Doing your own accounts: pros and cons...

When you start a small business it is always a good idea to look at the various costs and make a judgement call on which ones you can avoid and which are unavoidable for your business.

When it comes to the accounting costs then at the start there could be a good reason to do the accounts yourself, particularly if there are not going to be that many transactions at the start but mainly marketing and so on.

So how do you decide whether or not to get an accountant on board right at the start and what are the pros and cons of each route that you could go down?

I imagine if you have absolutely no knowledge of how to do the accounting then you will have to get someone in to do it, but if you are able to manage an excel spreadsheet and know there won't be that many transactions then is this a worthwhile cost to cut out to start with?

Re : Doing your own accounts: pros and cons

Obvious Pro

Saving the accounting cost of preparing accounts.

Obvious Cons

Will the accounts comply with the Companies Act.

Will the company be claiming the right expenses in the most tax efficient manner.
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Re : Doing your own accounts: pros and cons

I'm an accountant so obviously my viewpoint will be biased somewhat. However ....

If you don't know what is expected of you from an administrative, legislative/regulatory and technical point of view when it comes to tax and accounting then get in touch with an accountant at the start.

From there you can get an idea of expectations placed on you and can get initial advice as to how you set up records etc. After this, or an initial period, then your accountant can do less and less for you and your costs will decrease (or at least should).

That way you will spend a little more money at the outset but will most probably save in the long term as you won't have to pay anyone to sort out any messes you get into or have to pay penallties and interest levied on you. Also with an accountant on board, you will often end up saving more in tax efficiencies than what you pay the accountant anyway (whose fees of course are also tax deductible).

End of sermon!
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kontracta.com - sole trader accountants.com - Colledge & Co, Chartered Accountants

Re : Doing your own accounts: pros and cons

Doing your own accounts is a recipe for disaster unless you know what you are doing or have a sounding board to check things against when you first start.

Re : Doing your own accounts: pros and cons

For many micro businesses an accountant is an expense that is difficult to bear. In my first year in business my accountant wanted £700 just to audit my books which I had prepared on an excel spreadsheet that he gave me.

I have since found that a simple DIY bookkeeping system that enables you to reconcile your bank accounts is quite sufficient for 90% of start-up businesses. Most simple systems have video tutorials.

To mitigate year end costs, it is important to produce a good set of books to your accountant or bookkeeper who should help you to set up the basic structure of your bookkeeping.

I would also shop around as prices will vary (as does the quality of advice as I can testify as a former bank manager!)

My best advice is that you should at least have a rudimentary knowledge of bookkeeping and accounts (or access to someone who you can trust that does) because you will need to understand the financial implications of your business decisions.
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Mark Salmon Helping you to get all you can from all you've got in your business. http://businessrenegade.co.uk

Re : Doing your own accounts: pros and cons

One of pros of using an accountant, if you are self employed, is the choice of your accounting date.

If you do it yourself, then I find that taxpayers use the easiest accounting date (i.e. 5th April) in order to compile their accounts.

That is not necessarily the most tax efficient option.

http://www.truemanbrown.co.uk/index.php?option=com_content&view=article&id=131 ole-traders-choosing-your-accounting-date&catid=46:blog&Itemid=185
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Re : Doing your own accounts: pros and cons

I use an accountant but I find that I am doing most of the work. I use a sage accounts package and hand the figures to the accountant at the end of the year.
Im not sure what they do.

Re : Doing your own accounts: pros and cons

Use an accountant, but shop around - prices vary massively. Word of mouth recommendations from other small businesses can be very useful here.

Re : Doing your own accounts: pros and cons

If you have the time to do them yourself without taking away from the time needed to handle the things that are actually making money for your business it can be a great money saver to do your own accounts. However, if your business has grown enough that you could be using your time more wisely elsewhere you should start considering outsourcing the work.

Re : Doing your own accounts: pros and cons

We've always used an accountant, but our first one turned out not to be very good at all. In fact our current accountant was horrified by what our previous accountant had been doing. It just goes to show that you really should shop around and word of mouth recommendations are very good. We've now got an accountant who we feel really supports what we do and has a genuine interest in doing the best for our business. I would never go back to doing our own accounts. Too much hassle and time.
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