Let us first of all consider the two types of accountants. Not everyone knows that there are Financial and Management Accountants and they offer very differing skills.
Financial Accountants are chiefly involved in a business’s legal entity set up (eg. Limited company, partnership, sole trader or self-employed, etc) as well as their tax computations. They can audit the business’s accounts to ensure compliance with accounting laws and to test that financial controls are rigorous enough to avoid fraud, for example. They also advise and assist business owners with the submission of forms required by HMRC and by Companies House (if registered). They can provide advice on which expenses are allowable for Tax, thereby decreasing the annual tax bill. These are some of the skills for you to consider when deciding whether you need a Financial Accountant.
Financial Accountants are usually external to the small company and have offices on the high street. They will provide you with a quoted cost. To ensure you keep your costs to a minimum you should regularly test the market by asking other local firms to quote. If you change your Financial Accountant make sure you do this at your year-end, so transferring the accounts becomes a relatively simple task. You should also consider the type of work that is done - the more you can employ someone to carry out routine transactions (from a trained admin assistant, to a bookkeeper) the more you are in a position to reduce your bills.
The alternative is to do it yourself and take advice from HMRC websites and run the gauntlet with them as to whether you are actually compliant with tax and accounting laws. With a small number of transactions to process and little complexity in the business, there are lots of small businesses doing this! However, you need to weigh up the time you need to spend learning the tax rules and keeping up with latest legislation against the time required to grow your business.
Management Accountants, in contrast, are generally internal to a company. They process the weekly and monthly results; provide analysis of cashflow and profit; forecast financial outcomes and provide analytical insight on a product, a service or on a customer level. The Management Accountant effectively provides ‘a second set of books’ that you use internally to drive your business. The overall figures stay the same, but the Management Accountant uses models to extract parts of the financial data. For example, you might wish to understand the strategic implications of making certain capital investments or expanding a product line. The Management Accountant would be able to draw out the relevant costs and model different scenarios for you, analysing product profitability or business unit profitability as well as cash flow, thus giving you a better understanding of your business and helping you to make the best strategic decisions.
If you are too small to be able to afford a full-time Finance Director post, Scirum provides part-time support to its clients in book keeping, management accounting and strategic financial planning. Please call us on 01264 860060 or send us a message. We are a friendly bunch and happy to help and talk through your requirements.
For more useful tips and answers to common questions from SMEs, visit www.scirum.biz or follow us on Twitter and Google+, like us on Facebook or join our LinkedIn group.
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