Asking Why You Might Use an Accountant
What can an accountant provide you that a bookkeeper can’t? That’s a very interesting question, and the answer is — it depends! You may feel that you have a very good bookkeeper and you just want an accountant to finish off your year end and ensure that your tax calculations are completed and correct.
This would probably include your corporation tax liability (assuming that you’re a company) and possibly your personal tax liability (self-assessment) if you’re a sole trader or you need to supply a tax return to HM Revenues and Customs. But your accountant can do so much more. . .
Right from the outset, your accountant can suggest the best business type for you. He/she will be able to recommend whether you should begin as a sole trader or perhaps start a limited company straight away. It might be that you want to go into business with a friend or family member and so you need some sort of partnership agreement. Your accountant can advise you.
Once you begin trading, you’ll come across all sorts of issues that require careful thought. For example, you might buy some plant and machinery for your business. Your accountant would be able to tell you about depreciation and choosing the right method and amount to depreciate.
If you carry stock, you need to account for this correctly in your accounts. It is important to accurately calculate the cost of goods sold, for each month, if you’re expected to provide monthly accounts for your bank manager or other external parties. You can value stock in three different ways, which your accountant will be able to help you with. Some software programmes, such as Sage, adopt a FIFO method (First in First Out) but your accountant can help you decide which one you need to operate.
If you have a manufacturing business, your accountant can calculate your break-even point and determine how many units you need to sell before you start making a profit. They can play around with the figures and help you to determine what happens if you reduce the selling price of a product, and how that may impact profit.
Other considerations within a business are the control of costs and budgeting. Measuring costs can be a very complicated business and there are many different types of costs, such as fixed costs, variable costs, period costs, product costs and so on. If you’re already confused, then you need to speak to an accountant!