Running a business comes with many commitments but it can also come with many different costs, so you might choose to avoid the cost of hiring an accountant by taking care of accounting yourself. While it is possible to manage your accounts yourself, it can quickly become a problem and with that comes a range of risks. So, you might want to consider using a professional accountant as this will enable you to avoid the following problems.
You Could Mix Business and Personal Records
Small business directors have liabilities but they do have limited liability should a company get into trouble. This is a positive because it means that the business is considered a separate entity but this does mean that there are many rules in place when it comes to taking funds from the business. By accidentally mixing personal and business finances, it could result in directors claiming personal expenses against business taxes.
Accounting Becomes a Challenge
When it comes to the time of year when your accounts have to be completed, it can seem like a complete nightmare because of the amount of paperwork you need to sift through. If you leave it until the last minute, you might find yourself rushing which means you could make costly mistakes. Furthermore, you might also miss deadlines which means that you could face significant penalties.
Communicating with HMRC
When you own a business, you’ll become used to having letters from HMRC but seeing a brown envelope on the doormat can leave you filled with fear and worry. Of course, not all correspondence from HMRC is negative but any letters that you do receive might not make sense to you. Therefore, having an accountant will mean that they can explain the letters to you and they can also act on your behalf and communicate with HMRC.
It Takes Time
Running a business is a full-time commitment and from one day to the next, you never quite know what will happen. You might be dealing with customers, handling new projects or looking at ways to grow the business but either way, it all takes time. We have to be straight and say that accounting does take time and that will be time that is taken away from focusing on your business. So, it makes sense to outsource your accounting as that will ensure you save as much time as possible.
Incorrect Filing of Taxes
One of the biggest risks when taking care of your accounting yourself is getting your taxes wrong which means you might overpay or underpay. If you overpay, then you will have a smaller profit margin but it will also mean that you might have to apply for a tax refund if your money is not paid back automatically. If you underpay then HMRC will investigate and that could lead to penalties and even prison in some instances.
While taking care of your accounts yourself might sound appealing, it does come with certain risks. So, why not spend time running your business and leaving your accounts to the experts?