you in this area by handling your payroll and creating graphs that show how the ratio varies over time.
Is it possible for me to handle my small business accounting on my own?
How well-versed in accounting are you?
Do you have any understanding of accounting basics?
Do you understand the basic business accounting requirements?
Do you know what the differences are between single entry and double-entry bookkeeping?
What are the definitions of FIFO and LIFO?
What is the purpose of an income statement?
If you answer yes to all the above statements, it means you have basic accounting understanding, and with little small business accounting advice, you can manage your company accounts. On the other side, If you don't know the answers to these questions and believe you should, or if some of this terminology has come up in conversation at your company, it's time to get an accountant.
Bookkeeping software has helped some small business owners find a medium ground between conducting their own accounting and hiring an accountant. There are a variety of solutions, ranging from simple software that assists with VAT returns to more complex software that assists with accounts, purchasing, sales, manufacturing operations, and even customer interactions are available in the market.
What can an accountant do for your company?
If you own a small business or work for yourself, having an accountant might be beneficial.
Having an accountant helps you focus on your business by providing small business accounting advice. An accountant can assist you with important tasks such as bookkeeping and timely submission of your company's and HMRC taxes. Your accountant's contribution will become more important as your firm grows, covering important issues such as:
- Reporting on finances
- Efficiency in taxation
- Planning a business
By boosting tax efficiency and optimizing cash flow, an accountant may help you save money in a variety of ways.
Finally, what will happen to my business if I don't hire an accountant right now?
Now is the time to think about your small business.
How quickly is it expanding? Maybe you're working late two evenings a week just to stay on top of the books. Maybe you think it's worth it merely to have a good handle on the finances at any given time.
But consider this: is this workload manageable? Or do you want someone who can only give you the top-line summaries when you need them?
This allows you to take a step back from the minutiae and concentrate solely on the broad picture, which is exactly where you need to be as a business owner. This will enable you to make smarter financial decisions for your company's long-term health.