Do I need an accountant if I have an accounting app?
Whether you operate as a sole trader or a large company, having organised financial records makes it much easier to keep on top of your accounts and file your tax return each year. Whether you do this by hand, keep track of things in a spreadsheet or use a customised digital software app, your business needs to track invoices and payments so that you can budget effectively.
Keeping digital records can help to store, manage, and analyse your finances. With a number of accounting apps now available for a relatively low monthly subscription, and with more apps being developed, the question often asked is: Do I need an accountant if I use Quickbooks? Can Xero replace my need for an accountant? The same question also applies with the likes of Fresh Books, Wave and other software apps.
In short, the software will store and analyse data to a certain point, but a human accountant provides something that software can’t: advice about your specific situation, and how this relates to any upcoming changes in tax legislation.
Some people fall into the trap of using the software and then muddling through their accounts alone, thinking that hiring an accountant is a luxury that you can either live with or without. But an accountant can prove to be a sound business investment and unleash returns that wouldn’t have been possible with the software alone. They are also mandated to do CPD and keep up to date with the most up to date rules and regulations, which provides reassurance and added peace of mind.
By choosing to do your accounts without the support of a qualified accountant you could find that you are:
- Missing out on tax breaks by failing to claim valid expenses.
- Falling behind with invoicing.
- Underestimating your tax bill.
- Compliance paperwork e.g. Tax returns being filed late and resulting in fines.
- Costly mistakes due to incorrect data entry.
There is a common misconception that a software app relaces the need for an accountant and it’s something that all of the apps developers have been quick to dispel because they understand how critical a qualified accountant is to the process.
Here we include some reasons why you should seek the input of an accountant alongside your digital data entry.
- Keep your books organised
As an observation, most business owners try to squeeze in the time to do their own bookkeeping. Which as well as not giving the financial side of it the time that it deserves, it also results in:
- Data-entry errors.
- Missed tax breaks.
- Missing documentation (e.g. proof of purchase for expenses).
- Out of date books.
An accountant or bookkeeper will keep on top of this and ensure that you have accurate records backed up by documentation. They’ll can even set you up with the best software to support you with this.
2. Get your Tax in on time
Late filing and tax payments can result in penalties and interest. An accountant, by their nature, prevents this from happening. They prepare everything in advance so that the tax filing process is smooth and stress-free.
In addition, they could even reduce the amount of tax you have to pay. If you engage with them at the start of the year and work through their tax planning services, together you can ensure that you keep more money in your business.
3. Improve your cash flow
Your invoicing system is key to the health of your business. If you don’t invoice efficiently, you won’t get paid quickly, which could disrupt your cash flow.
An accountant or bookkeeper can set up automated invoicing to:
- Send invoices quickly
- Check which invoices have been paid and which haven’t
- Give customers a choice of payment methods
Accountants and bookkeepers can also give you good advice on invoice payment terms, to help reduce the time you spend waiting on money to come in.
4. Make better decisions and increase your profitability
If you’ve been doing your accounts yourself, you may have found that you often don’t get the chance to focus on it and you may make mistakes. This could mean that you don’t always have reliable and up-to date information on your business.
An accountant will ensure that you always know where you stand. You’ll be able to see income and expenses as they happen, which will give you a good picture of short-term cash flow and long-term profitability.
When you nominate an accountant, they will look first at removing unnecessary costs and smoothing out your cash flow. They can also help you identify what drives revenue and profit to help you improve and maximise on specific areas.
5. Help with “Making Tax Digital”
HMRC is working on Making tax digital, which will change how taxes are assessed and paid. Our experts at Ormerod Rutter can talk you through this process and keep you up to date with the latest guidance and requirements.
In short, an accountant will help to identify possible savings, manage your tax obligations and help you to grow your business. They can also help to prevent any nasty surprises should you find yourself on the end of a tax investigation.
Speak to one of our experienced accountants in a free, no obligation call, to see how we can help your business.
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