You are starting a business because you have a brilliant idea which you want to commercialize. You should know that business is not only about ideas. You cannot succeed as a businessman if your targets are not achieved and the target of a business is to make profits. That is why you need an accountant – to maximize your profits.
HOW EARLY SHOULD I HIRE AN ACCOUNTANT?
It is a good idea to hire an accountant at the planning stage. I have encountered a number of entrepreneurs who were so excited about pursuing their idea and introducing it to the world that they didn’t bother about the numbers. You might have an innovative idea but you have to make sure the financial aspect of your business is covered as well.
An accountant today is not only the bookkeeper, he can act as your financial advisor at the early stage of your business. For example, when you are planning your business you should know the financial feasibility of your project etc.
An accountant can prepare a cash flow forecast for your business. A cashflow forecast tells you how much cash you will have after deducting all your expected expenses and costs. An accountant will not only prepare the forecast he can explain to you what the figures mean and the importance of the figures for your business.
A cashflow forecast will tell you 2 important things: do you have enough money to pay to your suppliers and do you have enough funds and when and how much will you have to raise funds to keep your business running. Since the figures used in the cashflow forecast are an estimation there is an increased chance of an error.
This is especially true for a startup business at the planning stage since the business is new and the estimation is based on the prediction and there are no previous figures to look at. This chance of error can be decreased when you have an accountant who has worked for a similar business.
Your accountant can help you decide if you should run your business as a limited company, sole trader or a partnership. The structure you choose should be chosen wisely because it affects the taxes you pay and the way you report to HMRC. The fact is that the type of structure you choose to run your business depends on the individual circumstances. There’s no one answer to this even if you are in the same type of business. For example if you chose to run your business as a sole trader and you have personal assets as well on which you have to pay taxes you might end up paying more tax which could have saved if you were running your business as a limited company.
An accountant makes sure that you utilize all the reliefs available to you so you can maximize your profits but reduce the tax costs.
You will also need your accountant if you have to register for VAT. They can help you file your VAT returns, fill in the self assessment tax returns if you are a sole trader and file them on time, prepare your accounts, file your accounts and do all the necessary book keeping. If the returns are not filed on time and taxes are not paid on time you will have to bear unnecessary extra costs.