Should you hire an accountant? Pros & cons for startups

You’d expect an accountancy firm to be biased on the question of whether or not startups and other businesses should hire an accountant. But is getting an accountant always the right move? Perhaps not.

In this post, we take a fair look at the advantages and disadvantages of using an accountant to support your startup business.

Pro: Peace of mind

Finance is not every businessperson’s strong point. When you have many other tasks vying for your attention, this isn’t an area where you want to make a mistake.

Knowing that a professional organisation will keep your finances in good order is a great basis for turning your startup into a stable business.

Pro: Lower costs than expected

Many of the businesses we deal with find that the money they spend hiring us is paid for by the savings we’re able to help them make.

Our fees depend on the level of work involved. One good way for you to cut your expenditure on accountancy is to do some of the necessary tasks yourself. For example, many of our clients use cloud packages such as Xero, QuickBooks and Sage, which means there’s less admin for us and hence a lower charge.

If hiring an accountancy firm represents little or no cost to your business, the smart thing to do is to leave the numbers to the experts and get on with running your core operation.

Don’t forget that costs can be measured in time as well as in pounds and pence. We regularly save our clients hours of effort each month. Imagine what you could do with that spare time to help push your startup forward.

Pro: Claiming for the right things

Working with a professional accountant will help you avoid problems we’ve seen with lots of new clients. That includes issues such as not having registered for VAT soon enough or buying a car in an individual’s name and then trying to claim it as a company vehicle.

In addition, there are many things your business might be able to claim for but that you’re not aware of. Simply put, you don’t always know what you don’t know.

The good news is that it’s an accountant’s job to know this sort of thing. That’s why hiring professional help can often save your business money instead of being a cost.

You can learn more about the types of expenses you can (and can’t!) claim for by reading our article here.

Pro: Improved business processes

Working with an accountant shouldn’t mean having to record any more or less data about your business. Good record-keeping is essential and you should be doing this anyway.

However, we’ve found that many of our clients have changed and improved their processes based on our feedback. For example, we’ve shown them a better way of handling their year-end processes, and that sort of adjustment will benefit them for years to come, whether they keep working with us or not.

Your accountant may be able to assist you with book-keeping and cash flow projections. They can assess the likelihood of getting bank loans approved, and they can even make introductions to other businesses, such as solicitors, thanks to their network of connections.

Activities such as this are part of our standard approach to helping our clients. Instead of just being the number crunchers, we try to provide something of greater value so that startup businesses have the best chance of sticking around.

Pro: Privacy protection

All our processes are GDPR compliant, as are the cloud-based packages our clients use, including Xero, QuickBooks and Sage.

Data protection is an essential cornerstone of working with a professional accountancy firm. In contrast, handling financial tasks internally might not give you such protections.

Think about how well set up you are to explain how your financial processes work if ever your business were to be inspected by HMRC.

Con: Another burden on your funds

We know that money is top of mind in most businesses, especially in startups, where you have to stretch every penny while you work hard to build momentum.

If anyone in your business has financial skills and experience, they might be able to fulfil the role played by an external accountancy firm. Even if this isn’t a permanent role, leaning on in-house expertise in the short term could be a good way of saving much-needed funds until you’re ready to outsource this work to dedicated professionals.

In our experience, clients tend to hire accountancy firms like ours only at the point where it’s a necessity. That’s understandable: just make sure to keep good records so that it’s easy for you to work with an accountant when that time comes.

Con: Underuse of in-house skills

You might already employ someone with all the skills necessary to do the accountancy work in-house. If that person is already occupying another role, it might be possible to get them to handle their regular tasks and accountancy tasks as part of their normal working week. This has the potential to save the business a lot of money, so long as the person in question keeps their knowledge up to date.

Using an in-house person also means you avoid needing to carry out due diligence on hiring an accountancy firm. Assessing the relevant costs, services, locations and qualifications all take time. Bear in mind, too, that anyone can call themselves an accountant or tax adviser even though they might not be accredited via ICAS/ACCA/ICAW (we have these accreditations!).

Con: Hire your own member of staff

For some businesses, it’s important that every aspect of the work is done internally, and that means that even accountancy wouldn’t be outsourced.

If your corporate culture and ethos is built along these lines, you’ll need to hire people capable of handling your accounts. This comes with its costs, especially if those people have a dedicated accountancy-only role in your organisation.

This approach does not exclude you from potential inspection and auditing from the relevant tax authorities.

Con: Alternative routes may be better early on

Paying for an accountant isn’t the only way to get your accounts in order. You might be better served, at least early on, by learning the financial skills necessary through Business Gateway or through mentoring arrangements with experienced business-people.

Let’s sum up

We think that smart startups are best off working with an accountant as soon as they can. But as our list shows, there are reasons for and against doing so.

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