Do I need an accountant as a Freelancer?

It’s a fair question! One of the main reasons that you might have chosen to operate as a freelancer or a sole trader, rather than as a limited company, is to keep your financial affairs simple. So it’s not unreasonable to think that you might not need an accountant. But that couldn’t be further from the truth . . .

We often hear people say that they cannot afford an accountant, especially in the early days of setting up a business. Whilst others we talk to think that an accountant is just there to ‘fill out forms to keep the tax man happy’. In reality an accountant is much more than that, and once you find the right one, they should actually save you enough money to cover their costs and more, not just by showing you ways to minimise your tax bill – but in many other ways as well. Let’s look at some of them:

Saving time
You set up your business because you’re really good at what you do. As a freelancer or sole trader, the likelihood is that you charge an hourly rate for your time, and this is how you make money. So, if you are spending that valuable time working on your accounts, it’s time that you could be using to generate more income. In effect, every hour you spend working on your accounts (and let’s face it, as a non-expert it’s going to take you quite a bit of time!) – it actually ‘costing’ you at your hourly rate.

Doing it right
If you have a very simple business model, then you could be forgiven for thinking that you can fill out your tax return, and any other documentation, by yourself. But are you sure that you’re completing them correctly? And equally importantly, will you get them in on time?

If you complete a document incorrectly then the best case scenario is that HM Revenue and Customs will send it back to you to do again, which could lead to you submitting it late. If you miss a deadline for important documents like tax returns, then you could face a fine. At worst, your forms could be sent to a tax inspector, who will then go through every single element of your finances in minute detail!

By using the services of an accountant, you can be assured that the right forms will be completed, at the right time and in the right way. 

Tax planning
Let’s assume for a moment that time really isn't an issue and you're completely confident that you know how to fill in all of those forms correctly. In fact, you might even have a computer programme to do it for you. There are still many ways in which you could benefit from using the services of an accountant.

Completing the forms correctly is one thing, but doing so in the way that is going to save you the most money is quite another. A good accountant will make sure you take advantage of every legal way to minimise your tax bill, which means that the service will probably ‘pay for itself’. A good accountant will make sure that you take full advantage of the ever-changing tax laws, so that you pay as little tax as possible, and this ‘tax planning’ service is one of the biggest advantages.

Tax planning is more than just simple tax preparation. Your accountant will work with you throughout the year to offer advice that allows you to operate the business in a way which gives you the biggest tax advantages. Rather than just looking at the figures at the end of the year and saying ‘Ah well, if you had done it like this...'. And because your personal finances are of course directly related to your business income as a freelancer or sole trader, another advantage of having a good accountant is that they will give you personal financial advice throughout the year as well, as the two are so closely linked.

Growing your business
As well as handling all the paperwork and making sure that you legally minimise your tax bill, an accountant can also be a great source of advice to help you develop your business. If you want it to be a success, it's vital that you take the right financial decisions, as well as the right managerial ones, very early on. A few wrong moves at the start can put you out of business surprisingly quickly!

A good accountant wants you and your business to succeed, as it is a reflection on them as much as it is a reflection on you. They can also acts as a business consultant, assisting you with various business problems, and offering good solutions based on their experience.

A good accountant will act as a ‘sounding board’ because they will come to know your business almost as well as you do. In fact, they will probably know the financial side even better! Objective input from someone who is in this position, but who doesn't have the ‘emotional attachment’ to it that you do, is worth its weight in gold. An accountant’s advice and input can be as valuable, if not more so, than all of that the number-crunching and form-filling.

If your business does face problems at any point, or has needs that are beyond the scope of you and your accountant, they will usually have close connections to other professionals such as bankers and lawyers, who can help you out. Often, your accountant’s connections could be just as important to you as the accountant themselves is.

Finding an accountant
Just as accountants know other professionals who can help you, other professionals know good accountants. Begin your search by asking for referrals for accountants from your lawyer or banker if you have one, or from other small business owners. Recommendation is always the best way to find a new supplier for any service.

When you are searching for a good accountant, find out what their areas of expertise are. Most crucially, do they specialise in working with freelancers and sole traders, and will they understand your specific issues, or are they a ‘general’ accountant who is more familiar working with Limited Companies? This is a vital piece of information to find out. It is also important to ask a question about their phone call and/or email policy. You need to have easy access to your accountant when you have a question, without being charged every time they communicate with you.

Lastly, ask them how they will handle your taxes, what their fees are, what services they offer, what experience they have and who their other clients are. The accountant that you choose will have access to all of your financial information and will be an integral part of your business, so make sure you choose the right one first time.