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The Government has recently released some eye-opening statistics via the Department for Business and Trade that quantifies the importance of small businesses to the UK economy. At the very top level, there are 5.5 million private sector businesses in the UK. 5.45 million of those (99%) have 49 employees or less meaning they are classed as small businesses.
Of course, to a contractor or freelancer working alone, a business with almost 50 employees might not seem so small, but businesses with just one employee make a significant contribution to the workforce, both in numbers and in terms of providing flexibility.
2.9m private sector businesses are sole traders and 920k are limited companies with just one employee and many of these small business owners will have had an eye on the Autumn Budget, the first under the new Labour Government.
Each Budget always brings a degree of uncertainty for small business owners and this underscores the importance of effective small business accounting to ensure that your business is being run as financially responsibly and efficiently as possible to maximise your take home pay and build financial resilience that will stand it in good stead even in the toughest of times.
The best way to do this is to engage a small business accountant – in this post we’ll break down how they can help you as a small business owner.
Financial Resilience
The UK economy has been through some challenging times in recent years with a once in a lifetime pandemic and the cost of living crisis impacting many. Being financially resilient has never been more important, both in the here and now and to increase the chances of long-term success.
A small business accountant can help you to implement various financial safety nets so contingency plans are in place to help your business navigate its way through lean periods:
- Help your business to build more retained profit, some of which can be held in an emergency fund in case of any unforeseen events
- Refer you to trusted partners to ensure you have contractors insurance in place to protect yourself if, for example, you’re unable to work through illness or injury or legal action is taken against you
- Implement risk mitigation strategies and develop financial plans and projections to help your business adapt to unforeseen circumstances and market changes
Financial resilience is crucial for success in the long-term and an accountant can play a key role in this by developing contingency plans, trimming expenses and building an emergency fund to ensure liquidity so business vulnerability can be minimised.
Optimise Your Tax Position
Everybody would like to pay less tax and by tapping into the expertise of a small business accountant, your tax liability can be reduced. Small business accounting isn’t just about number crunching and accountants are experts in tax optimisation. Of course there would be a fee for their service, but this can be more than offset by the tax savings made.
An accountant will review your tax position as well as your overall financial position and implement various strategies to optimise it whilst, of course, remaining compliant with your obligations. They can advise you on:
- Optimal remuneration structuring for limited companies through a combination of salary and dividends
- Ensuring all allowable expenses are claimed as well as any other reliefs and deductions
- Utilise full expensing and advise on the optimal time to make any major purchases
Tax regulations and strategies to reduce your tax liability are complex and small business owners that appoint an accountant can rest assured that they won’t be paying more tax than they need to.
Staying Compliant
As a small business owner operating through a limited company, fulfilling your tax obligations can be challenging. You have to deal with income tax, VAT if registered and Corporation Tax all of which require separate calculations and filings, so the scope for errors is significant.
Taxes are simpler for sole traders. They just have to complete an annual self-assessment and VAT returns if registered, but the penalties for non-compliance are the same.
You will almost always incur an on-the-spot £100 fine form HMRC for filing a tax return late. Penalties can also be incurred for late payment of your tax bill and for inaccuracies or errors in your filings which can vary in severity depending on whether it was deliberate.
Penalties can increase over time if the issues aren’t resolved and can potentially become significant, and there can also be a substantial time-drain if HMRC initiates an investigation. It’s imperative therefore that you remain compliant with your tax obligations at all times.
The cornerstone of any small business accounting service is to ensure that you are compliant with your tax and other obligations including annual reporting to Companies House. Here’s how an accountant can help.
- Validate your record-keeping to ensure your tax returns are calculated based on accurate and complete data
- Provide you with accounting software to automate the calculation of your tax returns
- Validate your returns and digitally file them with HMRC
- Ensure you are compliant with other obligations including your annual filing requirements, Making Tax Digital and payroll obligations
With a small business accountant in your corner you can rest assured that your business will remain compliant with all its tax, accounting and reporting requirements avoiding any HMRC investigations or expensive penalties.
Effective Management of Business Finances
Accountants play an important role in the overarching financial management of small businesses. This involves assessing the financial metrics, performance and health of the business, identifying where improvements can be made and implementing a plan to achieve them.
A small business accountant can:
- Plan ahead for your tax bills
- Establish financial goals and track progress towards them
- Identify unnecessary expenses and help to cut costs
- Ensure that your bookkeeping is in order
- Produce budgets and forecasts
- Refer you to a trusted partner for a business bank account to separate business and personal finances
A small business accountant will ensure that your financial management is efficient, accurate and organised. This enables you to make decisions based on accurate data and by establishing goals and a path to achieve them can help your business to grow over time and increase profitability.
Less Stress
Small business accounting is a wide spectrum and managing your accounting and tax obligations and the overall financial management of your business can be a stressful and time-consuming endeavour.
These are additional responsibilities above and beyond doing your day-to-day work and marketing your business which can be a challenge in itself. Many small business owners don’t have any background in accounting and finance which exacerbates the difficulty.
By delegating your small business accounting responsibilities to an accountant, you ease the pressure on yourself and save a lot of time which can be reinvested into your business or to achieve a better work/life balance.
Small Business Accounting With Gorilla
We work with small businesses across a wide range of sectors. Whether you operate through your own limited company or as a sole trader, our small business accounting service will ensure all your business and personal accounting needs are expertly managed by your own dedicated accountant.
Our great value monthly fees are transparent and all-inclusive so you know exactly where you stand with no nasty surprises. FreeAgent accounting software is included saving you up to £330 a year and you’re guaranteed a same working day response to your queries. Request a call back to learn more or get an instant online quote here.
