Is DIY Business Accounting Possible?
It can be appealing to think you can prepare your own company accounts and file your own tax returns for a small company. After all, think of the money you would save, especially if you run a small, straightforward business. It is certainly possible to maintain the correct records and complete the relevant tax returns for HMRC. The introduction of online submission processes for both HMRC and Companies House guide you through the process so it is difficult to get it wrong. Or so you would think…
But accounting is much more than simply filing a tax return online so that the process does not produce any errors. Have you, for instance, claimed all the expenses you are entitled to or, worse, claimed for those to which you are not entitled? Have you structured your business in such a way to minimise your tax liability, have you set up a tax efficient payroll system? And apart from all that are the accounts actually right? Just because the HMRC process does not reject your submission does not necessarily mean the figures are correct so there is more to DIY business accounting than you might think.
Of course, you cannot hand everything over to an accountant, you should still be responsible for ensuring invoices are raised and paid, that receipts for everyday expenses are kept and subsequently reconciled with the bank account. You should have a clear vision of how the business is faring with respect to profit and loss but that does not mean you need to be an expert when it comes to tax regulations and balance sheets.
I have known new business owners struggle for days, even weeks, preparing the company accounts and submitting a corporation tax return to HMRC, at a time when a growing business needs attention focussed on running the business.
Doing your own accounting can lead to confusion over a range of accounting and tax related issues, not least being the issue of expenses. A good accountant can easily save a company more in tax efficiencies than the cost of their fees. And if you are worried about the cost (and who isn’t when starting a new business) then go for a fixed fee accountancy package where you will know the full cost upfront and can budget for it.
Using a professional chartered accountant will save your valuable time, give you peace of mind and hopefully less sleepless nights. Only you can judge how much using a professional is worth to your business and sometimes the only way of truly knowing is to try and do the accounts yourself first. That may, in fact, help you make the decision to bring in the professionals.