Many small business owners in London are doubtful about whether it is worthwhile to employ a firm of chartered accountants. After all, they are expensive, and there are several small business accounting packages on the market, where you can simply capture the transactions and then produce all the necessary official documentation very easily, as well as do stock takes and produce any needed financial figures.
However, those who have tried it will know that this isn't as easy as it is made out to be, except in the case of very straightforward businesses. Firstly, you have to get your chart of accounts properly structured; otherwise it just doesn't work out well in practice; changing it afterwards is a real headache. Not to mention setting up your stocks properly for accurate and easy stock-taking. Transaction postings have to be properly specified, along with a host of other technical details. Many problems only surface at the end of the year, when the process of trying to correct them can be an administrative nightmare, just when there is the least amount of time available for such issues. Unless the business owner happens to be good at accounting, this approach can end up causing far more trouble than the savings are worth.
Furthermore, just plain accounting isn't the only or necessarily even the best reason for using the services of a chartered accountant. Here are 5 of the prime reasons to consider using a firm of chartered accountants:
1. Better Accounting Services.
Yes, this is still a major reason. The sort of full-time bookkeeper a small business can afford as an alternative to DIY is usually at a very low level and cannot give advice about issues such as setting up a chart of accounts. Taking one of the standard charts available may not work well for your business. Understanding the issues involved and why structuring accounts correctly is so important for effective production of information is much more the province of a qualified accountant.
2. Tax Advice and Savings.
This is probably one of the most important reasons for using outside accounts. It reflects the realities of the modern business world. Enough said - small business owners in the UK should be well aware of the importance of this factor. Chartered accountants get a level of respect from the receiver very different to the standard attitude towards unqualified business owners. Taxation is the chartered accountant's bread-and-butter business.
3. Trustworthy Figures for Improved Decision-Making.
The giant Rolls-Royce Company was driven into bankruptcy because they implemented a new accounting system and couldn't extract the figures that would show the horrendous cost overruns on the RB 211 engine. Lack of reliable information is a frequent cause of business difficulties, as well as interpretation of what figures are available. Good accountants will be able to offer useful advice as part of the package. They are unlikely to err on the optimistic side when considering the expected cash-flow from a proposed expansion of business - something many people are only too prone to do. Remember lying to yourself and "massaging" the figures so they look good doesn't make for good decisions. Much rather decide from realistic (read "conservative")unbiased forecasts.
4. Freeing the Business Owner to Concentrate on Business Issues.
Rather than handling - or miss-handling - your own accounting to your detriment. This is arguably the best reason for following this route. Finding yourself involved in sorting out nitty-gritty accounting problems while your business looks after itself is a very dangerous situation. An accounting firm can also be very useful when arranging finance, as they know how to justify the need to ensure approval.
5. Peace of Mind.
Knowing that your accounts are being properly handled and you're not going to suddenly be presented with a whopping tax bill with penalties for understating income or because deductions were improperly taken, can be a huge load off a business owner's mind.
Although London firms of chartered accountants aren't cheap, the tax savings can help defray their costs to the point where they are no more expensive than a bookkeeper, without all the added concerns about leave and illness. There are many to choose from, and the canny business owner will be able to negotiate an advantageous deal to suit personal requirements.