I’ve recently come across a number of freelancers asking if they need an accountant.
It’s a fair question, as when you are starting up, or if your business is in a famine stage (rather than the favourite feast stage), it’s common sense to question where you are spending your money.
We all like spending money on fun things like marketing. After all, if money is tight it is easy to justify spending on a new website or some leaflets as these have the potential to bring in the business that you need.
However, paying someone to do your tax return isn’t quite as sexy and the value isn’t always so obvious.
Whilst the question of “do I need an accountant” is typically greeted by a chorus of other freelancers exclaiming that they do their own with little ease, I don’t feel it’s quite as simple as that.
So, as an accountant, here is my list of things you need to consider before deciding whether to get an accountant.
And it may be that the answer is no. You don’t need one.
Would you consider your business and tax affairs to be simple?
I am aware that we can sit here and debate what simple really means for a long time. But that’s one of the reasons I am no fun at parties.
If you are self-employed and your business consists of you raising one or two invoices a month and your expenses are largely regular direct debits, then I would say that your business is simple, and you may not need an accountant.
That said, if your clients pay you in advance for work, you begin to buy large pieces of equipment like a van or a car or you take out a loan or a finance agreement, then I would get an accountant. These are the bits where I’ve seen some real gems of a DIY mistake. Some of which have been quite costly.
Do you trade through a Limited Company?
If you trade through a Limited Company, then I really recommend getting an accountant from day one. And in some cases, maybe even day minus 5 as I think it is worth checking with an accountant to decide if forming a Limited Company really is the right thing for you.
That said, if you feel confident with your bookkeeping skills and again, if your business is simple, there are the tools out there to enable you to file your accounts yourself.
Companies House will allow you to create and submit your abbreviated accounts for free, directly through their website. If you google, CT600 software, you will find companies that can sell you individual licences to create your full Ixbrl accounts for HMRC as well as your company tax return. If there was anything that I’ve mentioned in this paragraph that you are unsure of, it’s probably worth getting an accountant.
Do you feel confident around your accounts?
Do you feel confident around finances? Do you understand bookkeeping? Can you read a set of accounts?
If the answer to any of these is no or the thought of doing your tax return or your accounts makes you nervous, then you may want to get an accountant.
If you engage the services of an accountant, you are not bound to them for life. Try to choose a nice, friendly accountant. Be honest with them that you would like to learn some of the process. Get them to check your bookkeeping and provide feedback. Check the documents that they send you.
There is no reason why you can’t get an accountant and once you begin to feel more confident, then look to preparing your own.
Just be aware that very few accountants will charge less for checking your work. Or provide a discount for correcting errors in previous Tax Returns.
So, if you feel confident, then go for it. If you don’t, then maybe don’t.
Can you afford an accountant?
I do appreciate that us accountants aren’t always the cheapest. I would say that the average starting costs of a self-employed tax return with accounts is around £350 and a small freelancer Limited company set of accounts is £600.
If those prices make you sweat a bit then I recommend shopping around and being honest with your budget. You should be able to get a fair feeling from the accountant’s website is they are cheap as in rubbish. (you could always read my blog, “How to choose an accountant who isn’t a little bit rubbish”, here)
Another option is to take a look at bookkeepers. Quite a few have extended their services towards self-assessment tax returns, so you may be able to grab a bargain there. Possibly not if you are a Limited Company however.
Are you planning on running a payroll or becoming VAT registered?
Payroll and VAT are two accountancy additions that can quickly become very complicated.
If you are only going to be running a Directors payroll then you may be okay. If you use the payroll module of your accounting software, then you may even feel confident to run the payroll for a couple of employees.
You may also feel confident with the VAT. Add up the VAT on your sales, deduct the VAT on your expenses. Pay the difference to HMRC. Job done. Again, accounting software can help with this.
But if either makes you feel unsure or nervous, then you may want to look at getting an accountant.
Or if you want to check if you are on the right VAT scheme or if an employee is about to go on maternity leave and you are not sure how to treat this, then you may want to get an accountant.
What should you do you are still not sure whether you need an accountant?
There isn’t a simple answer to this.
If you engage the services of an accountant, then you could risk paying out money on something you may feel you can do yourself.
If you don’t get an accountant, then you could run the risk of completing your tax return or accounts incorrectly. You could get a fine. Maybe overpay some tax. Choose the wrong VAT scheme and mess up your cash flow.
You could even choose a bad accountant and end up doing all the above. But that is very rare. I don’t want to scare you.
But if you find yourself with a spare bit of time, maybe connect with a few accountants on social media. Visit a few websites. Get a feel for accountants who are local to you or specialise in your industry or chosen accounting software or have brand colours that you like. Whatever makes you feel comfortable.
Then, when you feel ready, get yourself an accountant.