Person working out taxes with a laptop and calculator

Do start-ups need accountants?

May 24, 2021

In the early stages of starting a business, most founders are on the fence about whether or not they should hire an accountant.

Overheads are probably stretched enough as it is without having to worry about yet another expenditure. However, a lot of new business owners may not realise that hiring an accountant isn't the only way to get support with your finances. There are online accounting services that can offer so much more.

When running a business, it can be tempting to hand the accounting over to someone else rather than losing time trying to make sense of the figures — but it's worth considering whether handing over control to an outsider is better than understanding everything yourself.

It goes without saying that being on top of your finances will save you a lot of time and stress in the future, so it's worth taking the time to consider the options available to you.

Do start-ups need accountants?

You might not necessarily need to hire a full-time accountant for your start-up, but unless you’re actually running an accountancy business, it’s vital you get some type of professional help with your finances.

It can be tempting to think that to save money you’ll just do your own accounting and bookwork, but getting some trusted advice can actually be more cost-effective in the long run.

Read on to find out about the importance of accounting and what help is available to small business owners.

Why accounting is important

With everything else you’ve got to think about, the last thing you want to do is spend precious hours bogged down in numbers and filing.

Not only that, but finance is an overwhelming concept to many people, let alone someone who’s just started their own business. Since you’d much rather focus on the day-to-day running of your company, it’s easy to put managing your accounts on the back-burner.

Many founders don’t think twice about keeping receipts and recording transactions, finding themselves in a panic later on, searching for data that needs to be submitted to HMRC. But accounting is an essential part of running any start-up business and it’s vital not to underestimate how beneficial keeping on top of your books is for the future. Here’s why it’s so important:

  • You can track your income and expenditure
  • Your receipts and expenses are organised so you can easily file a tax return
  • You’ll have a record of important financial information for future use
  • You can make sure everyone who works for you gets paid correctly
  • Preparing financial reports like budgets and balance sheets will be easier
  • You can spot any errors and avoid theft or fraud

Although 42% of start-up companies fail because there's no market for their services or products, 23% fail for financial reasons. Sadly, even the ones with the best services and products on the market can fall by the wayside because they’re not managing their funds properly and are making ineffective financial decisions.

You may well decide it’s too early to pay for an accountant, but it’s never too early to make sure you implement financial processes and systems to prevent your business cash flow from running dry, as well as saving yourself stress in the future. The last thing you want is to be handed a huge, unexpected tax bill at the end of the year because you didn’t keep on top of your finances.

If you are thinking you might be in need of some support, the answer is you probably do. It’s much better to get the accounting support you need early on so you don’t end up having to clean up your messy finances further down the line.

Things to think about when recording your accounts

You may have got the basics sorted – like opening a business bank account, filing your receipts and putting some simple systems in place – but finances can become complicated really quickly. If you’re not mathematically minded, making sense of your numbers can be difficult and trying to do so can seem like a real chore.

Some of the things you might want to consider when keeping a record of your accounts include:

  • When and how to prepare and file your accounts
  • When you need to compile and file your tax return by
  • Whether there are any business tax reliefs available to you
  • Whether you’re keeping accurate records
  • When and how you pay the tax you owe
  • Whether your cash flow projections and forecasts are correct
  • Whether VAT is applicable
  • How to operate the payroll

By taking care to implement things like this on a regular basis, you can ensure that you’re legally compliant – however, this can be time-consuming and stressful. Not only that, but if you get it wrong, you could face significant fines for non-compliance. Being hit with a big fine from HMRC is the last thing any founder needs; fortunately with outsourced accounting services, it’s easily avoidable.

Hiring an accountant

With the average UK accountant charging around £35 per hour for basic services like a tax return and more than £150 per hour for specialist services like tax planning, it can be hard to justify paying for a bookkeeper when you’re just starting out. But as well as the obvious financial drawback, there are some other disadvantages to hiring an accountant:

  • You won’t be in full control of your finances
  • It’s not always possible to get immediate answers to your questions
  • Financial jargon used by many accountants can be hard to understand
  • You don’t have instant access to real-time data
  • Unless you're a top client you won't get tailored service, meaning you could be paying more tax than you need to

Despite all this, it’s important to remember that accountants are being paid for their skills and expertise. They can advise on ways in which to avoid paying too much tax, reach out to potential investors or help you with borrowing money. What you’re paying for is high-quality financial services, and while you may not be earning the big bucks yet, you might want to hire an accountant in the future. Just remember that they should be offsetting their fees with how much money they’re saving you.

Online accounting services

With the world becoming increasingly digitalised, computers now play an essential part in many industries. With that in mind, it might be time to consider using an online service to manage your business’ books.

It’s highly likely that you want to be in control of every aspect of your business. Luckily there are a variety of tools out there to help you organise your accounts and make sense of your finances.

Some of the advantages of using an online accounting service are:

  • It’s an affordable solution to your accounting needs
  • You have full control of your finances
  • You’ve got instance access to all your figures
  • Everything you need is organised clearly in one place
  • You can keep track of your finances as you go, saving time and hassle in the future
  • Filing a tax return is easy
  • You can know your real-time tax position at all times
  • Experts are on hand to answer all your questions

Although it's important for start-ups to stay on top of their finances, there are options available other than hiring an accountant from day-one. If you don’t want to sacrifice control of your company and fork out hundreds of pounds for an accountant, yet you’ve realised you need some help in that department, the ideal solution could be subscribing to an accounting system like Ember. For £39 per month, you'll get:

  • An app that's run by a qualified team of accountants, for real human support
  • Comprehensive accounting software
  • Real-time tax estimates and reporting
  • Live bank feeds
  • In-app support from an assigned chartered accountant
  • Automatic categorisation
  • Payroll
  • Automated tax payments
  • Tax submission reminders and scheduling

Run by qualified accountants, we’ve been awarded 4.5 stars by Trustpilot and can give you peace of mind when it comes to accountancy for your business.

Join us in creating the new age of accounting.

Simple language, simple software, so that you can spend less time dealing with admin and more time focusing on what really matters.

Daniel Hogan

Daniel is a Deloitte-trained, fully qualified Chartered Accountant with experience in the finance software space. It was during his tenure managing a finance system in the UK that he grew dissatisfied with the lack of synergy and automation in the space, compelling him to co-found Ember.