It’s an exciting time, starting a business, and it’s easy to get carried away with the big picture and forget about the details. After all, you want to be focusing on your startup, taking it from idea to real-life, not being bogged down by admin.
But you need to think about the details, especially the financial ones. Accounting can quickly become complex and spiral out of control. It’s scary how you can lose track of invoicing or expenses, which will make life impossible come reporting season. That’s why a startup accountant can be an essential partner right from the seed days.
If you’re bootstrapping or starting a small business on a limited budget, you will have spent time looking into cost efficiencies (a fancy way of saying where you can save money). With the plethora of do-it-yourself software packages out there, you might be tempted to think DIY accounting is the way to go. Before you make that decision, though, ask yourself these questions:
● Do you know the right business structure or entity type for your company?
● Do you know how to access government grants and subsidies for startups?
● Are you confident you know the right filing format and process for dealing with HMRC?
● Can you keep up with constantly-changing tax law?
● Is DIY accounting really the best use of your time - or would it be better spent focusing on revenue-generating activities?
A good accountant can transform your business
On the surface it might seem like you don’t need a startup accountant, but getting any of the above wrong can have a significant impact on your business. Incorrect filing with HMRC can lead to fines and penalties; the wrong business structure could leave you unable to access tax relief. And that constantly-changing tax law? It’s a nightmare.
An accountant can do more for your business than just file papers; a good startup accountant can be transformative.
● They can save you time: Your time should be spent on growing your business and dealing with your customers - on bringing in the money, not dealing with it. An accountant can help you meet key deadlines, ensure all filing is done correctly, and give advice to keep you on track.
● They can save you money: Incorrect filing can lead to penalties by the HMRC, but filing correctly is not all an accountant can do. Good accountants keep abreast of grants, tax breaks and legal ways to minimise your tax bill, all of which can save you money.
● They can help you to grow: Having advice from an expert who isn’t bogged down in the day-to-day running of your business is invaluable. An accountant can advise you and discuss ideas. A good startup accountant should guide you toward sound business judgements, and identify what changes would make your business more profitable.
● They can ease stress: Business accounting is much more complex than your personal budgeting, and the stress of deadlines and paperwork can be daunting. A good startup accountant can lighten your load and help minimise those sleepless nights.
Your startup accountant is your business partner
Your accountant can act like an essential business partner, someone with less emotional attachment to the dream who can nevertheless guide you towards its fruition.
In the early stages, an accountant can help you to write a business plan, and provide advice about the right legal structure for your company. As you begin to scale, they can keep your finances on track. Some may offer bookkeeping as a service or be able to recommend a bookkeeper. Others will provide business coaching and guidance to ensure you stay on track. They can also help to register you for VAT - which you’ll need to do if your annual turnover is getting close to or is above £85,000 - and keep your VAT reporting in check.
As a startup, you will likely want to keep a close eye on business metrics such as the ratio of salaries to total revenue, or look closer at incomings vs outgoings. A small business accountant can help by producing tables and charts to help you easily understand your financial situation.
And in the growth phases, your accountant can help you to manage change - be it bringing on board a new business partner, changing your legal status, employing people or thinking about employee benefits. Their knowledge goes beyond simply balancing the books!
Take all of this together and the question becomes not do you need an accountant, but why would you risk not using an accountant.