9 min read

When do I need to hire an accountant?

There are about 22,000 registered accountancy firms in the UK. The top 100 UK accountancy firms earned fees totalling £15.2bn in 2018 (source: Accountancy Age) and about three-quarters of this went to the top four firms (ie PwC, Deloitte, EY and KPMG).

While there are also mid-tier, regional and specialist “boutique” accounting firms, the needs of the UK’s micro-businesses (ie those with fewer than 10 employees) are usually served by local accounting firms. Moreover, various online accountants have emerged in recent years, and these provide basic bookkeeping and compliance services for a fixed monthly fee.

Businesses in the UK purchased more than £17.7bn of accounting services in 2017 (source: Oxford Economics). So, how could hiring an accountant to help your small business and how can you find the right one?

What services can accountants provide?

If you’re starting your own business, an accountant can help you to decide the most appropriate legal structure – whether that’s sole trader, partnership, limited liability partnership or private limited company. For a fee, they can register the business for you, help with your business plan, and advise on sources of funding and setting your prices.

To save money, you might do your own basic bookkeeping, which is simple enough thanks to accounting software. When better established, you could pay a freelance bookkeeper to look after some or all of your bookkeeping tasks. As well as recording all sums entering and leaving your business, these can include invoicing, credit control, payroll, producing balance sheets, etc.

An accountant can also do your bookkeeping, of course, which may or may not be more expensive than a bookkeeper. They can advise you on accounting software and tailor it to your needs, perhaps so you can limit costs by doing your own day-to-day bookkeeping.

How can an accountant help me with my taxes?

An accountant can help you with your tax admin, returns and payments, to ensure your legal compliance. Micro businesses often seek assistance from an accountant when it comes to VAT, because requirements are more complex. An accountant can also look after your payroll.   

A major advantage of using an accountant is the tailored advice you can receive on tax planning and finance, although you must pay for this. An accountant can also provide personal tax-planning advice

Cloud computing refers to the sharing and storage of data via an internet connection. These days, most accountants are using accounting software that utilises the ‘Cloud’. This way of working with your accountant will streamline your workload and provide you with a real-time view of your finances.

Traditional Accounting

Using traditional methods, you would take your invoices and bank statements into your accountant who would process the information and send you debtor and creditor reports, and also reports on the performance of the business.

By the time you have received these and had a chance to look through them they could be out of date. The debtors report may be no use. For example, there may have been a number of customers who have paid in between you sending the information to the accountant and you analysing the reports.

Cloud Accounting

Using the cloud, you can access your accountancy software anytime meaning that as soon as the reports are finished you can log in to view them and act on them instantly. Using such up to date information can help you to make more informed decisions.

You can chase debtors earlier, for example, meaning improved cash flow. Or, the reports might flag up that your wages costs are too high. The sooner you get this information the better. You can meet with management and work to increase staff efficiency, cutting out overtime perhaps, or stop using agency staff who are proving too expensive.

When should I start using an accountant?

The timing differs from business to business. Getting sound advice from an accountant when setting up your business can help get you off to a flying start, with your business having the most appropriate legal structure, robust financial management systems in place, the best accounting software, and tailored tax advice, so your business can minimise its tax bill and maximise your earnings.

However, when starting up, you might not be able to afford an accountant’s monthly fees. You might need to do your own bookkeeping, and maybe pay an accountant to take care of more complex tax matters.

Once your business is more established, you might sign up to a fixed monthly fee arrangement with an accountant, so you can get on with other things. This might come to an end once you start to take on staff, possibly including your own accounts person.

What to think about before hiring an accountant

It’s worthwhile taking time to get detailed quotes from prospective accountants and carefully considering what they have to offer, as well as whether you can afford them. 

Sector experience

It’s crucial to find an accountant who understands your business – preferably one with bags of experience of servicing businesses of your size and sector.

Attention

You also need to feel confident that they’ll value you as a client and really help you to succeed. If you need to contact, you should not feel that this is unwelcome; they should respond quickly. Smaller local accountancy firms can offer a cheaper and more personal service than larger firms. Working with an online accountant can save you money, but you may not get the same service and advice.

Cost

Before going any further, you should know how much your business could afford to pay each month for accountancy services. Sole traders can expect to pay upwards of £30-£50 per month. Most initial consultancies with an accountant are free.
Sector experience

It’s crucial to find an accountant who understands your business – preferably one with bags of experience of servicing businesses of your size and sector.

Attention

You also need to feel confident that they’ll value you as a client and really help you to succeed. If you need to contact, you should not feel that this is unwelcome; they should respond quickly. Smaller local accountancy firms can offer a cheaper and more personal service than larger firms. Working with an online accountant can save you money, but you may not get the same service and advice.

Cost

Before going any further, you should know how much your business could afford to pay each month for accountancy services. Sole traders can expect to pay upwards of £30-£50 per month. Most initial consultancies with an accountant are free.

Difference between a chartered accountant and an accountant

Technically, anyone can call themselves an accountant. However, it’s always recommended to work with an accountant who holds relevant qualifications and experience.

One title you may come across is ‘chartered accountant’.

A chartered accountant is someone who has completed in-depth training with a chartered accountancy body, such as the ICAEW (the Institute of Chartered Accountants in England and Wales) or ACCA (the Association of Chartered Certified Accountants). Chartered accountants will be qualified to a high level but may be more expensive.

AAT (Association of Accounting Technicians) is another common route to train as an accountant, awarding 90% of all vocational accounting and finance qualifications in the UK. If your accountant has trained with AAT they are still highly qualified, but not to the more advanced level of a chartered accountant. 

“An AAT Accountant can sign off the accounts for companies up to the audit threshold, where a company does not have a turnover more than £6.5 million and its balance sheet total is not more than £3.26 million. The majority of businesses within the UK do not meet this threshold so currently over half a million businesses trust AAT Accountants to service their accounting requirements.”

In both cases, chartered accountants and AAT licensed accountants are bound by the organisation’s code of ethics and are subject to its disciplinary procedures. They must hold a practising certificate and have professional indemnity insurance if they offer professional services to the public.

How to find an accountant

Informi has its own directory where you can search for AAT licensed accountants and bookkeepers. 

You can also search online for members of respected professional associations, including the Association of Chartered Certified Accountants (ACCA), Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants of Scotland (ICAS). Many small-business accountants are active on social media or appear in the small-business or local press.

Other small-business owners may offer recommendations, but don’t rely solely on these. Your bank, solicitor, trade association or local chamber of commerce may provide leads.

Don’t rush when considering potential accountants. Request client references. Find out exactly how much you’ll be charged and what services you’ll receive. Are they regulated by a professional body? Do they have professional indemnity insurance? What if their advice fell short? These are all key questions to ask.

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Train your staff with AAT

by AAT

Your business may already have someone unqualified who is looking after your accounts. Or, you might want to hire someone to be a full or part-time accountant, rather than outsource it. If that’s the case, AAT Apprenticeships are a cost-effective way to boost your in-house finance skills, with plenty of funding available to help you cover the training fees. In this video, businesses explain how an AAT Apprenticeship works in practice.