Good record-keeping and sound accounting practices can help your small business to save money, make important decisions and fulfil your legal requirements.
But beyond all that, good management of your small business accounts can help to grow a business. Do not underestimate the value of a clear view of your revenue and outgoings, both from an immediate and a long-term perspective. Whilst most small business owners understand why it’s so important to manage the accounts carefully, some people still come unstuck when looking at the how. There are in essence two main options:
- Subscription-based cloud accounting software
- Working with a professional accountant
Many small businesses choose one or the other, but more and more people are opting for both. This guide breaks things down into the three big things to consider – money, time and control – and aims to provide a good overview from which to make your decision.
How much will accounting services cost?
Firstly, the obvious question to ask is how much does each approach cost. Human accountants and accounting software both come at a cost, but both can also save you money in the short and long term. Let’s look at some of the average prices out there.
There are some well-established products in the accounting software domain, as well as a number of younger firms making a play for your business. Make sure you do your research before deciding which is best for you. Using online comparison tools is a good place to start here.
The cost of these products varies hugely depending on the level of service offered. Most will offer a 30-day free trial and you will then pay anything from as little as £6 per month, for a basic package aimed at a sole trader, to around £100 per month for services more suited to larger businesses with a number of employees.
Small business accountants
Prices vary across the country but as a general guide, most accountants who offer a basic package of advice, registration, end-of-year accounts and corporation tax returns will cost your business between £800 and £1,200 +VAT per year.
Combining the two
Some small business accountants will provide you with accounting software to use as part of their package. With prices starting at around £70 per month, your small business can access cloud-based accounting software and have an accountant on hand to complete your end-of-year accounts and corporation tax return. Often for a little extra they will also complete your personal self-assessment tax return as well.
How accounting software helps you stay in control
Maintaining control over your cash flow and funds is vital for business success. But there’s a bit more to control in this context.
Accountancy software gives you, as a business owner, a constant view of your company’s finances. The ability to keep an eye on the money coming in and going out of your business, as well as your tax liabilities, is essential in planning operations.
Many business owners also find that having this bird’s eye view helps to keep costs down and maximise profits. If you have a decision to make with regards to the running of your business, having such a clear view of how you’re doing financially can help you make the right choices.
- Software helps you keep one eye on your finances at all times.
- Your costs, liabilities, revenues and profits are clear to see with accountancy software.
- Accountancy software will nearly always require you to store financial information in the cloud.
- A human accountant will also require access to your company’s financial information.
But in return for the information that enables you to control your cash flow and business planning, you will have to store your financial data in the cloud with the software provider.
For some people, the idea of storing sensitive business and accounts information in the cloud is seen as a loss of control and can be a bit of a struggle to come to terms with.
There are a lot of checks and protections in place now, which are only set to improve as the law tightens up on data protection in light of the General Data Protection Regulations (GDPR). But ultimately it’s up to you to ask yourself if you feel secure doing this and can you fully trust the accountancy software option you have chosen?
Working with a human accountant brings a different set of benefits here. Find a good accountant and you can take a load off your mind safe in the knowledge that your accountant is in control of your books and will bring up anything you need to know about.
But remember you will still be handing over sensitive information for your accountant to handle and process so it’s worth spending time finding someone you trust in this scenario.
How accounting software saves you time
Let’s face it, bookkeeping is time-consuming. Taking on an accountant for even a basic level of service can save you an enormous amount of time when it comes to completing tax returns and end-of-year accounts. However, you’ll still need to keep your own detailed records of cash going in and out of the business.
Using accounting software makes this whole record-keeping process simpler and faster. Without the software, you face the prospect of building your own spreadsheets and entering a lot of information manually. With it, you can automate a lot of tasks, such as chasing late payments, tracking monthly cash flow and recording outgoings.
In some cases you can even connect the software to your business bank account so it can automatically pull the information required.
Which accounting option is best for me?
Clearly there is a lot to weigh up but if you take one thing away from this guide make it this: it’s vital to ask yourself what your company’s accounting requirements actually are.
Outline your requirements and then start looking for the right solutions. Some accountants and software packages will offer far more than you actually need and you could find yourself paying for services you don’t use unless you know in advance what you require.
Questions to help you decide
- Do I need VAT services?
- Will I be paying corporation tax? (the answer is yes if you’re a limited company)
- Do I need payroll services?
- Do I need help with my self-assessment tax return?
- Will I need regular advice and contact with a professional accountant?
- Do spreadsheets work for my business or do I need a better bird’s eye view of cash flow?
There are clearly arguments in favour of working with a small business accountant and for using accounting software. The two are by no means mutually exclusive and a lot of small businesses that are focused on growth and expansion will find that they may need the services of both to free up as much of their time and energy as possible.
Make the right decision for your company and you’ll find you have the overview, time and understanding you need to effectively focus on running a successful company.
All VAT-registered businesses are now required to comply with Making Tax Digital, and, by April 2027, many other businesses will need to keep digital records and file their tax returns digitally. Find out everything you need to know about this government scheme and what it means for you.