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When Does A Small Business Need An Accountant

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  • Accountant, Tax, Finances, Transactions, Businesses
  • Posted date:
  • 06-12-2022
When Does A Small Business Need An Accountant

When does a small business need an accountant? We look at if you need an accountant for a small business and can a small business do their own accounting?

Do I need an accountant for my small business?

The easiest answer to this is no. It is your business, and you can choose to do all your own accounting for as long as you please. This might be until the business has grown far too large for just one person to handle it all, or you might just want to change your focus and would rather have someone else in the business deal with all of the financial sides of things.


There are no legal requirements for small businesses to have a qualified accountant handle all of the financials. The only legal requirement is for a business to complete its tax returns, as well as have an official record of all the incoming and outgoing cash flows. As most things are digital in the modern age, ensuring that you have these records is incredibly easy.

Below are some questions you can ask yourself to see whether you really do need an account for your small business:

Am I comfortable with using a computer system?

Can I professionally handle the use of accounting software?

Do I have the time and capacity to handle all of my own accounting needs?

Do I have an excellent understanding of income tax and how to file a return? Keep in mind that HMRC do not accept ignorance or lack of knowledge as an excuse for tax evasion crimes

Do I have long-term goals set for my business? Do I have a plan for how we are going to reach that point?

Is my small business at the stage where it requires someone to give input on the financial reporting, payroll, compliance, business planning, or tax efficiency?

If you have answered no to any of these questions, then it may be required for you to hire an account for your small business.

The first place that the majority of successful businesses begin with is their finances. It is important to know whether you have enough start-up capital to be able to open and run the business. You will also need to have a set price point for all the goods and services offered. 

If you do not consider the business finances, then in all likelihood, the small business is destined to fail. In fact, recent surveys have shown that eighty-nine percent of small businesses claim that their success was majorly aided by having the assistance of a business advisor or an accountant.

Of course, then, it only makes sense that a business' finances need to be kept in order. If the goal of your new business is to make a profit, then it is important for you to keep a close eye on the bottom line. The best way to do this is to establish systems early, as well as ensure that everything is kept up to date and regularly monitored.

Large-scale businesses will either outsource their accounts or have an entire in-house team of accountants. This needs to be done because when a business grows so large, the task of managing all of the finances simply becomes too large for one person. 

Spending huge chunks of time trying to work through different financial records and books can also stop the owner of a business from being fully focused on what the business is truly about.

The difference with smaller businesses is that it is fully possible to maintain your own accounts. There is no legal stipulation saying that the account for the business needs to be qualified or registered. Although the advantages definitely outweigh the disadvantages when it comes to hiring a professional accountant or financial advisor.

One of the major reasons why a lot of small businesses refuse to use an accountant is just because they do not understand how the role of an accountant will be helpful to their business or even what exactly an accountant does. People do not understand that an account does much more than just get the business books in good shape and prepare various tax documents.

On the other hand, with all of the above aid, you need to be aware that not every small business needs to have an accountant. 

Hobbyists and freelancers are usually able to manage just fine without a professional accountant as the expenses and income will be relatively straightforward, and they will rarely be employing any additional staff. 

Have a good look at your business and think carefully about it. Only you will truly know whether your business needs an accountant and whether they would be important for your business' health and growth.

The benefits of having a professional account on your team really do speak for themselves, so if you are going to hire an account, then even from day one then can have a massively positive effect on the team. 

There are so many different potential pitfalls and issues that can happen with accounting that without the proper advice and guidance, things can very easily begin to go wrong. 

Completely losing control over your business' finances at any point of the business can have absolutely disastrous results, and this is exactly why it is so important to invest in accountancy services as early as possible if you are not a professional yourself.

A small business owner is completely entitled to do their own accounts, but there is no denying the huge amount of value that a high quality, fully trained accountant can provide for a business when it comes to support, guidance and services. 

An example of this would be the day-to-day bookkeeping. At first, it may not seem too onerous, but over time it can very quickly escalate out of control. Without professional help, this can have detrimental consequences. 

Although non-professionals may be able to handle the simple expenses and incomings of the business, there are other aspects that can begin to get quite confusing for those who are not trained.

Preparing statutory financial statements and tax computations can be incredibly confusing with all the processes and legislations that go along with them. With zero professional advice, it can be very easy just to make a simple error and leave the business with costly penalties from the HMRC. 

You should also consider how having a professional account on your team can assist the business in becoming more profitable. They can give advice on tax efficiency, identify ways to save on costs, and create financial projections to support the growth of the business in the future.

When Does A Small Business Need An Accountant?

What records do I need to keep track of for my small business?

If you are a sole trader or a limited company, then it is required for you to record and keep documentation to support all of the financial transactions that take place within the business. This includes the following:

Cash transactions

Invoices that support all expenditure

Sales invoices or other records, such as point-of-sale data

Complete bank account activity

Leases and contracts

CIS/payroll records

Stock records

Looking at that list, it is very easy to understand why keeping track of all the finances and documentation within a business can become a full-time job for several people. In modern times it is considered best practice to keep all your records electronically. This is actually due to become a legal requirement in April 2024 with the introduction of the new Making Tax Digital system.

Are you looking for payroll accountants in Redcar, Middlesbrough and North Yorkshire? Penny & Pounds can help you organise your bookkeeping and accounts.