Personal Finance

9 reasons why you need an accountant.

why you need an accountant.

I visited a lawyer recently to have some conveyance work done. After agreeing on the scope of work, she pulled out her calculator and the graduated killer tariff chart that lawyers normally have under their desks to calculate how much I should pay. Immediately, I could visibly see she was struggling.

A few thoughts crossed my mind and I asked her whether I could help and she said she was fine. Five minutes later, engrossed on my phone, I looked up to find her still working it out. I offered my help a second time and she agreed. She told me that she was just setting up her law practice but she was slightly challenged in things mathematical or calculations.

So, I asked whether she has an accountant and she said NO, and her reason, accountants are expensive and she can’t afford one right now.

In Kenya, a staggering 90 percent of businesses fail within the first 2years. This is due to many reasons such as lack of capital, lack of founder skills and poor financial management.

Poor financial management ranges all the way from inadequate or missing forecasts, poor working capital management, poor tax management, poor credit management, and poor investing decisions.

Despite these dire consequences brought about by poor financial management, many business owners go it alone when it comes to managing their money. A recent report in America found that 53 percent of small business owners don’t use an accountant at all and 27 percent of these respondents simply use pen and paper to keep track of their finances. This statistic is even more damning in the developing world.

Although it would be premature to conclude that these businesses are worse off for not having an accountant, the breadth of knowledge and experience an accountant can provide cannot be underestimated.

Robert Kiyosaki, the celebrated writer of Rich Dad Poor Dad, concludes that to manage a business effectively, an accountant is an investment and not an expense.

Accounting is a soft skill and many people are unable to see its benefit outright because those benefits are hidden and entangled in the complex web of business outcomes and it is difficult to isolate and attribute the benefits to the work of the accountant. We all know that most people would prefer to service their car at a professional mechanic instead of doing it themselves at home or hit the hospital when they feel unwell. But why then do small business owners decide to manage finances on their own when they know little about accounting?

The biggest excuse given is the expense involved.

Your accountant is supposed to be more or less your partner as opposed to someone who keeps books in the small office. Your accountant can do more than tax filing. He can take a comprehensive assessment of your finances and create a forecast through the year to keep your business running optimally and profitably. He can manage your credit and your working capital.

 

It feels intrusive to let an outsider know the intimate finance details of how you are running your business, especially if you are having some money troubles. Yet partnering with an accountant will actually set you up for long-term success. Here are nine reasons why you need an accountant for your business.

  1. Get the Business plan right.

Involving an accountant during the business plan writing stage can help you create a realistic plan that is more likely to succeed.

Accountants will use accounting software to add projections and other reports to your plan, hence giving it the professional touch that can encourage stakeholders and financiers to view it in a positive light.

  1. Get all your Tax deductions

In Kenya, the few days to 30th June of each year are usually busy with, most business owners frantically thinking about how they can maximize on their tax deductions. However, by this time, it is usually too late to make an impactful gain on that.

An accountant can support you by easily identifying these potential deductions throughout the year and advise you how to make strategic decisions for year-end deductions. Many business owners forget to track and account for items like depreciation, out-of-pocket expenses and home office space which could have an implication on your taxes.

  1. Financial Management

Small businesses have a tendency to grow fast if the structures are built right. This means that the accounting can quickly get complex and overwhelming if you are doing it on your own. An accountant will be able to put the sales side, the expenses, the assets, and credit side of your accounts into perspective and help you avoid financial mistakes that can kill your startup.

  1. Avoid an audit

Tax authorities are known to send audit queries and assessments to businesses randomly. However, it is not that random, there are many explanations as to why a particular business is usually singled out to be audited: from many mistakes on tax forms to excessive write-offs to unexplained contributions.

An accountant will help you by ensuring your tax returns are neat, only legal deductions are claimed and contributions are within the tax laws. He is a long-term partner who is invested in your business and cares to keep it fiscally sound.

Unfortunately, most business owners think of an accountant as someone who can fix these issues after they’ve occurred. The important thing to remember is that audit queries and assessments can easily be avoided if you get the guidance and counsel of an accountant all year-round.

  1. Save time and energy and remain sane.

As a business owner, your focus should be on running your business. Investing in an accountant and engaging him or her as an ongoing tactical business advisor will assist you in maintaining that focus and simultaneously keep you on the road towards achieving your business goals.

If you think about how much time and effort you spend on trying to manage your finances yourself (not to mention the possible errors you could incur during reporting, and related losses from poor financial decisions), the benefits of having a professional accountant certainly outweigh the cost.

  1. Make real-time decisions

Yesterday I spoke to a business owner. Her main concern was on how she could manage the performance of her employees on a real-time basis. She wished she could calculate the potential consequences and implications of making some office renovations or hiring more employees. This is the work of an accountant. Having one you can go to often as your financial advisor to help you with budgeting and monitoring cash flow on a steady basis will allow you to navigate any hurdles that occur in real time.

You should take a collaborative approach with your accountant, allowing you to make decisions together based on the latest data and also take advantage of a consultative relationship that will help you make business decisions when you need to make them.

  1. Deal with the government

Accountants can help you handle the daunting task of dealing with government paperwork when you run your own business by;

  • Preparing and filing tax returns
  • Completing and filing the required legal and compliance documents for your business
  • Keep your company up to date with the latest tax laws
  • Prepare annual statements of accounts
  • Keep your company’s status updated in the government’s company register
  • Maintain records of directors and other administrative personnel
  • Organize and record share/stock allocation, such as when the business is formed when a business partner leaves or a new partner joins
  • Handle your payroll and ensuring that all employees’ tax codes and payments are recorded correctly.
  1. When applying for Business Loan.

Banks are very tight at approving credit in Kenya after the interest rate capping laws. This means you have to have a watertight business case before you apply and an accountant can help improve your chances. The fact that you have an accountant might sway the bank in your favor, as it implies, you’re serious about your business. Your accountant will be able to answer any questions your bank might have about revenue projections and expenses.

Your accountant can also help you choose which loan to go for, and tell you whether your bank’s terms and conditions and interest rate are in your favor.

  1. Plan for the future

Finally, one of the biggest benefits of hiring an accountant is getting advice on how to plan for the future. Together, you can pull reports from past months and examine the seasonality of your business. Doing this will help you determine the best time to buy inventory, and budget for big-ticket investments so that you can stay competitive and viable.

As a business owner, you are most often preoccupied with the day-to-day operations of running your business. However, an accountant can take a step back and objectively look at the big picture to find the best way to support the longevity of your business.

The government requires a business to file various returns and accounting work can be isolating, especially when you are alone and you have to deal with a pile of receipts and invoices at the end of the month or the year. It doesn’t have to be that way. As the saying goes, “Many hands make light work,” and partnering with an accountant who has the skill and expertise to guide you through your journey will set you up for lasting success.

P/S

If the reason for your not having an accountant has been the cost involved, Financial Matters has a solution for you, check out BwanaPesa app and have your finances organized real time.

 

bwanapesa

bwanapesa

One thought on “9 reasons why you need an accountant.

  1. Bernard says:

    Thanks for this important information. This what have been thinking

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