Accountants for Startups: Everything You Need To Know

Running a startup is a time-consuming, stressful, but often rewarding endeavour filled with the challenges of finding intelligent solutions to a wide variety of problems. As a startup founder, you know that one such problem is managing your accounting processes quickly, efficiently, and accurately.

This is where hiring a great accountant can save you significant time and stress, reduce errors, and allow you to focus more effort on running your business. Accountants bring significant value to startups, including managing your financials, assisting with tax preparation and compliance, creating and tracking budgets, providing strategic planning services, and more.

In this article, we’ll discuss the value an accountant can bring to your startup, provide insights into the types of accounting services startups need, and share strategies to find the best accountant for startup business owners.

Key Takeaways

• Accountants can manage your accounting processes, ensure compliance with HMRC, and provide you with valuable financial insights about your business.
• The types of accounting services your startup needs will depend on your business’ size, complexity, and industry.
• Accountants can work in-house as part of your team, or you can work with an outside accounting firm to manage your accounting.
• Accountants can provide services such as bookkeeping, financial statement preparation, tax planning, budgeting, and more.

The Value of Accountants for Startups

While it’s possible to manage your startup’s financial processes on your own, it requires a great deal of knowledge and strategy. Financial software and apps make these tasks significantly easier, but it’s still out of the question for most. Professional accountants can handle every aspect of a startup’s financial processes from beginning to end.

Specifically, accountants can add value to your startup in the following ways:

• Accounting: An accountant can establish a robust and strategic bookkeeping practice for your startup, ensuring financial transactions are recorded accurately and in a timely manner.
• Tax compliance: Navigating taxes in the UK, from payroll to periodic HMRC reporting, can be complex. Accountants can ensure you comply with all tax regulations and file tax reports on time, minimising the risk of penalties and maximising tax benefits for your startup.
• Financial planning and budgeting: Accountants can create realistic financial forecasts for your business, helping you strategise your investments and find ways to optimise your finances. They can also create realistic budgets and track your startup’s progress against them to ensure funds are used efficiently.
• Procuring startup funding: When seeking investments in your startup, financial statements such as income statements, balance sheets, and cash flow statements prepared by a professional accountant are expected by every financial institution when evaluating your business for a loan. Additionally, accountants can optimise your financial health to make attracting investors easier in the future.
• Strategic decision-making: Finally, accountants can advise your startup on the financial impacts of your decision-making. For example, say you want to manufacture a portion of your supply chain in-house to lower costs and improve profitability. An accountant can evaluate the financial aspects of this decision and help identify your most strategic and financially optimal option.

What accounting services and functions do startups need, and who should perform them?

Now that we have an idea of the value an accountant can provide to your startup, let’s take a look at the services and specific tasks your startup may need and who can handle them.

Although a startup founder or team member can perform a number of accounting, financial, and tax-related tasks, due to the financial knowledge required, it may be highly inefficient and costly time-wise, and you may not end up with the best outcome.

A lack of financial or compliance knowledge can result in less accurate financial statements, owing more in taxes and even potential compliance issues. Similarly, a team member can’t perform many financial tasks effectively. Financial statement preparation, tax planning, tax filing, and financial statement auditing are all examples of skilled functions best performed by professional accountants.

However, software is available to help team members perform simple tasks and complement the services offered by your accountant. We’ll cover this later.

How To Find the Best Accountant for Your Startup

Finding the right accountant for your startup is an important element of your success. You’ll need to consider their qualifications and experience, communication style, technology usage, and the cost of their services. Below, we break down the types of accountants in the UK, their qualifications, and how to find the best option for your business.

Consider which type of accountant you need

There are two main types of accountants in the UK: chartered and non-chartered. They differ in their level of education, their professional experience, and the legal rights they have related to tax and financial reporting.

Chartered Accountants are the highest level of professional accountants in the UK. They’re certified by—and members of—the Institute of Chartered Accountants in England and Wales (ICAEW). As part of this certification, they have undergone extensive training in the topics of accounting, finance, and business.

Alternatively, they may hold an Associate Chartered Accountant (ACA) qualification from bodies such as the Association of Chartered Certified Accountants (ACCA) or the Chartered Institute of Management Accountants (CIMA).

While Chartered Accountants are widely considered the top choice, you can also hire an accountant who is not chartered. Their knowledge will generally be less extensive than that of a Chartered Accountant, but their services will often be less expensive as well. However, they’re still quite knowledgeable and are often capable of assisting startups and small businesses with accounting, tax, and financial situations.

