Do I need an accountant?

Customisable business insurance
04 October 2021
6 minute read

Whether you're a new freelancer or sole trader, or an established small business owner looking to expand and grow your company, the question of whether or not to spend money hiring an accountant is one you'll have to consider at some point.

For any small business owner, the thought of spending money on an accountant can seem like an unnecessary expense, especially when you could prepare and file your own tax returns. Indeed, as recently as 2018, research by business ratings and review platform Clutch found that 45% of small businesses do not work with professional accountants at all, and that only 12% of small businesses hire an accountant full time.

However, there are several compelling reasons why investing in an accountant’s expertise could be one of the most sensible business decisions you’ll make as you attempt to grow your company.

Learn more about the factors to consider in making the choice about accountancy services for your business with our helpful guide:

Free up time to focus on your business

As any freelancer or entrepreneur will know, your time is precious and prioritising your own workload is vital. A survey of 300 small business owners by Local First Bank found that, on average, owners of small businesses spend five hours per week (more than half a working day) on accounting and invoicing.

Employing an accountant to file your self-assessment tax return, or to manage invoices, is not a legal requirement and there are plenty of sole traders and freelancers who prepare and file their own returns each year. However, unless expertise in business tax happens to be part of your repertoire of additional skills, it’s likely that preparing your own return will take significantly longer than if it were done by a professional.

Paying an accountant a standard one-off fee of roughly £250 to prepare your taxes could save you days of lost working time which you can spend focusing on running the day to day affairs of your business.

An accountant can help you scale up your business

For entrepreneurially-minded business owners, the aim of the game is sustainable growth. When it comes to expanding your business, from a sole trader to a limited company with employees, or from one branch of your shop to several, an accountant can offer you valuable advice and assistance in a number of different areas, including:

  • Writing loan applications
  • Budgeting and managing cash flow effectively during an expansion
  • Managing debt
  • Setting up payroll for new staff

When you take on employees for the first time, you may be legally required to take out employers' liability insurance. An accountant can help you set up your policy to get the best deal for required insurance cover.

Do you need an accountant to file micro entity accounts?

The need (or not) to seek the help of a professional accountant will depend, in part, on the size of your business. If your business satisfies at least two out of the following three criteria, then you are classed as a micro entity (very small business):

  • A turnover of £632,000 or less.
  • £316,000 or less on your balance sheet.
  • 10 employees or fewer

Micro entities can prepare significantly shorter and less complex accounts and send balance sheets with less information to Companies House each year. If your business fits into this category, then you are more likely to be able to prepare your own accounts by yourself.

How to find an accountant for your business

Like many professions in the UK, accountancy is regulated by an independent body, the Financial Reporting Council (FRC), and boasts a number of professional membership bodies that help establish high professional standards within the sector, through qualifications and training.

Both the Association of Chartered Certified Accountants (ACCA) and the Institute of Chartered Accountants in England and Wales (ICAEW) have useful tools on their websites that can help you find an accountant or accountancy firm that is local to you and appropriate to your business needs.

These industry bodies can help you ensure that the accountant you work with, either on a one-off basis, or regularly on retainer, has the qualifications and experience needed to reliably and effectively handle your company’s accounts.

All ACCA and ICAEW registered accountants must have professional indemnity insurance, which protects your business in the unlikely event of an accounting error.

One-off fee, on retainer or an employed accountant?

There are generally three ways in which to hire the services of an accountant:

  1. A one-off - Accountants may charge a flat rate fee of between £75 and £350 for a sole trader, or up to £500 for a small company to prepare and file your tax return and Companies House accounts.
  2. On retainer - You can hire an accountant or an accountancy firm’s services throughout the year on an ongoing basis from around £50+VAT per month for a sole trader or from roughly £150+VAT per month for a limited company.
  3. Employee - For Limited companies with a large enough turnover to be financially justified, you may opt to employ a qualified accountant in-house, either full time or part time.

What about accounting software?

As the UK government moves towards its target of digitising the tax return process for businesses through the Making Tax Digital programme, accounting software has surged in popularity.

There are a huge variety of accounting apps available, and while they can make the process of organising your own accounts faster and more efficient, most software products do not allow you to connect with a real-life accountant during the process.

Exceptions to this include Finmo and TaxScouts, both of which incorporate the option to connect online to a qualified accountant to help you through the self-assessment process.

Read more about the best self-assessment apps on the market

Save money in the long run

By being experts in the tax legislation, accountants can often end up saving you as much or more than the cost of their services by making efficient use of allowable expenses and tax relief opportunities.

In this sense, the one-off fee you might pay for the services of an accountant when it comes to preparing and filing your business’ tax return can be recouped almost immediately thanks to the professional know-how they bring to the process.

Other important steps

Hiring an accountant is one of several steps you can take to make you and your business more financially secure. Other important steps you can take as a small business to help keep you on the financial straight and narrow include working with a financial advisor and taking out industry specific business insurance that protects your business from risk.

Unlike an accountant, a financial advisor is in a position to offer you professional advice about how to invest your money as a business. The UK government has some helpful guidance for when you come to choose a financial advisor, including details of the different kinds of advisor and how their professional industry body’s accreditation works.

When it comes to insuring the services, people and premises associated with your business, there are several types of business insurance that could be applicable to your company, and an accountant is ideally suited to helping you navigate the world of business insurance and advising you on the most efficient policies available.

At Superscript, we offer business insurance to cover 1000s of industries, with the most popular types of cover including:

  • Public liability insurance - Cover for legal and compensation costs relating to any claim against your business due to injury or property damage of a non-employee.
  • Product liability insurance - Cover designed to protect against legal and compensation costs if someone is injured, or their property damaged, by your business' product.
  • Employers' liability insurance - Legally required cover for any business with employees that covers your staff wherever they work.
  • Professional indemnity insurance - Protects your business from contract and intellectual property disputes, as well as mistakes made when providing services.

Whether you choose to use the services of an accountant or not, if you’re in the market for business insurance, our quote builder can guide you in the direction of appropriate covers. Simply click ‘Start your quote’ and go from there. If you get stuck, our friendly team are ready to help via web chat, phone or email.

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