Running a small business involves handling various tasks, with managing finances being crucial for success. Many business owners often wonder: When should I hire an accountant?
This detailed guide will help you understand when it’s necessary to seek professional accounting assistance. We’ll discuss the benefits an accountant can bring to your business, consider costs involved, and assist you in making a decision based on your business size and growth plans.
At TaxCan, we specialise in helping small businesses navigate their financial journey, ensuring they stay compliant and reach their full potential. Let’s explore the key indicators that suggest it’s time to bring in an experienced accountant.
Understanding the Role of an Accountant
A common misconception among small business owners is viewing accountants and bookkeepers as interchangeable roles. While both handle financial matters, their responsibilities differ significantly:
Bookkeepers:
Record daily financial transactions
Maintain basic financial records
Process invoices and receipts
Handle basic payroll tasks
Accountants:
Analyse financial data and provide strategic advice
Create detailed financial forecasts and budgets
Handle complex tax planning and submissions
Develop financial strategies for business growth
Ensure compliance with UK tax laws and regulations
Professional accountants bring specialised expertise that extends beyond number-crunching. They possess in-depth knowledge of tax regulations, financial reporting standards, and business advisory services. This expertise proves invaluable when:
Planning tax-efficient business structures
Identifying potential cost savings
Managing cash flow effectively
Preparing statutory accounts
Navigating HMRC requirements
Accurate record-keeping forms the foundation of sound financial management. A qualified accountant ensures your business maintains proper documentation, meets legal obligations, and avoids costly penalties. They implement robust systems to track:
Income and expenses
Asset depreciation
VAT records
Payroll information
Tax-deductible items
Working with an accountant helps establish strong financial controls and reporting mechanisms essential for business success and regulatory compliance.
Key Indicators That You Need an Accountant
Running a small business requires wearing multiple hats, but certain signs indicate it’s time to bring in professional accounting support. Here are the critical indicators that suggest your business would benefit from an accountant’s expertise:
Time Management Challenges
Spending weekends on bookkeeping instead of business development
Late-night reconciliation of accounts becoming a regular occurrence
Missing important deadlines due to administrative overload
Delayed invoicing affecting cash flow
Basic accounting tasks taking longer than they should
Knowledge Gaps in Financial Management
Uncertainty about which expenses are tax-deductible
Confusion over VAT registration requirements
Difficulty interpreting financial statements
Uncertainty about profit margins across different products or services
Limited understanding of cash flow projections
Complex Financial Responsibilities
Accounts Payable and Receivable Management
Multiple supplier relationships requiring careful tracking
Irregular payment terms with different vendors
Growing number of customer invoices to manage
Increasing complexity in payment scheduling
Cash flow challenges due to payment timing
Payroll Management
Growing workforce requiring sophisticated payroll systems
Need to handle PAYE and National Insurance contributions
Managing employee benefits and deductions
Ensuring compliance with minimum wage regulations
Processing expense claims and reimbursements
Tax Compliance Requirements
Self Assessment deadlines approaching
Corporation Tax obligations becoming more complex
Need for strategic tax planning
Risk of HMRC penalties for non-compliance
Requirements for Making Tax Digital
Business Growth Indicators
Monthly revenue exceeding £50,000
Staff numbers increasing beyond 5 employees
Opening additional locations or branches
Diversifying revenue streams with new products/services
Planning to seek external investment
These indicators often appear gradually, but addressing them promptly can prevent potential financial complications. Professional accounting support becomes particularly crucial when multiple indicators emerge simultaneously.
Learn more about our small business accounting services to understand how we can help address these challenges.
Benefits of Hiring an Accountant
Professional accountants bring invaluable expertise to small businesses through strategic financial management and reporting. Here’s how they create measurable value:
Financial Insights and Analysis
Creation of detailed profit and loss statements
Balance sheet preparation and interpretation
Cash flow forecasting and management
Budget planning and variance analysis
Performance metrics tracking
Regulatory Compliance Support
Real-time updates on tax legislation changes
VAT registration and returns management
Company secretarial duties
Payroll compliance and reporting
Implementation of required accounting standards
Strategic Business Growth
Business plan development
Financial projections for funding applications
Investment opportunity analysis
Risk assessment and management
Merger and acquisition support
An accountant’s expertise extends beyond basic number-crunching. They serve as trusted advisors who can spot growth opportunities, identify potential risks, and guide strategic decision-making. Their professional network often includes lenders, investors, and industry specialists—connections that prove invaluable during expansion phases.
Small businesses with professional accountants gain competitive advantages through improved financial efficiency, reduced compliance risks, and expert guidance for growth initiatives. These benefits directly impact the bottom line while creating a solid foundation for sustainable business expansion.
