When you should hire an accountant

Accountants offer assistance at various stages of a small business's life. So, when is the right time to bring one on board?

Challenges for growing small businesses

There are many reasons for hiring an accountant during different phases of your company's growth. From creating a business plan to forming the company, from applying for a loan to handling a government audit, an accountant can simplify things for you at every stage.

That doesn't necessarily mean you have to employ an accountant full-time or retain one on a regular basis. Sometimes just a few hours of their time will be enough.

Like many small business owners aiming to save money, you might think you can't afford an accountant. But consider how much time it would take you to do certain tasks (like taxes), and ask yourself, is that a good use of your time?

For example, if it takes you 10 hours to do your taxes, and your time is worth £100 an hour, that's a cost of £1,000 just to do your own taxes. Plus, there's always a chance of making mistakes – especially when you're multitasking, like most business owners.

However, if you hire an accountant to handle time-consuming tasks like taxes, it's likely they'll cost less per hour than what you pay yourself. You'll not only have extra time to focus on generating revenue, but you'll also have the peace of mind knowing an expert is handling the details.

So, at what other points in the life of a typical small business might it be beneficial to hire an accountant?

You'll want advice when you write a business plan

If you involve an accountant while you're drafting your business plan, they can use accounting software to include financial projections and other reports. This will help you create a business plan that is realistic, professional, and more likely to succeed. Our business plan template can get you started.

Bringing in a professional at this early stage will allow you to benefit from their financial expertise and advice right from the beginning. This could save you time and money compared to hiring one later on.

You'll need advice regarding your company’s legal structure

Not all businesses have the same legal structure; there are various types determined by multiple factors. Some might be called limited companies, limited liability partnerships, or corporations, while others could be sole traders or proprietorships. These vary depending on the country.

You should carefully assess each type before deciding which one is best for you. For example, you may operate as a sole trader or sole proprietor, working on a self-employed basis and invoicing under your own name. In this case, you might be able to offset some of your living expenses against tax.

However, this also means you could be personally liable for any business-related obligations. If your business fails to pay a supplier, defaults on a debt, or loses a lawsuit, the creditor could legally pursue your assets, including your house.

With a limited liability company structure, things are different. As the name suggests, the liability of the business is limited to the assets owned by the business, not you personally (though there may be exceptions).

An accountant can explain the legal business structures available and help you choose the one that's right for your situation.

You'll need an accountant to assist with the finances

Small business accounting can quickly become complex if you manage it on your own. If you feel you're losing track of who owes you money and how much, an accountant can help you regain control.

You may also want to measure key business metrics, such as the ratio of salaries and other employee payments to total revenue. An accountant can help here by managing your payroll and producing graphs, so you can visualise how the ratio changes over time.

If your accountant utilises cloud-based accounting software, they'll be able to share your business accounts with you quickly and easily. They can also create tables and charts to help you grasp your company's current financial situation at a glance. This will help you monitor the state of your business and keep track of things like cash flow.

Hire an accountant when you're ready to delegate

As a small business owner, you likely appreciate having control. You can set your own working hours, design your business strategy, manage your workload (to a certain extent), and manage your finances. Being in charge of all these aspects is a wonderful and liberating feeling.

But sometimes this can prevent you from delegating. Business owners can feel overworked, partly due to a reluctance to allow others to assist. You might believe no one can possibly know your business as well as you do, so nobody can handle any part of your business as well as you.

Inability to delegate can leave you feeling overworked and stressed. At some point, you will have to let go and learn to trust others to handle some aspects of your business so that you can focus on the rest.

Delegating your company's financial affairs is a good start. You need to choose the right accountant and ensure you trust them with your company's financial information. Once you've handed over your company's finances to someone with more experience in accountancy than you, you'll have more time to concentrate on other areas of your business.

Some of the most successful business owners in the world are experts at delegating work to the right people – so try to learn from them.

Hire an accountant when you must deal with the government

Dealing with government paperwork can be daunting when running your own business. That's why many small business owners hire an accountant when the first tax filing is due.

But they can also assist you in interacting with the government in other ways.

