One of the major reason most of the contractors and owner-managed businesses try their hands on DIY Accounting and do their own accounting and bookkeeping is to save money. When it backfires, you can end up paying fines for not submitting the correct information to HMRC and Companies House on time or not leaving enough money in the business to pay for the tax liabilities.
Some of you may not have had a good experience with their accountants and driven by a do-it-yourself (DIY) attitude decide to take over the ship.
You are signed up with a cloud based accounting software with fancy features and reports, so why not spend an extra hour or so and do the accounts yourself?
In this article I am going to highlight on some of the issues faced with DIY Accounting and the need for a qualified accountant.
Potential problems with DIY Accounting
Time management – Do you expect to make time for bookkeeping? This could mean that you will either end up doing it late (even on weekends) or switch more important tasks with bookkeeping.
Clerical mistakes – If you don’t have an accounting background the books might end up with mistakes that can take even longer to fix
Stacking up – You are at risk of falling behind if you are not able to do your bookkeeping tasks regularly and you keep setting these aside for more important things. Before you know it, things can stack up and cause big problems for your business.
Opportunity cost – You should be able to attach a value to your time spent for the business. Every hour spent on doing the bookkeeping yourself will be the cost for the business based on that value.
Technical knowledge – You have missed out on claiming valid business expenses or included disallowed/personal expenses into your books
Cash management – You have either not budgeted for tax bill or underestimated the liability. In both cases you may end up short of money or get into trouble with HMRC.
Ill-informed Decisions – You have not kept the books accurately and made mistakes, based on these there is no reliable information available to help in better business decisions
Why would you need to get an accountant?
Hiring an accountant is a Business Decision and encompasses much more than logging invoices and expenses, and filling the yearly tax returns. A good accountant will provide ongoing, proactive advice.
Some of the key things the accountant should be able to do for you are:
Compliance – Prepare and file returns with HMRC and Companies House for your Self assessment, Corporation tax, VAT, Payroll RTI and Confirmation Statement.
Tax Planning – Help structure your business in tax efficient way, correctly identify allowed and available business expenses, identify the timings for paying off tax liabilities and help to extract the money from business in the best possible way.
Business advisory – Add value to your business, help to boost profitability and improve cash flow, provide analysis on your business performance and timely report accurate KPI’s
Whether you decide to DIY or Hire an Accountant, we can help you make the right decision. Contact us today to schedule a free initial consultation.