Why you need to get an accountant in 2017
Small Business Guides
7 min read
Owner-managed businesses often do their own accounting and bookkeeping to try and save money. When it backfires, they come to small-business specialist, Bob Stebbings. He explains why you need to get an accountant or bookkeeper, and how to get the best value out of using one.
Bob Stebbings – Director and Founder, Bespoke Accounting
This guide is brought to you by Xero and our Xero partner, Bob Stebbings, because we share a passion for helping businesses everywhere thrive.
Most business owners don’t really enjoy bookkeeping or accounting. They end up doing it late at night or on weekends, when they’d rather be spending time with their family and friends. Yet they carry on because they have a do-it-yourself (DIY) attitude and they think hiring an accountant is a luxury. After all, why not work a little later and do the books yourself?
That attitude needs to change. Getting an accountant or bookkeeper is not a lifestyle decision, it’s a business decision. Investing in professionals – or changing the way you use them – can bring considerable returns.
They’ll keep control of your tax obligations, identify savings, and help you grow your business. And yes, as a bonus, they’ll give you back your weekends. You just need to use them in the right way to make sure your money is well spent.
Here’s what you’re missing
As a small business owner, you have to do a lot yourself. There simply isn’t the money to outsource much. In deciding whether or not to get outside help on something, you have to ask if doing it yourself creates extra risks or costs.
Here are the potential downsides of DIY bookkeeping and accounting.
You miss out on tax breaks by failing to claim valid expenses.
You fall behind with invoicing (and with chasing unpaid accounts).
You underestimate your tax bill and get into trouble with the government.
Tax returns and other compliance paperwork is filed late, resulting in fines.
The books end up with mistakes that take hours to fix.
You don’t have reliable information to help you make business decisions.
You may also run into issues when Her Majesty’s Revenue & Customs (HMRC) implements their Making tax digital plan, which is on target for a 2018 launch.
Why you need to get an accountant or bookkeeper
I specialise in helping owner-managed businesses so I see a lot of clients who started off doing their own books. They come and see me when the job becomes too big or when they start making mistakes and losing money.
There are so many things an accountant or bookkeeper can do for you but here are some key areas where they’ll help your business immediately.
Clean up your books once and for all
When business owners do their own bookkeeping, it often only happens when they can find the time. That’s not really giving your financials the attention they deserve, and it results in:
- data-entry errors
- lost documentation (such as proof of purchase for expenses)
- missed tax breaks
- books that are out of date
If you get an accountant or bookkeeper, they’ll clean everything up so you have accurate records backed up by documentation. They’ll even set you up with software that makes it much faster and easier to record future income and expenses. That way you’ll never fall behind again – and you won’t have to pay for someone to come and enter data for you.
Do your tax really well – and on time
Late filing or payment of taxes results in penalties and interest. We’ve taken on clients in the past who’ve lost thousands this way. When you get an accountant, you won’t miss any more deadlines. The good ones will work well in advance so that tax filing is smooth and stress-free. You’ll forget what it was like to dread tax season.
Plus an accountant can often reduce the amount of tax you have to pay. If you engage them at the start of the year and ask for tax planning services, they’ll come up with a strategy that keeps more money in your business.
Improve your invoicing and cash flow
Your invoicing system is central to the health of your business. If you don’t bill efficiently, you won’t get paid quickly – and that’ll leave you short of money. It sounds basic, but this factor alone undermines a lot of businesses.
As an example, I think of the plumbing and heating engineers that service our building. About two weeks after they’ve been, they send me an invoice, which gives me 30 days to pay. If I pay on time, their business is waiting more than six weeks for the cash, even though the employees who did the work were paid the week the job was done.
Get an accountant or bookkeeper to set up an automated invoicing system and you’ll be able to:
send invoices quickly
check at any time to see which ones have been paid and which haven’t
give customers a choice of multiple payment methods
Accountants and bookkeepers can also give you good advice on invoice payment terms, to help reduce the time you spend waiting on money to come in.
An accountant or bookkeeper will free you up to focus on your core business. Plus they’ll allow you to spend more time with family and friends, which is a really great perk of making a good business decision.
Get the power to make better decisions
When you have to do the books yourself, you often don’t get onto it straight away. Other things come up that delay progress, and because you’re not a robot, you make mistakes. That means you don’t always have reliable, up-to-date information about your business.
And when you fall behind, it limits your ability to manage well. You don’t know how profitable you are or how much cash you can afford to spend on improving the business.
When you get an accountant or bookkeeper, they’ll ensure you always know where you stand. You’ll be able to see income and expenses as they happen, which will give you a good picture of short-term cash flow and long-term profitability.
The AVN – an association of accountants whose mission is to make UK owner-managed businesses the most successful and enjoyable to run in the world – has done some research on this. They found that four out of five businesses fail within five years because they:
have no experience in record keeping
have no knowledge of financing
don’t pay taxes correctly
An accountant or bookkeeper can help you overcome these common hurdles.
Nail digital tax
The HMRC is working on Making tax digital, which will change how taxes are assessed and paid. We don’t yet know exactly how the system will work, except that businesses will need to use software to make their tax submissions. An accountant or bookkeeper can help you deal with the change.
Boost your profitability
Accountants can help you unblock growth in your business. They’ll start by removing unnecessary costs and smoothing out your cash flow, but there’s even more they can do. They’ll figure out what drives revenue and profit in your business – and help you improve them.
These will become your key performance indicators (KPIs). When a KPI goes up, so will revenue and profit. KPIs allow you to make strategic decisions.
KPIs in action
As an example of how this might work, think of a roofing business whose revenue is tied to the number of new jobs they win. They can’t win any unless they give an estimate, and they won’t get to give an estimate unless they answer the phone. That’s not always easy to do when you’re working at height.
So an accountant might measure:
If the relationship between these three things was strong enough, an accountant would encourage the business owner to get an answering service. They’d even tell you how much return you could expect from the investment.
KPIs like these can easily be tracked using apps like Crunchboards or Spotlight. An accountant will set them up for you, so you can always see where to improve your business.
Getting the best value from accountants and bookkeepers
As with any consultant you hire, you want to get maximum bang for your buck from an accountant or bookkeeper. Try to keep them focused on problems or opportunities that can make your business more profitable.
It’s all about return on investment so try to avoid tying professionals up with labour-intensive, low-yielding work like:
finding and fixing errors in your books
reconciling bank accounts
reconciling control accounts
rushing to meet tax deadlines
These are all important things, but they don’t add a tonne of value to your business. It’s catch-up work. You’ll burn through your accounting budget without getting any of the truly valuable services.
When you get an accountant or bookkeeper, find one that can automate your bookkeeping. There are accounting software systems that automatically capture all your business data – including sales, expenses, payroll, inventory, and more – with minimal human involvement.
This will mean paid professionals spend far less time fixing old problems, and more time saving you money and improving your business. It’s all about return on investment. No one should understand that more than an accountant.
Getting an accountant or bookkeeper is a business decision
Business troubleshooter, Sir John Harvey-Jones said “Leaders should only do what only they can do.” Don’t let bookkeeping distract you from your core work. It’s not where you’ll add value to your business.
A paid professional, on the other hand, has the expertise to:
lower your tax burden
avoid fines, interest and audits
identify and eliminate unnecessary costs from your business
help you measure and improve business performance
They’ll free you to work on the business, which is where you’ll be able to make the biggest difference. Plus they’ll allow you to spend more time with family and friends, which is a really great perk of making a good business decision.