The more your business grows, the more important the role of expert, trustworthy consultants and assistance becomes - especially when it comes to the financial and economic matters within your company. For many businesses, a good accountant or tax consultant is often indispensable, as people don’t want to get into the nitty-gritty of tax returns and tax laws – and for good reason. These are often time consuming and getting these things wrong can land you in hot water. This article will take a look at what an accountant can do for your business, and how much one should cost and why.

External Accounting: Tax Consultant or Accountant?

First things first: What exactly is the difference between a tax consultant, and an accountant? Why do you need one or the other? These are important questions, because although both can help your business with bookkeeping, the roles of these two jobs are actually quite different, and the cost of an accountant reflects this difference. An accountant is someone you hire to offer advice and analyse your financial state as a business. This is more than someone you hire just as a bookkeeper but considering the range of bookkeeping apps that there are out there, this article will not cover the cost and role of an external bookkeeper.

An accountant can help you review how your business has done in the last year, and with data from your yearly financial summary, can assist you in growing your business further for the next fiscal year. An accountant will help you keep your books, and then analyse the information from your bookkeeping in your best interest. Accountants are trained and qualified specially to give you professional financial advice, and this will be tailored to your business the longer you stick with one. Finding an accountant early on in your business is part of building a good support network. Potential services that an accountant can offer your business are:

  • Profit and loss statements: An accountant can do this for your business
  • Start-up assistance: If you’re just founding your business, an accountant can help you come up with a plan for your finances
  • Smart savings: Part of an accountant’s analysis will be to see where you’re already saving well, and where you’ve got room for improvement.
  • Budgeting: A trick as old as time, but without proper budgets, your bookkeeping will inevitably become chaotic and seem unprofessional to potential investors.
  • Tax returns: One of an accountant’s main jobs can be to help you file your tax returns properly, and on time, saving you a lot of paperwork and potential hassle.
  • Filing receipts properly: If you’ve got incoming and outgoing cash flows, you’ll definitely need to store your receipts properly. An accountant can help.
  • Different types of bookkeeping: An accountant will be able to help you keep your books, regardless of whether you use single entry accouting or double entry accounting.

There will be instances when your accountant can help you with common areas of taxation. However, you might find yourself requiring the assistance of a professional who is specialised in more complex tax advice, and in this case, you may want to hire a tax advisor. A tax advisor can help you understand the following subject fields when you need particular advice:

  • Business and Corporate Taxation
  • Sales Tax
  • Principles of Accounting
  • Personal Taxation, as well as Inheritance Tax
Note

This article will outline the responsibilities of a tax advisor, but to gain an insight into the fees for a tax advisor, please take a look at this article on the cost of a tax advisor

Costs for external accounting: What does an accountant cost?

The costs of an accountant are not regulated or determined by local governments, so the answer isn’t as simple as saying a percentage of a purchase price, as with many estate agents, for example. This means that you’ll have to put a bit more work in to figure out how much you want to or can spend on an accountant.

Of course, the cost of an accountant will also depend on how frequently you use an accountant’s services, and depending on the type of business you run, this can vary quite a lot. Accountants and attorneys typically bill on an hourly basis. And the number of hours they need to spend on your purchase depends on a variety of things, from the size of the deal and the complexity of the transaction to how competently the seller has kept financial and business records.

How much is charged depends on how taxing (pun intended) the work they must do is. In some countries, such as the USA, accountants charge by hour. However, in the UK, accountants charge by job. This is little known, but the way it works is that you and your accountant will meet to discuss your business’ needs, and they will then quote you an annual rate.

As with most things, you can probably assume that a good accountant will cost more than a bad one. However, this also isn’t as simple as that, because factors such as business size, experience, and projects type all influence the cost. If you’re a small business, you may want to look for an accountant with experience in advising small businesses, and it makes little sense to spend more on an accountant who specialises in big business deals, if that isn’t who you are. In this case, you might be better off with a small business accountant who charges a moderate annual fee – saving your business money and most likely giving your business better advice.

It is also worth noting that someone who has worked 25 years in the industry may charge more than someone who is just starting out. Whilst you may have greater peace of mind opting for an experienced accountant, there is nothing to say that a newly qualified accountant won’t be able to make the cut, and you could save yourself money for services that are just as good. One thing to look out for is whether your accountant is a chartered accountant or not). A chartered accountant will have to engage in continuous training in order to remain chartered, meaning that you’ll be advised by a fully qualified and informed professional.. A chartered accountant is usually a sign of a trustworthy business partner.

How much do small businesses spend on accounting costs?

A survey published by The Financial Stability Board in 2016 showed that of the British SME’s surveyed, the average time spent on tax reporting was three working weeks a year. The average spend on tax compliance was £5,000 a year, and filing their returns took the equivalent of eight working days. This seems like a lot, especially considering small businesses are often more pressed for time and resources. You may be able to minimise this spend by getting an accountant who makes up for the rate they charge and getting that time back might even be enough of a persuasion!

Even though it is hard to give a conclusive answer on how much an accountant costs for a small business, the survey showed that you can get a lot of your time back by hiring an accountant. Note that this data is 4 years old – as expenses have increased, it could be much more these days. As a straightforward start-up business, you’ll need perhaps less input from your accountant than a bigger business. This sort of meeting will go over your business structure, and the types of taxes you need to pay.

But that isn’t all you have to factor in: once you’re up and running, you’ll also need to look at financial analyses and get advice on how to ensure your business’ financial success. This might add to the total – but will always save you time.

The price of an accountant might seem daunting at first: Having to spend so much in the first stages of your business can be intimidating, but as established business owners will know, it is of vital importance to have a good accountant on your side. Spending money where it matters is a good skill to have, and an accountant is one of those expenses that may seem frustrating but is certainly worth it in the long run.

Please note the legal disclaimer relating to this article.

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