A guide for start-up, new and established businesses on building a successful working relationship with your accountant.
As a business manager you will find yourself wearing lots of different hats, one of the most important of which will be your financial hat. If your business is going to be successful you will need to understand about cash flow, projections and profitability and be able to identify trends that influence your revenue stream. Naturally, you will also need to know what the law says about how you should keep and file your accounts and, if you employ people, how you deduct PAYE and National Insurance. If you are a brand new business that could sound a little scary…but read on!
The reason you went into business – unless you are an accountant of course – is not to spend your time ruminating over the company books. It’s a fair guess to say that you didn’t want to become an expert accountant or spend your time adding up long columns of figures. That’s where your trained professional advisor comes in. A good accountant is essential to your business, bringing skills and knowledge that can be a real asset if you access and use them to their best advantage. Your accountant will help you with:
- setting up your business initially (for example, deciding whether you should be a sole trader, a limited company or another type of legal entity)
- registration processes with bodies such as Companies House and HM Revenue and Customs
- cash flow projections, budgets and trading forecasts
- sources of finance
- your relationship with your bank
- online and offline systems and processes to make it as easy as possible for you to keep records and ensure that those records help your accountant get the information he or she needs
- statutory compliance
- VAT, payroll, book-keeping, etc.
And as your business grows, there are other areas where your accountant will be a key part of your team, such as:
- employing staff
- taking on premises or moving to larger premises
- increasing levels of stock or product/service range
- setting profit margins
- mergers or acquisitions
- paying dividends to shareholders
- planning for the future
- minimising the tax you and your business has to pay
Starting Out
At the outset, you may be tempted either to do the accounts yourself or to hire a book-keeper to do them for you. Although there is nothing wrong with either of these courses of action, you should ask yourself whether doing your own accounts is a good use of your time. When your business is new you will need to focus on key areas such as getting your product or service to the market and building your customer base. Getting bogged down in paperwork is likely to be the last thing you need at a time when you’re going to be extremely busy. You will probably work more hours than you have ever worked in the past; do you really want to be the company’s Chief Financial Officer as well as all the other roles you will have to play? However, if you do choose to ‘do-it-yourself’ do use good accounting software such as Mamut and do talk to an accountant to find out what financial records you must keep.
Hiring a book-keeper may not be the right decision for you if you are a sole trader or run a very small business and you can ‘do-it-yourself’ using good accounting software such as Mamut. But if you intend to employ several people or want your business to grow, you will soon find yourself needing more skills than they are likely to be able to provide. A book-keeping service will allow you to stay on top of the paperwork and comply with your financial obligations as a sole trader or an employer, but it is doubtful that you’ll get the sort of advice that will help you make decisions over the direction of your business. For that, you’ll need a qualified accountant who specialises in helping businesses such as yours.
Doing Your Research
Like any service, accountancy firms have specialist skills. All will be able to help you with the fundamentals of accounting but some firms may have expert knowledge of your type of business, which could be very valuable. This knowledge might extend to a business sector, such as import and export, or a vertical market, such as residential care for the elderly or retail. Try to find out as much about the firm as you can before you make a decision as to whether it is right for you. Most accountants will be pleased to offer you an informal meeting where you can get to know them. It is likely that you will be trying to network in order to build up your business, so why not ask other business contacts who they would recommend?
Starting to Grow
As your business grows you will be faced with a multitude of decisions about everything from raising finance to who should be responsible for making the tea! Understandably, you might feel overwhelmed by the directions in which you are being pulled, while being very aware that the decisions you make now will have a lasting impact.
This is a stage at which businesses either thrive or die. Poor decision making – often linked to a lack of financial advice – can jeopardise the security of the business going forward. Whether your business grows organically or by merging with another business, you will have higher overheads that could expose you to greater risk. Your accountant should be your right hand man (or woman!) at a time like this. Discuss your plans with them so that you can get their input before you reach a point of no return. They have experience of business entrepreneurs and will have seen it all before, so why not benefit from their knowledge?
Becoming Established
Most established businesses can afford to assume a degree of security – but only a degree! Even in a bullish market, complacency can lead to ruin. And in a recession, there is absolutely no opportunity to stand still.
Successful businesses look ahead. They examine their product or service life cycle and keep in touch with their customers. They anticipate need and how they’re going to fulfil it. All this requires investment of some form or other, whether that be in R&D, marketing, capital equipment or skilled personnel. Use your accountant as you would one of your Board. Make sure they are updated with your plans and understand how you want to take the business forward. They don’t have the benefit of working alongside you every day of the week, so don’t make assumptions about what they do and don’t know. Get them involved, invite them to your premises, introduce them to key staff and let them have access to your business and marketing plans. Only when they are truly involved will you reap the benefits.
Colbea’s business courses introduce you to the world of finance when you are first starting out in business. The Step Into Business course covers all the basics you will need to know and tackles them in an accessible way, without the use of jargon or complicated terms.
Established businesses can get advice from Colbea’s Business Advisors too. The Advisors are all people who have held senior management posts, many in finance. There are few problems or opportunities that they haven’t encountered in their own careers.
Colbea is sponsored by several firms of local accountants who will be pleased to talk to you about your business. You can find them on our ‘Sponsors’ page.