Your choice of accountant will depend on your financial needs, budget, and your startup’s financial complexity.

Ensure that your accountant’s communication style and technology usage align with your startup

Next, it’s important to consider your potential accountant’s communication style and level of technology adoption. You should get along with your accountant and feel comfortable speaking freely about your financial matters with them. Similarly, your accountant should be able to explain financial topics—which can often be complex and technical—in terms that you and your team can understand and make decisions based on.

Additionally, your accountant should use technology at a level that either aligns with or exceeds that used by your startup. For example, if your startup uses accounting software that allows remote access to an accountant, then your accountant should have the technological knowledge to use this software. This will enable them to analyse and update your financial records remotely anytime, anywhere.

Consider the accountant’s cost and service packages

Finally, when choosing the right accountant for your startup, it’s important to consider the accountant’s fees and service packages. In general, the more extensive your chosen services, the more an accountant is likely to charge. The following questions will help give you an idea of the fees an accountant may charge for their services:

• How complex are your needs? The most significant driver of your accountant’s costs will be the complexity of your startup’s accounting needs. If you only require bookkeeping services, the price will be relatively low. But if you need more sophisticated services, like financial statement preparation, budget creation and tracking, financial planning, tax preparation, or strategic planning, the costs could increase significantly.
• Is the accountant an individual or a member of an accounting firm? If your chosen accountant is an individual, their fees are likely based on their availability and may increase as a result. If your chosen accountant is part of an accounting firm, the cost may be lower because lower-level employees can do the majority of the work while managers or owners review and correct the work.
• What is the accountant’s skillset? Your chosen accountant may charge more for their services if they’re highly skilled in a certain area of accounting, such as auditing or tax preparation. The more skilled an accountant is in a challenging area of accounting, the more in-demand their services are likely to be and the more they can charge.
• How hands-on do you need the accountant to be? In general, the more hands-on your accountant is, the more they’ll charge. If you want them to handle everything, the cost could be significant. However, if you—or someone on your team—can handle basic accounting functions, like bookkeeping, you’ll save money on accountant fees. You can also save costs by using accounting software to help automate some of the simpler accounting and tax planning functions.

How Technology Can Complement Your Accountant

Accountants are capable of managing every element of a startup’s financial process. However, startups can also use technology such as accounting, tax, and payroll software to supplement their accountant’s services. This is particularly ideal for startups that don’t need full-scope accountancy services yet or those looking to save money.

Let’s explore software options startups can use to complement their accountancy services and simplify their financial management.

Accounting software

Accounting software allows businesses to save time by simplifying and automating a number of financial tasks. For example, instead of needing to understand complex accounting topics like journal entries or double-entry bookkeeping, you can simply input an income or expense item, tell the accounting software what it is, and let the software add it to your financial records.

Using accounting software generally comes at a cost (usually a monthly fee), but it should save you money on accountant fees. Accountants can use the information in your accounting software to perform more complex accounting tasks like financial statement preparation, tax preparation, burn rate tracking, strategic financial planning, and more. Take a look at our best accounting software for startups article to learn more.

Accounting software generally costs a base monthly fee, and the cost may increase as additional users are added. Most accounting software allows remote access to your accountant.

Tax preparation software

A similar process can be used for tax preparation; accounting or tax software can classify expenses, determine what is and is not tax-deductible, track tax deductions and credits, and more. Although a team member may be capable of performing some of these tasks, taxes can become complicated quickly, so it’s crucial to use an accountant’s expertise to ensure your tax records and tax returns are correct.

It’s important to note that not all accountants are tax accountants. A tax accountant is an accountant who has focused their education and career almost exclusively on tax preparation and filing, and they have extensive knowledge in this area. If your startup’s taxes are simple, then a financial accountant may be able to handle them. But if they’re complex, you should enlist a tax accountant.

Tax software generally costs a fee for filing your taxes, and some software providers may also charge a monthly or annual fee for the ongoing use of the software.

Payroll software

Finally, payroll software could help with further cost savings for your startup. Payroll software allows you to track payroll information, manage employees and employee onboarding, and prepare and file payroll quickly and easily. This software can also manage payroll tax calculation and filing and submit information reports to HMRC on your behalf. Take advantage of our payroll services quote finder to learn more.

Payroll software generally costs a monthly or annual fee plus a small fee per employee or contractor each time you run payroll. Payroll software is considered a required subscription for any business that hires employees or contractors.