For most startups, cost-cutting is the first move entrepreneurs make when struggling with cash flow or financial issues. Startup valuations have been depressed post 2022, making fundraising challenging for startup owners.
This may sound easy, but without experts backing you, deciding on cost-cutting challenges can be difficult.
It is when you can hire an accountant who is responsible for looking after your business’s financial health and advising you on how to deal with cash flows, tax preparations, financial forecasting, and more.
This blog post covers the basics of hiring an accountant for a startup business.
Table of contents
- Who is an accountant?
- Why do you need an accountant for a startup business?
- When should you consider hiring an accountant in business?
An accountant is a financial expert with the right skills and knowledge to manage your business finances and ensure you comply with regulatory requirements.
These professionals are familiar with different tax laws, accounting standards, and the latest technology and can streamline your accounting and bookkeeping process.
Besides keeping track of your financial records and creating annual financial reports, they help you prepare and file taxes and future budgeting and advise you on business financial decisions.
Why do you need an accountant for a startup business?
While it may seem like hiring an accountant for a startup is an unnecessary expense, they can actually save time, money, resources, and stress in the long run.
An experienced accountant will offer you value-added services to help you stay on top of current tax requirements, save money, reduce risk, manage growth, and financial planning.
Listed below are some of the benefits of hiring an accountant for your startup
Accountants can offer you a clear picture of the present financial scenario of your business. They keep track of your financial records and assess all your statements, including cash-flow statements, income statements, and balance sheets.
This helps you make informed financial decisions about your investments, expenses and revenue generation.
Some of the complex accounting tasks in a business include examining cash flows, making financial forecasts, analysing markets, balancing your financial statements, etc. An accountant has the expertise to navigate through all these complexities and ensure accurate accounting practices in business.
This, in turn, helps you create realistic budgets and financial forecasts such that you can allocate your resources efficiently and clarify your future business directions.
Every business in the UK must abide by complex tax laws, accounting standards, and financial regulations. These complex regulatory requirements can be confusing for startups, especially when dealing with multiple business areas.
However, if you are hiring an accountant for your startup business, they make sure you stay up to date with the latest laws and regulations and eliminate the risk of penalties.
It can be challenging for startups to understand their cash flow. However, experts can help you understand such complex scenarios, monitor your income and expenses, and ensure you have enough capital to cover operational costs and eliminate financial crises.
Performance analysis for every business is essential as it gives you a clear vision of how your business is performing over time.
An accountant can analyse your financial ratios and metrics, identify business trends and possible threats, and benchmark against industry standards. All these help you pave a smooth path for business growth and improve revenue earlier.
Startups often suffer from capital deficiency, but securing funds at an early business stage is difficult. Any financial institutions or investors will ask for accurate financial records and other documents proving investing in your business won’t put them at risk.
An accountant can help you create accurate financial records by automating your processes and helping you secure loans, grants, or investments.
Running a business and paying taxes in a timely manner can be overwhelming for startups. It is when you can hire an accountant who helps you stay updated with tax laws, reduce tax liability, and prepare tax returns.
They have in-depth knowledge in identifying your tax saving opportunities and can advise you on creating tax-efficient business structures, claiming tax relief, and maximising tax benefits.
While focusing on your accounting and tax requirements, you may miss core business activities like customer service, administrative tasks, etc. This can severely damage your reputation and be a wall in your path to business success.
Therefore, hiring a financial expert is the best decision as they have the knowledge and expertise in handling financial scenarios and accounting complexities, meeting regulatory compliance, preparing tax returns, etc.
These, in the long run, help you save money on penalties and prevent investigations.
For any startup business, hiring an accountant should depend on its current financial situation and budget. However, keeping your financial concerns aside, hiring these financial experts at any point of business is a good decision.
Not only do they help you deal with accounting and tax requirements, but they also assist in business growth and profit generation.
Below are a few situations when hiring these financial experts becomes extremely necessary.
- The financial situation in your startup has become complex, with multiple revenue streams, international transactions, difficult tax situations, etc.
- You and your team don’t have sufficient knowledge and expertise in accounting.
- Managing your startup accounting is making you lack Focus on core business activities.
- You are trying to gain funds and investments.
- Your startup is rapidly growing, and managing its finances is becoming challenging.
- VAT complexities when you start selling internationally.
- You operate a marketplace.
The primary concern for startups is the cost of hiring an accountant, which largely depends on the services you require, business size and financial complexity.
However, one good news is you can claim the accountant charges on your tax return and receive a part of your investment from HMRC.
A great accountant can go beyond simply preparing your tax returns or managing your finances. When hiring them in business, they often become an extension of your team, offer valuable insights and advise you on financial decisions.
These professionals not only have expertise and knowledge in streamlining your operations but can also use technologies to ensure accuracy and save time.
However, you must be careful while hiring an accountant and do good research to understand if they fit your company.