EFM Associate Guest Blog – Why do you need an Accountant?

Why-do-you-need-an-AccountantHere at EFM, we ask our Associates to share their knowledge and expertise on certain topics that can help to improve your company’s financial management. In this article, Surrey based Finance Director, Andrew Sugden, discusses why do you need an Accountant?

Before considering how to operate with your accountant, it’s probably a good idea to consider why you would want or need to work with an accountant in the first place.

When you set up in business you will suddenly find yourself with a raft of tax and accounting requirements. At the very least you’ll probably need to address VAT, Corporation Tax and PAYE registration, together with filing and compliance, and there may be other taxes you’ll need to be aware of depending upon the nature of your business. You’ll also have to maintain accounting records and possibly have your accounts audited. Ignorance of the law is unfortunately not an acceptable defence for failure to comply, so getting the right advice early on is critical.

Depending upon how you have set up your business (e.g. as a limited company or a partnership), you may also find you need to get advice from two perspectives, one in the form of you personally, and the other in terms of the business entity, because as far as HMRC is concerned, these are two separate legal entities. The advice offered to you personally might differ significantly from that for the business, for instance you might want to consider inheritance tax planning or how best to be paid for the work you perform for the business.

Once you are up and running, a good accountant will also help you understand trends within your business, help you recognise future needs and generally act as a sounding board, helping you to successfully grow and flourish.

What is an Accountant?

The word accountant covers a broad eco-system of business-related activity, running from simple bookkeeping, credit control, accounts preparation and tax compliance and filing. If we compare to  the medical profession as an example, the entry level for treatment is most likely to be via a general practitioner (“GP”), who will refer conditions requiring specialist skills to subject matter experts. This GP role is mirrored in the accounting world, and it is this form of accountant (the local general practitioner) that you are most likely to deal with when you first start out.

They should be able to deal with most of your immediate business and personal needs, but will have the experience and local network to be able to refer you to specialists (for example, if you are considering international expansion and want to know how best to configure your operations).

So, now we have established why you need an accountant, and the type of accountant you are seeking, we should consider how to go about finding one.

How do I Select an Accountant?

As noted above, you are looking for a general practitioner, and the odds are you will have a number of locally based firms to choose from. There are a number of factors you should consider when shortlisting potential candidates:

  • Do they come recommended by members of your network, or your trade body?
  • Do they hold a professional qualification? (this should give you confidence that they are properly trained and are supervised)
  • What sort of client base do they have? (a larger firm that specialises in large and medium sized companies may not be geared up to support an early stage business – you should ask)
  • If the firm has multiple partners, who will be your primary point of contact?
  • Do you feel you could get along with the contacts at the firm? (personal fit is important – just because someone has great technical skills, doesn’t mean you will enjoy working with them)

Working with Your Accountant

Changes in technology now mean that having access to accounting software is not only affordable, but also relatively painless, as cloud-based systems mean you no longer need to maintain the software yourself, and you can give your accountant remote access to your ledgers. Your accountant should be able to recommend a system what will meet your needs and budget, and as part of that process you should agree how you will interact.

You may want to post all of your data yourself, or may look to have their staff, or someone they recommend carry out some or all of the basic bookkeeping. You may also elect to have them manage your payroll, and reviewing VAT returns. While modern systems may be able to do this, a review is very beneficial as there can be situations where special rules apply and having an expert review things before they are submitted can help prevent problems.

Where you do outsource work, you should agree who will do what, and also circulate key deadlines (e.g. when you will submit any changes to the payroll) so that deadlines are met and confusion eliminated.

Is an Accountant for Life?

There is no simple answer to this question. If your business is not changing dramatically year on year, and you are happy with the service you are getting from your accountant, then there is no need to change. You may decide that a fresh pair of eyes might be beneficial, but that will be a matter of personal taste.

Where your business is growing, then the question is less clear cut. Your existing accountant may well have the experience and capacity to grow with you but may not, and if they don’t, you might need to consider changing. There are protocols involved in changing accountants (the new firm will need to liaise with the old firm before taking on your account) so you should try to avoid key points in the financial year when making a change as this will make for a smoother transition.

You may find yourself considering changing accountants because your current accountant doesn’t drop everything the moment you call them. This may not be an indication of poor client service, it is more likely because they, like you, are running a business with an existing workload and multiple clients to satisfy. There will also be seasonal factors (e.g. the filing of tax returns) that make it especially difficult for them to be instantly available.

In this kind of situation, instead of changing accountants, you might also consider taking on finance staff within your business to compliment the work performed by the external accountant. In large, mature businesses, there will generally be an internal finance team led by a Finance Director that take care of some of the business’ financial needs, collaborating with the external accountants.

In smaller businesses, this type of organisation might seem unnecessary or unjustified from a cost perspective. In which case you may be able to use equivalent part time, external experts in the same roles. This can be a very cost-effective way of accessing the advice and expertise you need to help your business grow.

One of the leading providers of this form of flexible accounting support is the EFM Network. To find out more around our FD services, please get in touch with EFM. Our team of EFM Experts can help to support your business with effective financial management and growth techniques.

If you have a burning question and would like a quick financial advice please call our “Finance Director on Demand” Service now at 01582 256 122.