How an accountant can help your small business

Surveys regularly show accountants to be the most trusted adviser for business owners.

In this blog, Clive Lewis, chartered accountant and former head of enterprise at ICAEW, considers what an accountant can do to help your company.

Lighten your workload

Running a business can be very demanding and small business owners often don't have the time or the skills to do all the tasks the business requires. An accountant can help lighten the load.

This includes keeping a check on the accounting records through to providing services such as payroll. A business's accounting software systems can be monitored in real time through the cloud allowing the accountant to keep a check on clients' records.

Payroll preparation has become more complicated in recent years with the advent of real time information (RTI) which requires businesses to notify HM Revenue & Customs "as and when the payroll" is activated.

The complexities of the national living wage and the national minimum wage have added to the burdens of payroll preparation.

Help you measure your business's performance

Many businesses plod along at the same level of trade never really realising their full potential. It's easy to think that the current performance is the best the business can achieve. A conversation with an accountant can bring some new thinking.

An accountant can also make sure you're getting regular reports on the business's performance through management accounts. They can also suggest some key performance indicators (KPIs) which measure the performance of individual aspects such as turnover and gross margins.

Help you apply for and raise finance

One way to develop a business is to invest in some new equipment or to take on a new customer. That may require an increase in working capital to fund increased stocks or debtors (amounts owed to the business).

Accountants can help you prepare an application for finance as well as helping prepare forecasts of future trading. The accountant can also help find finance appropriate to your business's stage of development and help respond to finance providers' questions.

If you're considering selling equity (shares) in the company, an accountant can help prepare a business plan, including financial forecasts.

Register you for VAT and file returns

Your business must register for VAT if its sales in the preceding 12 months exceed £85,000.

Some businesses aren't aware of this requirement and only realise that they must register months later. Consequently, they may have to file an initial VAT return covering a longer period than the usual quarterly return.

In addition, as they should have registered earlier, they won't have charged VAT to customers and consequently the VAT on sales in the period to registration has to come out of the business's profits.

An accountant can help by monitoring your sales performance to make sure you register at the correct time, as well as helping to prepare the VAT returns.

Work out whether you're paying the correct tax

If you're filing your own tax returns, you may not be certain you're paying the correct amount of tax and national insurance contributions (NICs).

• Are you claiming all the expenses you are entitled to claim?

• What about the allowances you get from buying equipment?

• Are you charging the right cost for use of a motor vehicle?

• What about using your house as an office?

An accountant will have other clients with similar businesses to yours, so they'll be able to make sure you pay no more tax and NIC than you should.

Help you sell your business

If you're planning to sell your business, an accountant can help prepare the financial reports that prospective buyers will expect to see.

Many accountants undertake the advertising of clients' businesses for sale so as to preserve anonymity and to keep the sale confidential.

They can also research recent transactions of similar businesses and advise on the potential selling price, using price and earnings ratios.

Plan your inheritance tax

An estate will be entitled to an additional inheritance tax threshold if:

• the person dies on or after 6 April 2017

• the person owns a home, or a share of one, so that it's included in their estate

• their direct descendants such as children or grandchildren inherit the home, or a share of it

For estates valued at more than £2 million, the additional threshold (and any transferred additional threshold) will be gradually withdrawn or tapered away.

An estate may also be entitled to the additional threshold when an individual has downsized to a less valuable home or sold, or given away their home. Many homes have increased in value in recent years, so this additional allowance will help reduce the number of estates which pay inheritance tax.

It's always worth consulting an accountant to check that you're making the most of the opportunities to reduce your potential liability for inheritance tax.

Relevant resources

• How to choose an accountant to help your small business grow

• What is bookkeeping? Small business bookkeeping made simple

• Lunch and Learn: Accounting for small businesses