When do I need to hire an accountant?

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.

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

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.

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.

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.