Every business has different needs when it comes to using an accountant. Indeed, some may decide not to use one at all.
Only a limited company
with a turnover of more than £6.5m and a balance sheet total exceeding
£3.26m needs an audit – which would require an accountant. Most other
businesses can do their own accounts and tax returns, if they so choose.
However, running a business is hard enough without having to learn
every accounting and tax rule, regulation and law.
But what exactly do you need your accountant to do?
Most businesses need their accountant to complete what we accountants
call “compliance work” – basically, filing your accounts and tax
returns (eg statutory accounts, annual return, VAT, Self Assessment,
Corporation Tax, PAYE, etc) in correct format, ahead of deadline.
Most small businesses have very simple accounting and tax needs. Accounts usually consist of:
- sales invoices each week/month
- costs for stock, advertising, web hosting, etc
- daily/weekly travel expenses
- mobile and other phone charges
- monthly salary/wages
- use of home as office
- insurances and/or professional subscriptions
- bank interest/charges
- sundries such as stationery, postage, laptop, etc
- dividends (if your business is a company)
- and, of course – accountants fees!
So how many individual transactions would this be a year? 100? 200?
500? Not too many, really. Add a free or inexpensive accounting system
to your PC to record these transactions and you won’t have to face the
nightmare of bags overflowing with receipts, invoices, statements, etc.
You can save a lot of money simply by doing your own bookkeeping, of
course. Modern PC-based systems also grant better control of the
financial side of running a business. Thanks to accounting software (or
even just a basic Excel spreadsheet system), you no longer have to wait
several months after the year-end to find out how your business has
performed.
Keeping your accounts up to date in this way allows you to make
better decisions based upon current financial data. It also allows your
accountant to provide appropriate advice based upon your current trading
rather than on previous accounts, which could be two years or so out of
date.
What more do you need?
Occasionally, you might need clarification on a financial or tax
matter – so being able to quickly pick up the phone to ask your
accountant questions can be hugely beneficial.
Accountants like to give this advice the grand title of “tax
planning”. For some businesses (ie those with a high turnover or value),
it’s important to have a clear and documented tax strategy. But in most cases, a tax planning strategy can be quite simple.
Your accountant should also make sure you claim all allowable costs –
those that are “wholly and exclusively for business”. Many myths exist
about what you can claim (eg clothes, all lunches, etc). Some seem to
think that unless you hire an ‘expensive’ accountant, you won’t get the
right advice on allowable costs. Utter nonsense! The advice you get
depends on the accountant – there are good and bad ones – whatever price
you pay!
Changes in your circumstances
Planning for the long term may give you a different tax plan, for
example, if you intend to build up and sell your business. In addition,
your circumstances could change and it may be necessary to discuss your
tax plan with your accountant if, for example, you separate from your
spouse, want to retire or buy property, etc.
Trying to account for “ifs, buts and maybes” in a tax strategy can
make it unnecessarily complex. Taking into account events that may never
happened can lead to a flawed plan, so keep things simple, based on
what you know and what is likely to happen. Make sure you keep your
accountant informed of any likely or forthcoming changes in your
circumstances. This will help them ensure your tax plan remains valid.
Pay for the advice you need – when you need it
There’s no need to pay fancy fees for specialist services you’d
rarely, if ever, use. You can get the best of both words by making sure
your accountant provides the service you need as and when you need it –
at a fair price. An accountant with core trained and qualified staff,
plus access to specialist services, should easily be able to do this for
you.
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