As the owner of a small or medium enterprise, you might feel employing an accountant will be costly. However, regardless of the size of your business, an accountant always has a role in ensuring everything runs smoothly. As the business grows, it will become more difficult to manage the financial side without expert help.
© Elnur / Shutterstock.com
While SME owners might handle accounting themselves with a new enterprise, this becomes more time consuming and complex as time goes by; dealing with financial matters can detract from managing and growing your business.
When business owners try to juggle too many tasks themselves, it can have a negative impact.
Common accounting problems
Around 60% of small business owners feel they aren’t knowledgeable enough when it comes to doing their own accounting. Despite this, 53% of small businesses don’t use professional accountancy services.
Even more shocking is the fact 27% keep track of their finances using just pen and paper, as they don’t have a clear understanding of the latest accounting software. A lot of them don’t trust software, with 38% of business owners who do their accounts manually saying they’re worried the software isn’t secure from hackers.
Only 25% of self-employed individuals use a professional accountant. A massive 72% do their own accounting, while the remainder ask family or friends. Unfortunately, studies show 36% of SMEs have problems when it comes to keeping accurate accounts records.
Read on to find out why small to medium enterprises need an accountant…
1. Save money and time
Outsourcing to a professional accountant can save your business money and time. Saving time is self-explanatory, as hiring an accountant means you will no longer have to deal with the company finances. However, you may wonder how it can save you money too?
An accountant will free up staff from financial tasks, enabling them to devote more time to their regular duties. Business owners won’t have to incur costs to acquire accounting tools and resources, as a professional accountant will already have up-to-date software.
Thanks to their knowledge of sound financial practices, forward planning and tax compliance, an accountant can also save your business from potentially costly pitfalls. For example, if you fill in your tax returns incorrectly, or don’t fully understand what’s required, you could receive a financial penalty for non-compliance.
2. Develop an understanding
A firm of professional accountants can develop a clear understanding of your company’s finances. They can support your business by easily identifying potential tax deductions, advising you on how to make strategic decisions.
Business owners can improve profitability by having access to high-quality financial information and the means of analysing the results. Accounting firms can analyse the overall financial health of a company and identify any red flags, being proactive rather than reactive.
An accountant will create business forecasts and budget accordingly to develop sound strategies. SME owners will gain an understanding of what aspects of their business are profitable and how to build on this. The company can then make informed decisions on where to reallocate resources to improve its financial health.
3. Improve cashflow management
Accounting firms can provide advice and implement modern digital tools to improve your company’s cashflow management. Monthly cashflow reports can be provided, so business owners will know what money is flowing in and out. This enables them to structure their cashflow and payment cycles to maximise cash reserves.
4. Being audit-ready
An accountant will be able to prepare accurate financial statements in case of an audit, should your company receive the dreaded letter advising, “HMRC has selected you for a tax audit.” This happens to a company, on average, every five years in the UK, although it can be more frequent.
Accountants play a critical role in an audit, as they can address often complex accounting questions and act as a business’s point of contact.
HMRC looks at your tax affairs to make sure the records are accurate. This includes declaring all your income; making sure you’re entitled to the deductions, tax offsets and credits you’ve claimed; checking your PAYE amounts have been correctly reported and checking you’ve calculated and reported other tax-related obligations.
When an accounting firm manages and prepares your financial statements, this enables greater compliance, so your company can enjoy a seamless review.
5. Prioritising other business focus
An entrepreneur must be able to focus on running their business. Hiring a qualified accountant means you can maintain that focus while they manage the finances to keep you on the road towards achieving your business goals.
Partnering with a professional, who has the expertise to guide you through your journey, will set your business on the road to lasting success.