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How to choose the right accounting service as a contractor

July 28, 2021

There are lots of benefits to being a contractor: being your own boss, choosing your own hours and being able to work on different projects, to name just a few.

However, as a contractor you also have to shoulder the responsibility of managing your own accounts. Whether you're starting out on your journey as a contractor or already have your own limited company, there are a number of core responsibilities involved in the setup and running of your business alongside ongoing tax obligations to HMRC.

Trying to manage this on your own can be complicated and take up valuable time. If you made the decision to become a contractor for the flexibility, odds are you don't want to be spending your spare time poring over receipts, calculating expenses and working out your tax liability.

This is where having the right accounting service can really help. It can free up a lot of your time and save you money by advising you on the most tax-efficient way to pay yourself. The question is: what is the best way of managing your accounts?

How to choose the right accounting service

Choosing the right accounting service isn't limited to just one factor. From the type of software you'll need to use, and how much it costs, there are many considerations to take into account. The first choice you have to make is which type of service to use.

Up until recently, the term 'accounting service' really only referred to one thing: an accountant. For contractors looking for the best way to manage their accounts, using an accountant is still an option, but it is no longer the only option. Between an accountant, accounting software, and a clever hybrid of the two, you now have a range of options.

Accountant, software, or both?

A lot of contractors face a similar decision when it comes to looking after their accounting requirements: hire an accountant or use accounting software. But which is the better option?

For a monthly or yearly fee, an accountant will analyse your financial information, calculate statements, prepare tax returns and provide advice and recommendations. The main advantage of hiring an accountant is the knowledge and expertise they provide. Tricky subjects like IR35 and end of year accounts suddenly don't seem so daunting if you have someone to talk you through them. However, this advice and these services aren't free. Accountants are expensive – often costing a lot more compared to using accounting software.

Accounting software provides you with the ability to manage your own finances, usually at a fraction of the cost of an accountant. You can record all of your expenses, automate your transactions, set tax reminders and generate financial statements. The problem? Not all accounting software is the same. Some software requires a strong understanding of accounting practices, while other systems are basic and have limited features.

What if we told you that you don't have to choose between one or the other? At Ember, we combine the accountant with the accounting software to bring you the best of both worlds for an affordable price. From automatically categorising your transactions to submitting your end of year accounts, you can navigate your finances in just a few clicks of a button.

Do they offer specialist contractor services?

The rules around contracting can be complicated, so it's essential to find a service that is aimed at you. As a contractor, this is a list of just some of the activities you'll likely need to deal with:

  • Decide on company structure
  • Incorporate company
  • VAT registration
  • Corporation tax
  • IR35 status
  • Set up a business bank account
  • End of year accounts

There is no point at all in hiring an accountant or using software that isn't set up to perform these tasks. From knowing how to optimise your salary between dividends and wages to understanding how much personal tax to set aside, you'll need reassurance that the system you use speaks in a way you understand. If you need advice about an IR35 review, there is no use asking your high-street accountant if it's not something they regularly deal with.

All of these functions listed above are critical elements in how you operate your business; failure to get them right can pose a significant financial risk. Save yourself the unnecessary hassle and worry by only using an expert.

Is the software easy to use?

What's the hallmark of good technology? Yes, it's likely packed full of features and can perform a whole range of tasks, but in order to appeal to people, it has to be easy to use. No one wants to pay for a product or use a service that makes their life more difficult.

The same applies to accounting software. Is it really beneficial to you if you have to spend hours of your time mastering accounting principles before you can use it? But that's still the case for a lot of the software on the market.

That's why at Ember, our software has been designed with you in mind. We do the bulk of the work for you, so all you have to do is log in to your account and view the information that you want to see. Our system automates and classifies your transactions, stores your receipts and files your tax returns.

Ember is also cloud-based, meaning you can access your accounts from any device at any time, and if you do get into any difficulty or have any questions, we have a team of qualified accountants on hand to help with anything you need.

Cost

Not everything is about finding the lowest price, but when you are comparing services, it's impossible not to factor in cost as a consideration.

When weighing up your choices, the simplest thing to do is work out exactly what you get and how much you can expect to pay. Regardless of the size of your business, you will easily pay over £100 a month for an accountant, and if you outsource payroll and other functions too, that cost is only going to go up.

For accounting software, focus on the features available and if there is any accountancy support provided as well. Quite often, you will find you need to hire an accountant on top of the price you pay for the software because the features are too limited to be able to do everything you need.

But what if you could manage everything yourself and have support when you need it? With Ember, what you see in our pricing is what you get. Company incorporation, accounting support and payroll are all included in the set monthly fee.

Read reviews and recommendations

Chances are you wouldn't buy a new smartphone or television without reading a couple of reviews first. The same applies to choosing an accounting service.

As a contractor, accounting is an integral part of your business. You need to make sure that you record all of your expenses, pay the right amount of tax and gather the necessary information to be able to complete your tax returns. The confidence you have in your company's financial health is directly aligned to the confidence you have in your accounting system.

Take the time to find out what users think by looking at comments on their website or places such as Trustpilot. Are they happy with the service? Does it make it easy for them to manage their finances? What better endorsement is there than other contractors leaving positive feedback and recommending other people use it too.

Also, take the time to research the accountant or software provider. What is their background? What is their expertise? Do they understand contracting?

Switching your accounting service

If you've read through this article and find yourself questioning if your current accounting service is worth it, don't be afraid to change. Your time and money are too important to waste on something that doesn't meet your needs.

With Ember, it only takes 5 minutes to change from your existing accountant or software. We'll import all of your information without any hassle, and our team of qualified accountants are on hand to help with any questions you may have. We also offer 'try before you buy' – a free 1-month trial that allows you to test out our software and see exactly what you get.

Unlike other systems, our accounting software is made for you. As we like to say, it speaks contractor language.

Here are just some of the great features that it does:

  • Optimise how you pay yourself between wages and dividends
  • Live reports: Know how much you can withdraw without going past the company profits
  • 24/7 support – tax and accounting advice whenever you need it
  • Know how much tax you owe in real-time
  • Making Tax Digital (MTD) ready
  • Transaction classification
  • Incorporate your limited company free of charge
  • Live bank feeds
  • Corporation tax return

Being a contractor is challenging enough without having to stress about your finances. You just want something that is easy to use and manages all of the processes for you. Why not give us a try and see how Ember can give you more time to focus on the things that matter.

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.