8 Key Questions You Should Ask Your Accountant When Starting a Small Business
Starting a small business in the UK involves navigating many challenges, particularly in relation to financial planning for a small business, with 20% of SMEs failing in their first year. Working with a small business accountant can help you manage these, but what questions should you be asking such an accountant when starting your business?
Let’s show you 8 key questions to ask so you get the right information:
1. What Business Structure Should I Choose?
Depending on the size of your business, choosing the right structure will have a direct impact on your tax liabilities, legal responsibilities, and regulatory requirements. The main choices for small business owners in the UK is to become a sole trader, partnership or limited company.
Being a sole trader means you pay income tax on your business profits through your personal tax return and are personally liable for any business debts. If you work as a partnership, each partner pays income tax through the share of their profits, and if you are a limited company, the company will pay corporation tax on its profits and requires a number of other essential legal responsibilities such as complying with statutory obligations. However, there are some potential tax benefits of switching to a limited company, due to the more flexible nature of how you can pay yourself through the business.
This is the tip of the iceberg when choosing the right business structure, and this is why consulting with a small business accountant can help you understand the implications of each structure and choose the best one for you.
2. What Cloud Accounting Software Do You Recommend?
Efficient accounting software is a must for managing your finances in the modern day, and a small business accountant can recommend the appropriate cloud accounting solutions that suit your business needs, streamline your bookkeeping, and ensure that you comply with HMRC requirements.
Modern accounting software offers a comprehensive range of functions to improve efficiency and accuracy, for example, automating invoicing processes, tracking expenses, financial reporting, and so much more.
Your prospective accountant should have some preferred software they use for their clients (ours is Xero or Quickbooks depending on the clients’ needs), so be sure to ask for reasons why they recommend software for your business.
3. How Do You Charge for Your Services?
It's important to ask if your accountant charges per hour or on a fixed or retainer structure so that you can budget for their services accordingly whilst avoiding unexpected costs (some accountants will charge for meetings/calls. so make sure you are clear on that before going ahead with them).
Understanding what services are included and any additional charges means you can gain greater financial control, ensuring every single penny available to your small business is well spent.
4. What Is Your Experience with Other Small Businesses in My Industry?
When it comes to finding an accountant for your small business, the previous industry experience they have is vital to understanding the field you work in.
Asking this question means you will know if your accountant has insight into the unique challenges and opportunities within your sector. If they know your industry well (ideally with positive case studies), they can provide even more tailored advice and accounting tips, helping your business thrive.
5. What Financial Reports Do You Provide?
Regular monitoring of financial reports such as the profit and loss (P&L) statement, balance sheet, and cash flow statement is essential to make informed decisions.
Your accountant can explain which reports they recommend for small businesses, any costs involved in providing these, and if they offer any additional insight once these are produced.
Utilising financial reports early on in your business development process will give you more insight into what’s working well and help demonstrate growth for investors if needed.
6. How Can you Assist with Tax Management?
Small businesses need to know tax deadlines that relate to them, as well as VAT return deadlines (if applicable), but they also need to understand how to manage their tax burden through accounting practices.
Whilst accounting costs can seem high, a good small business accountant will be able to give expert tips on how to reduce your annual tax burden by ensuring expenses are being utilised correctly; business investment costs are maximised; and other clever accounting hacks that will help the financial health of your startup business.
7. How Can You Help Strategise My Business Growth?
Some accountants will just focus on the basics; you may even only hear from them once a year when it’s time for your tax return. Others will go beyond the numbers to help strategise business growth based on your finances.
There may be a price difference between these types of accountants, but finding one that can do more than just assist with the basics is vital to help grow your business to the next level.
Ask how the accountants can assist with budgeting, financial forecasting, management accounts and other types of strategic planning to help support your long-term goals.
8. What Kind of Support Can I Expect from You?
Ongoing support from your accountant is a must. This can make all the difference in managing your finances, so make sure you are clear on what level of support you can expect. A small business accountant will be able to provide a variety of services such as financial reviews and regular check-ins.
There are so many aspects of running a small business that can be complex, for which a pro-active accountant will be able to help with.
Ready for the Next Step? We Can Help!
Asking all of these questions will help you choose a small business accountant who understands the needs of startups and can add value to your business operations.
If you are starting a small business and need accounting support, Linggard and Thomas can help. Get in contact with us today and let us answer any queries you have about starting your new business.
