Despite small businesses accounting for 99.9% of the business population, and single-handedly generating around half of the economic activity in the UK private sector, more than a quarter (26%) of small business owners have next to no accounting knowledge. In fact, accounting is the reason many budding entrepreneurs don’t get a business off the ground — with one in ten people put off starting a business by tax and accounting.
Uncertainty around finance is really fear of the unknown. And rightly so. If business owners don’t file their tax and VAT correctly, they could face fines and penalties from HMRC. In the start-up phase of a business, when money is usually especially tight, unexpected costs like these could have a significant impact.
I think accountants should play a far bigger role in a small business than just being the person that fills out your tax return for you. Using your accountant as a sounding board for your business plan is really beneficial. Everything comes back to finances: if you want to expand your product range, you need capital to invest in new stock; if you want a turnover of £100k a year, you need to set your pricing correctly and be able to afford the right team to get you there; or if you want to expand internationally, you need the finance in place to support that period of growth. Experienced accountants, who have a broad understanding of how businesses work, can almost be business advisers as well.
In addition, accountants — good ones, at least — can save new enterprises significant sums through effective financial planning, far outweighing their fees. A point seasoned business owners agree with, as over a third advise others to hire an accountant.
Which brings me to the question: where can small business owners find an accountant? Well, actually, more to the point — where can small business owners find a qualified, competent, and trusted accountant?
There is a real lack of knowledge around the accounting industry, and too many assumptions. For example, six out of ten people have no idea that an accountant can practise without a qualification. Or that around one third of all accountants practising in the UK are not members of a professional body. What’s more concerning is that most people don’t even know that they should be worrying about these things. There is an assumption that any practising accountant adheres to standards and regulations.
Which, to be fair, is perhaps not unreasonable. How many of us ask to see the DBS check of our children’s nursery worker? Or ask our GP to produce evidence that they are suitably qualified to be in the position they’re in? We all assume that their employer will have done these checks — or that the industry itself has protective measures in place.
Any business owner should go into a working relationship with an accountant with their eyes wide open, knowing exactly who they are working with. It’s up to them whether they use an accountant who is unregulated or not, but the fact that four in ten small business owners have suffered financial losses due to poor accounting emphasises the significant benefit to business owners choosing to work with someone who is appropriately qualified.
This is why easy-to-use, online search tools, that give business owners access to skilled and professional accountants, are so key. At the Association of Accounting Technicians (AAT), we provide one such tool with our Licenced Member Directory, which allows small businesses to find anyone with an AAT licence at the click of a button. This is an example of how, as a sector, we can work to ensure small businesses are protected from rogue accountancy.
With tools like this, business owners can search by location, so they can find an accountant based locally if this is important; or they can search by the name of the accountant, if they have been recommended someone specific by a friend or colleague. They can also select the accounting service they require help with, whether that’s bookkeeping, budgeting, forecasting, accounts preparation, tax, payroll — the list goes on — so they can match with an accountant that specialises in the specific topic area they are looking for.
Debbie Taylor is Finance Director at the Association of Accounting Technicians (AAT), the leading professional body for accounting technicians and bookkeepers. The AAT has more than 50,000 members who are accountancy and finance professionals working in the sector or running their own practices. These members collectively serve over 840,000 small businesses in the UK.
