As the owner of a small business, you may believe that hiring an accountant is a luxury that you cannot afford. However, this type of attitude is now beginning to change. Obtaining the services of a financial professional is regarded as more of a business decision; you simply have to remind yourself that an accountant can provide your company with considerable returns.
So, how can they achieve this?
- They can help with your tax obligations
- They can identify possible areas where your business could save money
- They can help with your business growth
As a result, whatever amount you invest in employing the services of an accountant, it will be money well spent.
The downside of doing your books
Of course, a lot of small business owners prefer to do everything themselves, including bookkeeping and accounting. However, if you are unsure about whether you should outsource these tasks, here is a reminder of the potential risks involved in doing your own books.
- Possibility of missing tax breaks because you have failed to claim valid expenses
- Your revenues may fall behind due to delayed invoicing or having to chase receivables
- You underestimate your tax bills which could cause you to receive financial penalties from the government
- You fail to file tax returns and compliance works on time
- You make mistakes in the books that could take hours to rectify
- You lack reliable financial information that could help you make business decisions
Why do you need an accountant?
Many small business owners only become aware of the need for a financial professional when:
- Keeping the books becomes a hugely onerous task
- They start making errors
- The business loses money
There are also other areas where an accountant’s services will prove invaluable, as outlined below.
1. They can remove errors from your books
If you are the person responsible for doing the books, you may only do it when there’s sufficient time. This means you probably won’t pay enough attention to your financial transactions. This can result in:
- Committing errors in the data entry
- Losing essential documents, such as receipts for expenses
- Missing tax breaks
Accountants will assist you by keeping your books up to date and accurate. They can even help you set up the appropriate software to record your company’s revenue and expenses. If you use these tools wisely, you are unlikely to fall behind in maintaining your books. In addition, you may no longer need to hire someone to enter the data.
2. They will accurately file your taxes on time
The late filing of taxes is often expensive in terms of penalties and interest payments. A reliable accountant will ensure that you never miss your tax deadlines. They may also help you find ways to reduce your tax liability. Remember to ask them which tax strategies you should adopt so that you can keep more money in the company.
3. They will enhance your invoicing and cash flow system
Your invoicing system is an essential aspect of your business; it’s unlikely that you will get paid if you don’t bill your customers efficiently. Furthermore, if you don’t receive your money on time, your business will always be short of cash.
To avoid these problems, an accountant will help you implement an automated invoicing system that will:
- Quickly send invoices to your customers
- Continuously check which receivables have been paid and which are still pending
- Provide customers with various payment options
4. They will give you better control over your business decisions
If you are a small business owner doing your own books, it is quite possible that you are doing them incorrectly. For example, there may be something more important that you have to do or you may be prone to making mistakes. This will result in unreliable and obsolete financial data. It will also hinder your ability to manage your business as you won’t know how profitable your company is or how much cash you have available to make improvements.
By employing a good accountant, you can monitor your income and expenses in real time. You will then have a clear picture of your company’s cash flow (short-term) and profitability (long-term).
5. They can boost your company’s profitability
Accountants can help your business increase its profitability. They can:
- Point out any unnecessary expenses
- Smooth out your company’s cash flow
- Figure out the factors that drive up your revenue
You can then use this knowledge to determine your company’s key performance indicators (KPIs); when they rise, so will your profits. This will also enable you to make crucial decisions. In addition, you can also use apps such as CrunchBoards to monitor your KPIs.
As a small business owner, hiring an accountant or bookkeeper is one of the most important business decisions you will ever make. Don’t forget, you shouldn’t allow the recording of financial transactions distract you from your main goal – to increase your company’s profitability. Although doing the books is vital, your time and talent would be better spent expanding the company. Fortunately, accountants are professionals who will help you lower your tax liabilities and avoid fines and interest payments. They will also identify and eliminate any unnecessary expenses. Furthermore, they will provide you with expert advice on how to assess and in turn improve your business.
Nishi Patel is the founder of Northants Accounting. His company helps small business owners with accounting, tax planning, cash management and identifying business opportunities.