What accounting activities should you outsource and what should you keep in-house?

If you’re running your own business you’re ultimately responsible for its financial wellbeing.

A responsible business owner needs to be able to identify, in a timely manner:

• their significant financial obligations,
• when they are due to be paid,

They then take steps to ensure that there is sufficient money in the business to make any payments due.

If you agree with the above, the issue is to consider whether you have the expertise and resource in-house to accurately take on all book-keeping and regular accounting issues.

In our experience in working with start-ups and small businesses, the answer is rarely yes to all of the above.

Learning helps

We encourage our clients to take as much responsibility in-house for the organisation’s day to day finances as possible. However that doesn’t mean we leave them to figure things out for themselves. Instead we are often asked for our input and advice on implementing improvements to accounting procedures that are specifically tailored to client’s needs and circumstances.

We aim to educate and equip our clients so at the least they can understand:

• How to account for money they’re due to receive for the services provided or products sold,
• Check if they’ve been paid for these invoices, and
• Identify and include accurately all relevant liabilities in their accounting records.

Routines will free you

Establishing a daily routine of checking the bank statement for movements and ensuring there is sufficient headroom in the bank account to meet your immediate obligations, should also be at the top of your to-do list.

Payroll – if you have employees

So you may have the basics under control, but if you have employees you will also have a requirement to operate a payroll scheme, calculating tax and national insurance to be deducted, reported under RTI to HMRC and then paid over to them.

With the interaction with pension auto-enrolment reporting, an already specialist area is becoming more complex. Because of this, over 100 of our clients prefer to let our expert payroll team take care of the payroll processing and then provide them with details of how much to pay to individuals and to HMRC.

VAT Returns

Depending on your business and the VAT scheme applicable to it, the preparation of VAT returns may be another area where you consider there is more value and comfort in outsourcing this task to your accountant.

Management accounts reporting

Similarly you might have the routine book-keeping under the fingers, but are you regularly monitoring actual financial results against predicted performance? Perhaps involving your external accountant in preparing monthly or quarterly management accounts and providing a commentary on them will help in the planning and projection of future projects.

Year-end accounts

With audit thresholds rising recently to an extent that a standalone company with a turnover of £10m and gross assets below £5.1m, does not by law need to have an independent audit of its financial statements, in theory a company can take the preparation of its year-end accounts in-house too.

However given that the biggest change to UK accounting standards for a generation has just come in, coupled with the requirement to file corporation tax returns online and in a special iXBRL format, unless the directors have amongst them a professionally qualified accountant with recent practice experience we would be surprised if business owners saw taking this role in-house as an opportunity to effectively cut red-tape, but more likely a sure-fire way to tie themselves up in knots!

What works best?

Nearly all of our clients find that they are comfortable in keeping tabs on the bank account and at the least analysing the movements on the bank account in-house. They then let us do the payroll, VAT and annual accounts preparation. A number of our clients have taken some training and prepare the VAT returns and control accounts for us to then review. However,  there are some who want to outsource all book-keeping to us and even get us to make payments on their behalf and account for every transaction. It’s a matter of realistically assessing your time, skill-set and budget. We offer free consultations to assess which combination works best for you – get in touch by calling 020 7935 3793 or emailing rhill@gsmaccountants.co.uk.