Ercan Demiralay FCCA looks at what early stage, start-up businesses go through, the challenges they face and the professional support they need.<\/h2>\n
Have you started a business and wondered whether\u00a0you need an accountant yet?\u00a0<\/p>\n
Trying to manage the finances yourself and questioning if it’s costing you more time, effort, and money than it’s saving?\u00a0<\/p>\n
Not every business is likely to need the same level of accounting support from the outset.\u00a0<\/p>\n
If you’re a sole trader with straight forward income and expenses then you may be able to manage the finances yourself in the early days. If however, you have a limited company, a multi-owner business, you\u00a0employ staff, or you’re a founder seeking investment, then you’re likely to face more complex responsibilities earlier in your\u00a0journey as a business owner.<\/p>\n
Perhaps the better question isn’t whether you need to hire an accountant<\/a><\/span>, but whether professional support could help you make better decisions and avoid preventable problems.\u00a0<\/p>\n We’ve written this guide to explain the key moments when hiring an accountant is likely to be valuable and what you can expect to get help with. Here are some quick links to the various sections we cover for you:<\/span>\u00a0<\/p>\n <\/p>\n You should consider hiring an accountant when you’re facing decisions that impact on your legal structure<\/a><\/span>, tax position, need for funding<\/a><\/span>, or financial systems. Don’t just look for an accountant when a filing deadline is approaching. For many founders the best time will be just before you start trading, or soon afterwards.<\/p>\n We’d suggest that, at the latest, you seek professional support when you:<\/p>\n <\/p>\n Consider the following as signals that you’re likely to need professional advice:<\/p>\n 1. You’ve yet to choose a legal structure<\/span><\/p>\n The structure you select will impact on the amount of tax you have to pay, your degree of personal liability in terms of debts and claims, and how much administration you’ll have to undertake.<\/p>\n 2. You’re forming a limited company\u00a0<\/span><\/p>\n Running a company brings additional accounting, tax, and filing responsibilities that you’ll likely need systems in place to manage.\u00a0<\/p>\n 3. Doing the bookkeeping yourself is taking time away from growing the business<\/span><\/p>\n If the financial administration of your business is consuming time that could be better spent winning customers or enabling growth, then you may need to consider the opportunity cost of continuing to do everything yourself.<\/p>\n 4. You can’t decipher what the numbers are telling you<\/span><\/p>\n Recording transactions is one thing. Understanding what your cash flow, profitability<\/a><\/span>, and performance are telling you about your next decision is another.\u00a0<\/p>\n 5. You’re approaching a tax or regulatory deadline <\/span><\/p>\n VAT registration, employing people, and year-end filings can all introduce new responsibilities and requirements where mistakes and delays can prove costly.\u00a0<\/span><\/p>\n 6. You’re seeking funding or about to make a major investment <\/span><\/p>\n Profit forecasts, cash-flow projections, and reliable financial information can help you assess whether an investment is affordable\u00a0and demonstrate the strength of your plans to any potential funders.\u00a0<\/span><\/p>\n 7. Your\u00a0business has become more complex<\/span><\/p>\n More customers, taking on employees, and additional revenue streams mean your business is evolving. The financial processes that worked in the beginning may no longer be fit for purpose.\u00a0<\/p>\n <\/p>\n A sole trader is likely to have relatively more straight forward financial affairs, this means many of them are able to handle much of the record keeping and processing themselves. But if you’re a sole trader, don’t discount taking on a professional, their support can still be invaluable to you for:<\/p>\n The essential thing to think about isn’t the complexity, or lack thereof, of the bookkeeping, instead it’s whether you, as a sole trader, have\u00a0the time to manage it properly.