When you start up a new business, whether it be a stand-alone, a franchise or a licensee, you won’t necessarily be worrying about when you should engage an accountant and what for. As a franchisee you should hopefully have been provided basic bookkeeping advice and perhaps installed accounting software, either as part of the package or as a recommendation. But you don’t need to worry too much about your final figures until a full 18 months have passed since your ‘Limited’ company incorporation date. There would appear to be a great deal of other things to turn your head to…
After the first eighteen months of your business, you will need to file some accounts and it is probably at that time that you will first consider the need for an accountant. Probably though, the accountant will be contracted only to file your year-end accounts at Companies House and to prepare your year-end tax return to HMRC for corporation tax. Indeed apart from your year- end accounts and advice perhaps on credit control, payroll and funding, you won’t need an accountant for much else.
As your business develops and you take on staff; you will hopefully find that you have more time to actually develop and manage the business. Perhaps you have started to generate monthly spreadsheets which show where your business was in relation to last month, last year etc. Again, as new projects start and the business begins to gather momentum you probably find you have less time rather than more time to monitor those accounting trends and yet bizarrely the need for them grows. Perhaps now is the time to consider the appointment of that first accountant. But wait do you really want to? You don’t mind taking on new staff where you can see that there employment will actually generate income for the business. More sales staff, more warehouse staff, more customer service staff, but an accountant? What part of their role actually helps to generate business for the company? And it is all still about growth isn’t it? Actually perhaps the time when you actually do need an accountant, is when your business enters a stage when perhaps ‘profit’ and not ‘growth’ is the major player. Control of costs and the supply of information becomes critical to decision making and to strategic thinking. Surely now you must employ an accountant?
Actually, you could consider taking one on at a much earlier stage. Who would think that your accountant could actually play an active part in the operation and growth of your business? Could his monthly information packs allow you to make those strategic business decisions in the knowledge that you are armed with the most up to date information possible. Could the analysis of costs help you to recognise that when benchmarked against your competitors you are charging too much for a core product or service? If you adjust the price, could this generate more sales? In this way and many others, your accountant or finance manager becomes a key member of your operational team and he will be knowledgeable too; there are few other staff members with an overview of the whole companies functionality, other than perhaps yourself of course. Small wonder that many Finance Directors take over the reigns as CEO, when the MD retires…
Of course, your business does not need an accountant or finance manager until it reaches a certain size and that size differs from sector to sector. But information is king and whilst there will be others in your organisation who can provide you with figures; e.g. your Operations Manager or your IT Manager, neither will have a grasp of the whole… So my advice? Bring an accountant in early and make the work that he does pay for your business… And consider other options too. Perhaps you can employ an accountant part –time or engage a freelance accountant, to work for you a few hours a month, with the number of hours growing as the business does.
A business is the sum of the people that it employs. You need good sales staff, good operational staff and good processing staff, but despite the lack of importance attached to your accounting in the first few years of your business, you will one day find that your business can not operate at the top of its game without a good accountant… But be wary. One day he may be after your job.
All Things Financial 