Cost Considerations When Hiring an Accountant
The financial investment in accounting services varies based on your business needs and chosen solution. Here’s a breakdown of different options and their cost implications:
1. Full-Time Accountant
Salary range: £30,000 – £50,000 per year
Additional costs: National Insurance, pension, benefits
Best for: Large businesses with complex daily transactions
Provides dedicated support and immediate availability
2. Part-Time Accountant
Hourly rates: £25 – £35
Flexible scheduling options
Ideal for medium-sized businesses
Reduced overhead compared to full-time staff
3. Outsourced Accounting Services
Monthly fees: £200 – £600
Scalable packages based on service level
Access to team expertise
No employee-related costs
4. Virtual Accounting Solutions
Cloud software costs: £20 – £50 per month
Remote accountant fees: £40 – £100 per hour
Perfect for small operations
Combines technology with professional support
Cost-Saving Tips
Bundle services for better rates
Use technology to automate basic tasks
Schedule regular reviews to adjust service levels
Consider seasonal support during peak periods
Small businesses can start with basic cloud accounting software and virtual support, upgrading services as they grow. This approach allows for cost control while maintaining professional financial management.
Assessing Your Business Size and Growth Trajectory
Business size plays a crucial role in determining your accounting needs. Here’s how different business sizes typically align with accounting requirements:
Micro Businesses (1-9 employees)
Basic bookkeeping and tax returns
Part-time accountant or accounting software
Quarterly financial reviews
Small Businesses (10-49 employees)
Regular financial reporting
Dedicated accounting support
Cash flow management
Tax planning strategies
Medium Businesses (50-249 employees)
Full-time accountant or accounting team
Complex financial operations
Multiple revenue streams
International transactions
Your growth trajectory also shapes your accounting needs. Consider these growth indicators:
Revenue Increase: A 20% or higher annual growth rate signals the need for professional accounting support
Market Expansion: Entering new markets requires understanding different tax jurisdictions
Product Diversification: Multiple product lines create complex inventory and cost tracking needs
Staff Growth: Additional employees bring payroll complexities and tax implications
Early Investment Benefits
Prevents costly financial mistakes
Establishes scalable accounting systems
Creates robust financial controls
Supports data-driven growth decisions
Professional accounting support becomes essential as your business complexity increases. A qualified accountant helps navigate financial challenges while building a strong foundation for sustainable growth.
Conclusion
Deciding to hire an accountant is an important step in your business journey. Your specific business situation – including factors like growth rate and financial complexity – will influence this decision. A skilled accountant offers more than just number-crunching skills; they become a strategic partner in your path to success.
We recommend taking a close look at the following areas:
Current financial management capabilities
Time spent on accounting tasks
Business growth projections
Budget constraints
Compliance requirements
This evaluation will help you figure out when and what kind of accounting support your business needs. Keep in mind that professional financial guidance can be extremely valuable for sustainable business growth and peace of mind.
Contact TaxCan for personalised advice on your accounting needs.
Additional Resources
Expand your knowledge about small business accounting with these valuable resources:
Small Business Guide to UK Tax Returns – Learn about tax obligations and deadlines
Understanding VAT Registration – Essential information for growing businesses
HMRC Small Business Resources – Official guidance from HM Revenue & Customs
The Association of Chartered Certified Accountants – Professional insights and industry updates
Recommended Reading
Small Business Financial Management Kit For Dummies by Tage C. Tracy
Understanding Business Accounting For Dummies by Colin Barrow
Digital Tools
QuickBooks Online
Xero
FreeAgent
Sage Business Cloud Accounting
These resources provide practical guidance for managing your business finances and making informed decisions about accounting support.
Frequently Asked Questions (FAQs)
A: A small business should consider hiring an accountant when it struggles to find time for accounting tasks, lacks sufficient knowledge of accounting practices, or desires accurate tax return filing. Indicators like managing accounts payable and receivable, handling payroll efficiently, and ensuring tax compliance also suggest the need for professional help.
A: An accountant typically has specialized knowledge in tax regulations and financial analysis, while a bookkeeper focuses on maintaining accurate records of daily transactions. Accountants provide higher-level financial planning and help ensure compliance with legal requirements.
A: Hiring an accountant can provide numerous benefits, including assistance in preparing financial statements that offer insights into your business’s performance, guidance on regulatory compliance, and support in strategic planning for financing requests. They help minimize risks associated with tax laws and improve overall financial management.
A: To determine whether to hire a full-time or part-time accountant, assess your budget and workload requirements. If your accounting needs are minimal or you operate a smaller business, outsourcing services or using cloud-based accounting software might be more cost-effective.
A: Business size influences the need for accounting support as larger businesses often face more complex financial situations that require professional expertise. Additionally, if your business is experiencing rapid growth, investing in an accountant early can prevent bigger problems down the line.
A: For further reading and resources related to small business finance, you can visit TaxCan or explore other articles that provide insights into managing finances effectively for small businesses.
