Why start up businesses can benefit from outsourcing an accountant

Running a successful business requires many skills. When money is tight, as it usually is for startups, there’s an understandable tendency to have staff do as much as they can themselves. Sometimes this approach works, but often it's a false economy. This is particularly true when it comes to finance.

To explain further, Peter Scully, Marketing director at Rogers Spencer, discusses why many start-up businesses can benefit from outsourcing an accountant.

Accountants are not bookkeepers

The first point to understand is that accountants are not bookkeepers. Standard bookkeeping is a task you can often keep in-house. Alternatively, you can outsource it to a bookkeeper rather than an accountant. Bookkeepers provide a much simpler service and hence charge much lower rates.

An accountant's job is to look at the records created by a bookkeeper and interpret their underlying meaning. They can then use this interpretation to guide management when making important business decisions. Here are just some of the ways an accountant can help startups.

Forming a company

An accountant can guide you through your options for forming a company. They can also explain, clearly, what records you need to keep and make suggestions on how best to keep those records. An accountant will generally be able to point you in the direction of a bookkeeper. They can also, usually, provide training and guidance on how to use standard accountancy packages such as Xero, Quickbooks and Sage.

Managing your taxes

This is probably the role for which accountants are best known and for good reason. On the one hand, it’s vital to pay any taxes you legitimately owe. On the other hand, it’s also vital to avoid paying any taxes you don’t actually owe. For example, if you can claim a purchase as a tax-deductible expense, then you should certainly do so. This is far quicker than claiming a refund later, always assuming you think to do so.

Right now, having an accountant manage your taxes is arguably more important than ever. Today’s startups are having to navigate COVID19, Brexit, IR35 and making tax digital. Any one of these could present a major challenge to a new business. All four of them could become a serious headache, but outsourcing an accountant is an obvious cure.

Looking at funding options

One of the defining characteristics of startups is that they grow. How quickly they grow depends on various factors. One of the most important factors is the availability of resources. Many startups have limited revenue from their operations. In fact, it’s not at all uncommon for startups to run at a loss until they become established. This means that they often need to find other sources of financing.

The most obvious sources of financing are mainstream lenders. As is often the case, however, the obvious option is not necessarily the best one. For example, it might be much better for startups to seek investment than to take on debt. Startups are highly unlikely to be in a position to list on the stock market. This means they need to look at private investors such as angel investors and venture capitalists.

An accountant can help you investigate options like the seed enterprise investment scheme (SEIS) and the enterprise investment scheme (EIS). They can also help you to create the sorts of financial records potential investors will want to see and talk you through any potential pitfalls and strengths.

Forecasting and decision-making

Last but definitely not least, an accountant can often help significantly with forecasting and decision-making. Not only will they know your accounts thoroughly, but they’ll also be bringing experience from other areas. They’ll almost certainly be aware of other businesses which have had to address the same issues as you’re addressing. This means that they’ll know what has and hasn’t worked for whom and why.