When is the right time for a small business to appoint an accounting firm?

/ Posted By - Bradleys Accountants / Categories - Advice for Small Businesses

Updated: 5 October 2016

Small business and start-up owners often tend to keep their accounting functions in-house. Unfortunately, a lot of them consider only the cost because they are looking at saving some money. However, there are some very good reasons to appoint an accountant or an accounting firm. Right from business plans to company formation, loan applications to opening a business bank account, liaising with HMRC to staying on top of your finances, an accountant can help at various stages of your company’s growth and make your life much easier.

Like other small business owners you might think that you can’t afford an accountant. But look at how long it takes you to do certain tasks, such as your taxes.

For example, let’s say you take 10 hours to do your tax return and your time is worth a minimum of £50 an hour. That’s a cost of £500 to do your tax return yourself. And there’s always the risk of making errors – given the many hats you wear. But get an accountant to take care of this time-consuming task, and it’s certain they will save you more than they cost.

To appoint an accountant or not?

The real question to think about is this: “What can you do with the extra time you have if you use an accountant to do certain tasks? Look at how long it takes you to do your taxes. Is it the best use of your time or can it be used in a more productive way, like generating more revenue by meeting and building relationships with your clients?

Perhaps, your small business accounting has always been done in-house. But consider whether you have the right skills to do the job, or is it better to delegate to an expert with the right skills who can do the same job in a more cost-effective way.

So at what different stages of your business should you consider appointing an accountant?

1. When you need to prepare a business plan

An accountant has the professional experience and financial knowledge to study your business ideas and evaluate the profit potential. If you involve an accountant at this stage of your business, they will be able to set realistic financial targets, establish budgets, and compare forecast figures with actual results. A credible business plan is a valuable tool when it comes to securing finance from a bank, raising equity finance and benchmarking your business performance.

For securing finance from a bank, an executive summary is very important, and so is clearly stating your financial objectives, business idea and profit forecasts. A credible business plan is an important pillar for your business, and hiring a professional right from the start will ensure the likelihood of its success.

2. When you need advice on choosing the legal structure of your business

If you’ve been a self-employed freelancer you may not have set up a company structure and would so far have opted to accept payments through PAYE. However, as your freelancing business grows and you make more profits, it makes sense to set up a business structure for your safety. A qualified accountant can offer advice that will help you to confidently choose the most appropriate structure for your business. There are 4 main options available to you: sole-trader, business partnership, limited company, and limited liability partnership (LLP). The type of legal structure you choose is determined by a number of factors. And in case you find a new structure suits you better after you’ve started up, you can change the structure too. An accountant will help you consider each type before helping you decide which one suits you the best.

3. When you want to raise finance

At some stage of your business growth, you will need to apply for a business loan, and an accountant can make the difference. Not only will he/she reassure the bank that your business is worth the investment, but they will also fine tune the paperwork to perfection. Since the credit crisis, bank lending to small businesses has dropped considerably in the UK. This makes it all the more important to have an accountant by your side to present your case. And even before you get to that point an accountant will give you guidance on which loan is best for your business.

An accountant will also be able to answer any questions the bank might have about your financial objectives, business idea and profit forecasts. In the long run, you will find that the benefits of using an accountant far outweigh the expenses of hiring one.

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    4. When taxes get complicated

    As your business grows, taxes can get complicated very quickly. Considering elements such as rental properties, private equity investments, stock transactions, annuities, dividends and income from several sources it will become difficult to predict the taxes you owe. Appointing an accountant will not only save you time and energy but they will also help you get a better understanding of how the UK tax system works. Without an accountant it’s likely that you will miss deductions and business tax credits as well. Having a good accountant at this stage might actually save you money.

    5. When you need to liaise with HMRC

    Administration is part and parcel of every business, especially when you are liaising with government bodies like the HMRC and Companies House – the latest ‘HMRC Contact Centres survey’ report concluded that over a third of callers to the HMRC helplines had to wait 10 or more minutes for their call to be answered. And the last thing you want is to slip-up in your communication with HMRC. That’s why so many businesses today appoint an accountant when it comes to tax-related correspondence. But a good accountant will do more than only interact with HMRC regarding your taxes – they will also be able to:

    6. When you plan to expand your business

    The good news is that your business is established and customer demand is increasing. But the bad news is the accounting aspects of business expansion, such as hiring employees or taking on more space, aren’t that easy to figure out. An accountant can help you with the growth transitions and the paperwork that comes with it – right from looking after full-time hiring, payroll related tax obligations, employee tax management, property tax, utility payments and so on. Not only that, but a good accountant will analyse your cash flow, provide a financial analysis and manage the inventory – leaving you free to focus on growing your business.

    7. When you want to buy an existing business to add to your growth

    Buying an existing business can be a challenging task, especially when you don’t have the right people around you. It would be worth your time to consult an accountant at this stage as they will be able to pre-screen the business’ accounts in detail and find out if anything is out of place. An accountant will also help you check the key indicators of the business’s health such as balance sheets, income statements, cash flow statements, inventory, business assets (furniture, fixtures, and equipment) and liabilities like outstanding debt, employee claim benefits, out-of-court settlements, etc. A detailed analysis will enable you to spotlight any underlying problems and also provide a closer look at the wide range of less tangible information available when purchasing an existing business.

    8. When you want to sell your business

    Whatever brings you to the stage of selling your business, you will need an accountant to navigate the sale process successfully. Starting with putting your company’s financial records in order and producing a statement of accounts for prospective buyers, an accountant will help you evaluate the dual terms as defined in the Letter of Intent long before the due diligence process begins and purchase agreements are drafted.

    Most importantly, an accountant will help negotiate a satisfactory price and acceptable terms that will help with making the sale a success.


    As a business owner you have enough challenges to deal with. Running a business without an accountant is a sure-fire way of losing the business. An accountant should be there when you start the business, during the planning phase, when you need to raise finance, file taxes, communicate with HMRC and when you need to expand or sell your business.

    Perhaps the most important reason to appoint an accountant is so that you can focus on running your business, knowing that there’s an expert taking care of the fine details.

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