A good accountant can:

• complete and file the required legal and compliance documents for your business;

• keep your company up to date with the latest tax laws;

• prepare annual statements of accounts;

• keep your company's status current in the government's company register;

• maintain records of directors and other administrative personnel;

• organise and record share/stock allocation, such as when the business is formed, when a business partner leaves, or when a new partner joins;

• handle your payroll and ensure all employees' tax codes and payments are recorded accurately.

Preparing your tax documents correctly could save you money – perhaps even more money than your accountant charges. And a good accountant will use their knowledge of tax laws and legislation to suggest ways to free up cash flow, save money, and raise capital for expansion.

Hire an accountant if you're audited

Statistically, it's unlikely your company will be audited because there are so many small businesses and relatively few government auditors. However, if it happens to you, it can be expensive, stressful, and time-consuming.

If you don't already have an accountant at this point, it's a good time to hire one. They can advise you on how to navigate the auditing process. They can also help ensure you don't violate any tax laws afterward – because the government will almost certainly be monitoring you.

But it's better to hire an accountant before an audit ever happens, especially if you can find one who offers audit insurance. Audit insurance covers the fees you'd have to pay if your business needed to respond to an official inquiry, review, investigation, or audit by a tax department. An accountant who offers audit insurance means they won't charge extra for the considerable amount of work they'll have to carry out during the audit process.

Good accounting software includes an audit trail. This makes it easier for you and the government to see precisely which transactions have occurred over time – and who authorised them.

You need an accountant when applying for a business loan or overdraft

Banks want reassurance they'll get their money back. Since the credit crunch, lending to small businesses has decreased in most countries. This makes it all the more critical to have a solid business plan when seeking a loan or overdraft.

An accountant can improve your prospects. Even having an accountant might sway the bank in your favour, implying you're serious. With good accounting software, your accountant can present facts and figures supporting your application. They can also address bank questions about revenue projections and expenses.

Your accountant can also help you choose a loan and assess if your bank's terms, conditions, and interest rates are beneficial.

When your company is growing, hire an accountant. Companies don't always grow steadily. A new client or major project can mean faster-than-expected growth.

An accountant can manage growth transitions, such as hiring staff or expanding office space. They'll handle the details (payroll, taxes, property taxes, utility payments, etc.), letting you focus on your business's broader growth.

An accountant can use accounting software to analyse cash flow, inventory management, and pricing. They can also advise on how to properly grow your business through financial analysis. They might even help determine the best time to introduce a new product or service.

Get an accountant's advice before pursuing a franchise. Franchising is popular for startups, especially in car grooming, cosmetics supply, lawn-mowing, courier services, and fast-food restaurants. You're your own boss, and in return for revenue or business equity, the franchise company provides support like brand marketing, sales, product supply, and more.

This can reduce startup risk. But you'll have less commercial freedom and higher overheads because a portion of your income goes to the parent company. Franchise contracts vary, influencing what you pay and keep.

It's hard for business newcomers to assess a franchise's worth. That's where an accountant helps. They review the contract to identify fees and percentages, helping you estimate post-deduction income.

You decide whether to pursue the franchise. But informed with financial knowledge, you can make that decision with greater confidence.

Get an accountant's advice before buying a business. Some start a business from scratch; others buy an existing one. Consult an accountant before buying. They'll scrutinise the company's accounts and spot potential issues.

For example, they can check if company assets (like equipment) are fully owned, leased, or partially paid, and if there's outstanding debt.

Consulting a lawyer is wise too. Your accountant and lawyer together should uncover everything about the company you're buying. This ensures you're getting what you pay for.

Get advice from an accountant before selling your business. You likely already use an accountant. If not, seriously consider hiring one before selling.

An accountant will organise your company's financial records and create financial statements for potential buyers. With high-quality accounting software, they can generate useful charts and tables, presenting your company favourably. They can also liaise with potential buyers' accountants during due diligence, a legal requirement in takeovers.

Importantly, an accountant can structure your finances to maximise your sale proceeds. Depending on how the sale is structured, post-tax earnings can vary considerably. For example, a lump sum may be less tax-efficient than instalment payments.

Every sale is unique, and a good accountant helps you get the best outcome

Accountants can assist you at every stage. As you see, accountants aid at every development stage. Hiring one isn't mandatory, but the right accountant simplifies your life, allowing you to concentrate on what you enjoy.

You specialise in running your business. Let our accountant handle the financial details. That way you save a lot of time and don't risk your money!