Navigating Your Business Finances: Choosing the Right Accountant and Understanding Bookkeeping & Payroll

Isobel Chaplin •

July 9, 2024

Hello, fellow entrepreneurs! Let’s dive into a crucial topic that can make or break your business’s financial health: choosing the right accountant and understanding the essentials of bookkeeping and payroll.

Choosing Your Accountant

First things first – finding an accountant who gets you and your business is key. Here are a few pointers to consider:

Specialisms: Look for someone who understands the unique needs of sole traders or small and growing businesses like yours. Their expertise should align with your industry and the specific challenges you face.
Experience: Experience speaks volumes. An accountant who has worked with similar businesses can offer valuable insights and advice, helping you navigate tax laws and financial regulations effortlessly.
Personal Fit: It’s not just about numbers; it’s about chemistry too. Find someone you can communicate with openly and who listens to your goals and concerns.
Services Offered: Beyond tax filing, consider what other services they offer. Do you need help with financial planning, budgeting, or even business growth strategies? A versatile accountant can be a true asset to your team.
Cost: Of course, budget matters. Balance the fees with the value they provide. Remember, investing in a good accountant can save you time, stress, and potentially money in the long run.

We’re often asked the difference between a bookkeeper and an accountant (we offer both services here at IJC Finance), and it makes to take it straight from the AAT’s website:

“Bookkeeping is the first part of the accounting process, so the work of a bookkeeper and accountant often overlaps. Bookkeeping focuses on recording and organising financial data, while accounting is the interpretation and presentation of that data.”

With that in mind, let’s talk bookkeeping – the backbone of your financial records!

Bookkeeping

Bookkeeping ensures your day-to-day transactions are accurately recorded. It includes:

Invoicing: sending out invoices promptly and tracking payments received
Expenses: recording all business expenses, from office supplies to travel costs
Bank Reconciliation: matching your bank statements with your books to ensure everything adds up

While you can handle basic bookkeeping yourself with software like FreeAgent or Xero, many businesses opt to outsource this to professionals. It frees up your time and ensures accuracy, especially as your business grows, and an experienced bookkeeping will know ways to speed up processing time and will make sure transactions are coded to the right place first time.

And what about paying yourself, and your team? There are difference if you are a sole trader or a director of a limited company, and we cover these below.

Payroll

As your business expands and you start hiring employees or even contractors, payroll becomes crucial.

If you are a sole trader, you take your wage from your business profits and these won’t be classed as a deductible expense and won’t need a payroll. However, if you have staff employed by you then you will need a payroll scheme in place to process their wages (which are a tax-deductible expense for you).

Payroll will cover:

Salary Payments: calculating and distributing salaries, ensuring compliance with tax and employment laws
Tax Deductions: withholding taxes and making timely payments to HMRC
Employee Records: maintaining accurate records of employee earnings and benefits

If you are a company director with no other earnings outside of the business, it makes sense to consider being paid via a payroll scheme through the company so it’s worth looking into this if you haven’t already done so. Any wages you take from post-tax profits are classed as dividends, but any salary paid via a payroll scheme will be a tax-deductible expense for the company.

While some businesses manage payroll in-house, outsourcing to a payroll service provider can simplify compliance and reduce the risk of errors.

Conclusion

Choosing the right accountant, handling bookkeeping, and managing payroll are all essential parts of running a successful business. Whether you’re just starting out or looking to streamline your operations, investing in professional support can give you the peace of mind to focus on what you do best – growing your business.

Remember, it’s not just about crunching numbers; it’s about building a strong financial foundation that supports your entrepreneurial journey. At IJC Finance we are geared up for supporting businesses with all aspects of their finances and so please get in touch if you’d like support keeping yourself on track for a hassle-free accounting experience. Every business is different and we work with our clients to put together a package that works for them and grows with their business – you’ll never be forced to take a service you don’t need!

Here’s to making smart financial decisions and thriving in your business endeavours!