Work & Business

DIY Business Accounts vs Hiring An Accountant

With the rise in freelancers and startup businesses in recent years, one of the most important aspects can be easy to overlook. Accounting. Yes, it’s not sexy, but it is very important.

It can be tempting to skip out on hiring an accountant and opt to DIY your small business accounts.

But, with so much to bear in mind, there are a number of reasons why it is wise to hire a bookkeeper or accountant. Saying that, there is also a case for choosing to DIY business accounts.

So, let’s weigh it up…

What does an accountant do?

In general, an accountant takes care of your monthly reconciliations and then will process your tax returns at the end of the year. And, if nothing else, it’s those tax returns where a good accountant really earns their keep.

A good accountant will also have an understanding of how you can reduce your tax bill, usually by explaining what you’re entitled to claim or funding that might be available for you.

As an example, during the Covid pandemic, many businesses would have been eligible for tax breaks that they might otherwise have missed. This is where a good accountant would have been very useful for any small business.

An accountant can also process payroll, handle investment advice and other financial paperwork.

Does a freelancer/small business need an accountant?

There is no definitive answer, and the reply usually depends on a few factors such as:

  • How many transactions per month are you processing?
  • How much does the business take or expect to take each year?
  • How many clients do you handle?
  • Do you have staff, suppliers or contractors that need paying?

Putting it simply, the more complex the financial paperwork, the more value you will get from an accountant.

Take for example a small ecommerce store that handles hundreds of transactions each day, has a small inventory of sourced stock and a team of freelancers.

The paperwork for this company will most likely be quite complex, with multiple invoices, payments to suppliers and contractors. In this instance an accountant will take the hassle out of putting paperwork in order, something that can take a long time for a busy business owner.

By contrast, a freelance proofreader or translator might only have one or two clients and very few overheads. In this instance, opting to DIY your business accounts makes much more sense. Once the freelancer takes on a number of clients, or even starts to sub-contract or offer additional services, this is where they might consider hiring an accountant.

In short, whether you choose to DIY business accounts depends on the volume and complexity of your monthly transactions.

How much does an accountant cost?

The cost for an accountant varies hugely. In the UK, a reasonable monthly rate will likely be around £100-150 per month.

However, you can likely find a freelance business accountant for under £100 if you shop around.

In the USA, you might find accountants that charge hourly, with the average quoted price around $40 per hour.

It’s best to hire an accountant who is familiar with your tax system. For example, you wouldn’t hire an accountant based in the USA if you wanted to complete tax returns in the UK or Europe.

How to choose an accountant for small business

Finding a good accountant for your business can be an art in itself. You don’t want to just pick the first person you find on Google, and many people will find their accountant through personal recommendations.

If you’re looking to hire an accountant, check these things:

  • What certifications/accreditations do they have?
  • Are they a large company? Larger accountants will likely charge more and provide a less personal service
  • Are they an independent accountant? Smaller and freelance accountants can often provide a more personal service and competitive price
  • What services do they offer as part of their package? Is anything an added extra? Ideally you want bookkeeping and tax returns as standard.
  • Do they supply software, or do you need to give them access to yours? If you don’t already have accounting software, they can usually provide you access either as an optional add on, or as part of the price.
  • Have they worked with business like yours, or in the same industry?
  • How do they process personal data?

In general, these are the main considerations for hiring an accountant for your small business.

Another tip is also to avoid hiring an accountant based in a large major city. They often have bigger overheads than companies based in less central areas. For example in the UK hiring an accountant in York would be much more cost effective than hiring an accountant in London or the South East, wherever you’re based!

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