Running a small business can be an extremely gratifying enterprise. Being able to cultivate your ideas and watch them turn into a functioning and successful business, the ability to monopolise your own time and to work on something that you’re truly passionate about every day are among many of the reasons entrepreneurs decide to break the mould and set up their own shop.
Although it’s you that’s running the small business, sometimes it’s easy to feel as if it’s the business that’s running you – especially in start-ups and smaller enterprises. With less human and financial resources, the onus is on you to juggle multiple roles to get the necessary work done, and it can often seem as if you spend more time slogging away at administrative work than focusing on the aspects of the business that you love.
One of the administrative aspects of running a business that’s sure to strike dread into any business owner’s heart is their accounting. Maintaining your books, whether you’re tethered to Excel or still using ledgers, can be extremely time-consuming, not to mention mundane if you’re not the special kind of sadist that trains to be an accountant.
If you’re running on limited funds hiring an accountant may seem pricey expenditure, but it is a wise investment that can make a noticeable difference in anything from the daily running, to the eventual growth of a company.
What Does an Accountant Do?
The exact specifications of the role of an accountant usually wholly depend on the size, type, industry, or even the requirements of the business they are employed by. Largely accountants concern themselves with monitoring, overseeing and performance of the financial functions of any business. Whether it is dealing with accuracy, recording, analysis, tax compliance, a tax audit or even crafting a business plan, an accountant can offer their knowledge and expertise to build and expand a business.
An accountant usually handles a variety of administrative roles within the operations of a company, including the maintenance and collection of financial data; ensuring that the records are maintained in compliance with accepted laws and policies; report preparation; analysis of financial data; and advising on business operations.
In a smaller business, an accountant’s role will primarily consist of financial data collection, report generation, alongside acting as an interpreter and advisor using the data collated. They play a vital role in helping to inform essential business decisions.
Should You Hire an Accountant?
Generally, business owners work with accountants to meet the necessity for compliance, but there a multitude of benefits outside of formalities that come with hiring an accountant at whatever stage of growth your company is at. Whether you’re in the early stages of its formation, looking to expand using loans or weathering a tax investigation, an accountant will make your life easier.
But that’s not to say that you should necessarily employ an accountant full time, or hire one on retainer. How you utilise an accountant is dependent first and foremost on the needs of your business, whether that equates to a couple of hours a week or a full five days. What exactly does your business need from an accountant? How will an accountant or accountancy firm address these needs?
One of the most precarious balancing acts for all new business owners is between investing more money or investing more of your time. The primary reason new business owners take on such a multiplicity of roles, especially within the first few years, is to minimise overall spend.
You might think that you can’t afford an accountant, but when you look at it literally, the amount of time you save on performing those dull administrative tasks far outweighs the initial financial investment.
Let’s do the maths.
If your taxes take you 10 hours to do, and you value your time at an hourly rate of £100, then you are theoretically costing yourself £1000 to do your own taxes. And that’s without factoring in the risk that you’ve made one, or many errors. Comparatively, if you hire an accountant to complete these consuming tasks, it’s more than likely their hourly rate will work out less than your own.
Getting those administrative duties out of the equation means that you’ll have more time to devote to other, important, duties like generating revenue and promoting your business. Plus, you’ll be able to work in security, knowing that an expert is handling the facts and figures.
When else will you need an accountant in your small business?
Advising on Writing a Business Plan
By involving an accountant whilst you’re writing your business plan, you’ll be setting out far more informed and realistic guidelines. Accountants will be able to utilise accountancy software to analyse reports and create realistic financial projections. Enabling you to design a business that is professional, realistic and ultimately, far more likely to be sustainable and successful.
Delegating Administrative Roles
One of the main draws of owning your own business is that you have full control. It allows you to dictate your own working hours, determine your finances, create your business strategy and, to a certain extent, regulate your own workload. Having this mastery over your own time can be wonderfully liberating.
However, this control can sometimes stop you from sharing out the workload and delegating, placing yourself firmly at the nexus of all your business operations. It’s common for small business owners to feel overworked, with a reluctance to accept aid from the rest of their team, whether it’s due to a disbelief that no one can know your business as well as you do, and therefore perform as well, or because it feels right to be the primary driving force behind the action. But this inability to share out the workload can often have a detrimental impact on the growth of your business. In order for you to do the job you were meant to do, and to expand your business further, it is necessary to learn to let go and to trust other people to handle specific parts of your business.
Delegating the responsibility for the maintenance of your business’ financial affairs is where most business owners choose to start. The nature of the role means that without specific training, the job is rarely done as adequately as it could be, calling for a professional to be brought in.
Choosing the right accountant is important as you will be trusting them with an essential aspect of your business. But when you’ve found the right accountant, and you’ve passed over the responsibility of your company’s finances to someone with the correct experience, knowledge and training, the only numbers you should be concentrating on is growing your revenue.
To Help With Your Finances
The main problem with attempting to do your own business accounting is that it can quickly become extremely complex, especially when you’ve not got the correct knowledge base. It is easy to lose control of the various financial streams coming into and leaving your business. Hiring an accountant can reign in any confusion and potential for error.