\u00a0<\/p>\n <\/p>\n It’s really important that you know that directors are responsible for a limited company’s accounting and filings, and that remains the case even when you have an accountant prepare and submit them on your company’s behalf. As a general rule private companies need to adhere to the following:<\/p>\n 1. Financial duties<\/strong><\/p>\n 2. Registration duties<\/strong><\/p>\n 3. Tax responsibilities<\/strong><\/p>\n Not only do you need to get these things correct from a compliance perspective, you need to ensure you’re not missing anything, and that it all gets filed on time. Fail to do this and you\u00a0risk potentially expensive\u00a0penalties and fines.<\/p>\n Sure, an accountant is useful as they can help you complete all the\u00a0necessary forms. But their\u00a0true value is likely in applying their knowledge and experience to help you set up systems and controls to ensure all the above run\u00a0more smoothly, accurately, and on time.<\/p>\n The lesson is the bigger your business becomes, the more sophisticated the filing and reporting requirements are likely to get, so you’re more likely to need professional advice<\/a><\/span> as you scale.\u00a0<\/p>\n <\/p>\n As a founder you may be quite capable of doing the bookkeeping and accounts yourself. However, you need to ask the question as to whether this is sensible use of your limited time? Might it not be a poor commercial decision to be spending so much time on business administration?\u00a0<\/p>\n Instead, ask yourself what is an hour of your time worth? Could you instead spend it\u00a0converting opportunities into customers, up-selling, developing your\u00a0products or services, or moving the business forward?\u00a0<\/p>\n How you\u00a0spend your time is up to you and will naturally be\u00a0influenced by what you enjoy and where your skills lie. Just be sure to consider the opportunity cost. Could that hour generate more value elsewhere in your business than it saves by doing the accounting yourself?\u00a0<\/p>\n <\/p>\n This is a common problem we see amongst entrepreneurs in the early days<\/a><\/span>. They’re bootstrapped and try to do as much as they can on little to no budget. They make a good fist of things in the various different business areas but that can only get you so far. There comes a stage with growth where it’s no longer feasible.\u00a0<\/p>\n On the financial side of things, warning signs often include:<\/p>\n Bookkeeping tells you what happened. Financial insight<\/span> on the other hand helps you decide what to do next. At this point in your journey it’s likely no longer about record keeping, it’s about obtaining the necessary performance data to help you make better quality decisions<\/span>.\u00a0<\/p>\n <\/p>\n You set up your business<\/a><\/span>, you’re trading and maybe start making money. From the offset you knew you’d need advice but to keep things as lean and efficient as possible you did the bookkeeping yourself. It’s an understandable and common scenario.\u00a0<\/p>\n Maybe hiring an advisor<\/a><\/span> is something you keep meaning to do, but never quite get round to. After all you’re trusting someone with the essential information, data, and processes of your business potentially. The problem is that the longer you wait, the greater the potential for relatively small issues to become more difficult, time-consuming and expensive to rectify.\u00a0<\/p>\n Potential consequences can include:<\/p>\nWhen should you hire an accountant?<\/h2>\n
7 Signs it may be time to hire an accountant<\/h2>\n
![\"Do](\"https:\/\/no-cache.hubspot.com\/cta\/default\/2284600\/486c9b39-1b81-4070-975a-40862088f07c.png\")
<\/a><\/span><\/span><\/p>\n![\"Choosing](\"https:\/\/www.wellersaccountants.co.uk\/hs-fs\/hubfs\/.13%20Social%20Media%20and%20Micro%20Content\/Choosing%20the%20right%20business%20structure%20for%20your%20start-up.png?width=700&height=990&name=Choosing%20the%20right%20business%20structure%20for%20your%20start-up.png\")
<\/p>\nDoes a sole trader need an accountant?<\/h2>\n
Does your limited company need an accountant?<\/h2>\n
\n
\n
\n
Can you manage the accounting yourself?<\/h2>\n
When bookkeeping is no longer enough<\/h2>\n
\n
What happens if you wait too long to hire an advisor?<\/h2>\n
![\"Click](\"https:\/\/no-cache.hubspot.com\/cta\/default\/2284600\/b1494abd-9a1c-45ce-ae46-a9f97cc39a23.png\")
<\/a><\/span><\/span><\/p>\n![\"The](\"https:\/\/www.wellersaccountants.co.uk\/hs-fs\/hubfs\/.08%20Wellers%20Visuals%20and%20Internal%20Projects\/Stages%20model\/The%20stages%20model%20Shirlaws%20official%20version.jpg?width=700&height=525&name=The%20stages%20model%20Shirlaws%20official%20version.jpg\")
<\/a><\/p>\n![\"Looking](\"https:\/\/no-cache.hubspot.com\/cta\/default\/2284600\/f53bcd4d-5e16-48dd-a61e-a40555cd369f.png\")
<\/a><\/span><\/span><\/p>\n