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Do I really need an accountant for my small service based business?

And the answer is – it totally depends!

Every service based business is different and, whilst most are fairly uncomplicated, some require some more support than others – mostly that comes down to the priorities and capabilities of the business owner.

More often than not, our limited company business owners  definitely think they do need an accountant, as they feel they need reassurance and peace of mind that they are fulfilling all their obligations as directors and owners, but what about sole trader service based businesses?

Certainly, if we are to believe HMRC’s theory that the arrival of MTD for Income Tax will help the small sole trader business get their taxes right, and reduce the need for accountants help and support, we may well see less sole trade service businesses feeling the need to work with accountants in the future.

So, to help you assess whether or not you and your small business would benefit from working with an accountant, we’ve outlined when you should, when you shouldn’t, and what benefits you could gain from working with an accountant regardless of your business model.

Signs you should work with an accountant

Some accounts are incredibly complex – others are relatively simple. Similarly, some solopreneurs are far more financially literate than others. So the answer entirely depends on you and your business.

With that said, here are some tell-tale signs that you should consider working with an accountant:

You suffer from a lack of confidence or understanding

If you’re not confident managing your own accounts, we strongly suggest letting someone else do it for you.

A professional accountant will ensure you’re always compliant with the latest tax legislation and can help prevent any costly mistakes.

You don’t have the time.

Running a business is a time-consuming endeavour (especially if you’re doing it alone). So, if you’re struggling to find the time to keep up with your books, you need to assess whether managing your accounts is the best use of your time and skillset.

A professional accountant will help you find smarter ways of looking after your business finances.

You want to expand your business.

Successfully growing a business requires a solid business strategy.

A professional accountant can help you develop the perfect business plan by eliminating unnecessary expenses and capitalising on your strengths.

The benefits of hiring an accountant

If you’re still unsure whether hiring an accountant is worth the investment, here is a brief list detailing just a few of the benefits a professional accountant can bring to your small service based business:

  • More time – instead of spending hours pouring over your books, you can reinvest that time into other parts of your business.
  • Increased growth – 89% of small businesses attribute their increased success to their accountant.
  • Reduced anxiety – you can rest assured knowing your accountant is taking care of your tax-related obligations.
  • Improved accuracy – kiss goodbye to costly mistakes or late penalties.
  • Maximise tax efficiency – now, who wouldn’t want that?
  • Increased cash flow – your accountant can help reduce your running costs whilst you focus on generating more income.

This is all very well, but does everyone need an accountant?

Despite all the benefits you can gain from working with an accountant, not every business needs one. There are certain circumstances where you can quite easily do without (assuming you have a complete understanding of your tax obligations).

For example, you can get away without working with an accountant if:

You’re a freelancer – if you only have a couple of clients to keep track of, monitoring your income and expenses should be pretty simple and you can streamline the process by using software like FreeAgent which is very much aimed at Freelancers who want to look after their own tax and accounts obligations.

You have a hobby business – if you are only generating a small sum from your side hustle, you probably don’t need to hire an accountant – just make sure to keep a spreadsheet of your income and expenses to support your tax return entries. If your income is less than £1,000 you don’t even need to declare it on a tax return as it would be covered by the £1,000 trading allowance.

Your tax situation is simple to manage – if you are the sole proprietor of your business, you should also be able to navigate your bookkeeping without assistance. By the time MTD for Income Tax arrives in 2024, there will be a few good solutions to choose from, but if you want to start preparing now, you should read our resources on MTD for ITSA here to find out what you should be doing to get ahead of the game.

Be open to accepting help

Not every small business needs an accountant, but every business could benefit from one. Don’t limit your success by only hiring an accountant when it’s absolutely necessary.

Finding the best accountant for you and establishing a good relationship early on will give you the peace of mind that you have someone on your team looking out for you from the outset.

If anything you have read here has raised more questions, please feel free to contact us to see how we can help.