An accountant can also manage your payroll and measure key business metrics, including the ratio between employee payments, revenue and salaries. Breaking down the numerical results into actionable charts, tables and strategies to help you to understand your business’ financial situation and keep track of cash flow and other important things.
Applying for a Business Loan or Overdraft
Since the recession, the banking industry has quite rightly recoiled from the same reckless money lending that catalysed the credit crunch in the first place. Whilst this is a positive for the global economy, on a micro level, it has made it harder for small businesses to become eligible for a load. In fact, since the recession, the percentage of small businesses being awarded loans has dipped considerably.
If you are going to apply for a loan or overdraft for your business, now more than ever, it is imperative that you make a strong a case for yourself as possible. Having an accountant can definitely help to improve your changes and fortify your case. Not only will they be able to provide the facts and figures to back up your funding application, but by even having an accountant demonstrates an awareness and proactivity regarding the handling of your finances, and, in consequence, the seriousness with which you take your business.
Growing Your Company
Companies don’t always grow linearly. You may take on a new project or client that boosts your business faster than expected and need an accountant to handle the excess work as a result. An accountant can advise on transitions necessary to handle new growth, such as hiring our more office space or new employees. Your accountants will focus on the details, allowing you to concentrate on the bigger picture.
Similarly, an accountant can analyse your stock, cash flow, pricing and other productivity data, gaining insight into what is making your business tick. This information can be used to build the basis of future business plans, from introducing new products to simply shifting the target of a marketing campaign.
Accountants can also help with the selling of your business, the expansion of your business, as well as dealing with government agencies, potential investors and outside vendors.
Should You Use Xero Accounting?
But traditional accounting methods have their own set of problems which are increasingly being recognised and addressed across the industry. A number of recent surveys of small business owners have found that, across the board, the main issues they are having with their accountants can be split into 5 central areas.
1.Lack of availability
Small business accountants are often outsourced, and, because of this, the company may not always be able to schedule meetings when and where they want and have to spend valuable resources both setting up and attending the meeting. Similarly, this small business is usually one of many, so it may be difficult for the accountant to fully understand the complexities of the business at hand, especially with clunky paper, or spreadsheet resources.
Building on from the last point, due to their position outside of the company, getting hold of the accountant and then, for the accountant to look through your financial records for the relevant information can be a clunky, ineffective and time-consuming process.
3.Lack of proactivity
Companies want an account to be regularly reviewing their financial positions and seeing if there is any way in they can help either develop their business, or make savings in areas like tax and overheads. Ultimately making the effort to expand their business further.
As businesses are becoming increasingly technology focused. It’s necessary for their accountants to keep up with the latest technological advancements in accounting software, processes and techniques.
5.Lack of value-added services
It’s not enough these days for an accountant to offer just accountant services. Small business owners don’t have the time to shop around for different areas of business advice and with the wide oversight, an accountant has, they often turn to them to look for advice in other areas of the business.
But how do you solve these problems?
The key is in connectivity.
The ability to access and communicate your accountant and your data whenever and wherever you need them is becoming increasingly imperative as businesses increase in pace and customers become increasingly used to faster and higher quality service.
Luckily, the advent of cloud based accounting software has offered a multitude of solutions to that specific problem. Specifically, Xero accounting software.
But, what is Xero?
Xero is one of the world’s best cloud accounting software, used by over 500k small and medium sized businesses globally to streamline their accounting functionality. Xero accounting software was manufactured with the pain of small business accounting in mind and sought to offer up a beautiful and efficient solution to small business accounting woes.
As Xero is cloud based, it can work across multiple devices, tablet or phone, Mac or PC, meaning as long as you have a working internet connection, you’ll never be out of control. You can monitor your business performance, update your accounts, apply for business loans and build your business network when, and wherever you want.
And what’s even better, is so can your accountant. Nearly every issue that current business owners have with their accountants can be solved by using Xero software.
Xero doesn’t limit the amount of users you can add onto your account, meaning that you, your team, your bookkeeper and your accountant can all access, update and monitor your accounting information in real time. So everyone can stay in the loop and up to date on the latest data.
You don’t need to worry about your accountant being unavailable to meet for the next week because you can both access, view and discuss the latest data within the software without having to leave the comfort of your respective offices. And by allowing them access anytime, your accountant can review your performance whenever they want to, or hop on to solve an issue after a quick email.
Moreover, with Xero, you’ve always got the latest software. The software updates automatically and integrates fully across your devices, even allowing you to send and receive emails using its services.
As well as drawing a far more realistic portrait of the state of your finances, this accessibility means that both you and your accountant can save resources and address issues as soon as they may come up, without the need to waste time coordinating schedules. Using Xero for your payroll and accounting means that your accountant is by your side no matter the time.
Additionally, and unlike any other software, Xero can integrate with a whole ecosystem of in-software applications which can enable you to do anything from sending and paying invoices, or integrating your business email with inside the software. With Xero, you can construct a total business management tool that both you and your accountant can utilise, giving you both greater control and in-depth information, without the expense of having to hire an entire management team.
As certified Xero accountants, we’ve helped a number of UK businesses transfer to Xero and watched their businesses boom as a result.
If you have any queries about using Xero accounting software, simply contact us on 01634 540040 to talk to one of our qualified accountants.