Question and Answer: Accountants and Business

Question and Answer

Q: When do you hire an accountant for the growth of your business?

Dealing with the government

It can be daunting dealing with government paperwork when you run your own business. This is why so many small business owners hire an accountant when the first tax filing is due.

But they can also help you cope with more than just tax returns. They can help your company interact with the government in other ways.

A good accountant will be able to:

  • Complete and file the required legal and compliance documents for your business
  • Keep your company up to date with the latest tax laws
  • Prepare annual statements of accounts
  • Keep your company’s status updated in the government’s company register
  • Maintain records of directors and other administrative personnel
  • Organise and record share/stock allocation, such as when the business is formed when a business partner leaves or a new partner joins
  • Handle your payroll and ensuring that all employees’ tax codes and payments are recorded correctly.

Preparing your tax documents correctly could save you money – perhaps more money than your accountant charges you. And a good accountant will use their knowledge of tax laws and legislation to suggest ways you can free up cash flow, save money and raise capital for expansion.

Need audited financial statement

It’s statistically unlikely that your company will be audited because there are so many small businesses and relatively few government auditors. But if it does happen to you it can be expensive, stressful and time-consuming.

If you don’t already have an accountant at this point, it’s a good time to hire one. They can give you advice on how to work within the auditing process. They can also help ensure you don’t violate any tax laws afterwards – because the government will almost certainly be watching.

But it’s better to hire an accountant before an audit ever happens, especially if you can find one who will offer audit insurance. Audit insurance covers the fees you would have had to pay if your business needed to respond to an official enquiry, review, investigation or audit by a tax department. An accountant who offers audit insurance means they won’t charge any extra for the considerable amount of work they’ll have to carry out during the audit process.

Good accounting software incorporates an audit trail. This makes it easier for you and the government to see exactly what transactions have taken place over time – and who authorised them.

Applying for a business loan or overdraft

Banks like to know they’ll get back the money they lend out. Since the credit crunch, lending to small businesses has dropped in most countries. This makes it all the more important that you have a sound business case when you apply for a loan or overdraft.

An accountant can help improve your chances. Even the fact that you have an accountant might sway the bank in your favour, as it implies you’re serious about your business. With good accounting software, your accountant can present facts and figures that back up your application for funding. They’ll also be able to answer any questions your bank might have about revenue projections and expenses.

Your accountant can also help you choose which loan to go for, and tell you whether your bank’s terms and conditions and interest rate are favourable to you.

Appreciable improvement or increase in sales, cash flow, market share etc.

Companies don’t always grow at a steady rate. A new client or a big project can mean you need to grow your business more quickly than expected.

An accountant can help you handle growth transitions, such as hiring employees or taking on more office space. They’ll look after the detail (payroll, employee tax management, property tax, utility payments and so on), leaving you free to look at the bigger picture of the way your business is growing.

An accountant can also use accounting software to analyse your cash flow, inventory management and pricing. They can also provide insight into how to properly grow your business through financial analysis. They could even help determine when is the best time to introduce a new product or service offering to your range.

Taking a franchise

Taking on a franchise is a popular method of starting up in business, especially in areas such as car grooming, cosmetics supply, lawn-mowing, courier delivery operations and fast-food restaurants. With a franchise, you can still be your own boss, yet in return for a share of the revenue or business equity, the franchise company will support you with brand marketing, sales, product supply and other important matters.

This can take some of the risks out of starting a new business. But on the downside, you will have less commercial freedom and increased overheads, because some of your income will go to the franchise parent company. Franchise contracts vary, so the amount you pay and keep will also vary.

It can be hard for someone new to running a business to tell whether it’s worth taking on a particular franchise. That’s where an accountant can help. They can look through the franchise contract to find out the fees and percentages charged, then help you estimate your likely income after those costs have been deducted.

Only you can decide whether you then want to take on the franchise or not. But armed with detailed knowledge of the finances, you can make that decision with greater confidence.

Before buying a business

Some people start their new business from scratch, others prefer to buy one that’s already up and running. You should always consult an accountant before buying an existing business. They will be able to look into the company’s accounts in detail and find out if anything looks wrong.

For example, they can check whether the company’s assets (like equipment), are fully owned or leased or part-paid for and whether the company has any outstanding debt.

It’s a good idea to consult a lawyer too. Working together, your accountant and lawyer should discover all there is to know about the company you intend to buy and run. This will give you peace of mind that you’re getting everything you’re paying for.

Before you sell your business

It’s unlikely that you’ll have run your business for years without employing the services of an accountant. But if you have, you should seriously consider hiring one before you sell up.

An accountant will put your company’s financial records in order and produce statements of accounts that you can show to prospective buyers. Using high-quality accounting software they can create useful charts and tables to show your company in a good light. They can also talk to any potential buyers’ accountants during the due diligence process, which is often a legal requirement when a business is being taken over.

And, perhaps most importantly, an accountant can help you structure your financial affairs so that you get the most money from selling your business. Depending on how the sale is structured, the amount of money you receive after tax can vary considerably. For example, a lump sum might be less tax-efficient than monthly payments over a period of years.

Every company sale is different, and a good accountant will help you get the best result when you sell up.

Accountants can help you every step of the way

As you can see, accountants can help you out during every stage of your company’s development. That doesn’t mean you have to hire one, but the right accountant should make life easier for you, so you can concentrate on what you love doing.

Your speciality is running your business. Leave the financial detail to an accountant. If you and your accountant use cloud-based accounting software, you’ll be able to keep track of what your accountant does, and always be able to see your company’s financial situation at a glance.