Do Freelancers Need An Accountant to Manage Their Finances?

As a freelancer, sole trader, or small start-up in the UK, you have a lot on your plate. From finding clients and delivering projects to managing your finances, you're constantly juggling multiple tasks. One question that often comes up is whether or not you need an accountant to manage your financial affairs?

While some might think an accountant is only necessary for larger businesses, the reality is that they can offer valuable support to the self employed business owner as well.

From tax compliance to financial management and planning, an accountant can help you navigate the complex world of business finances and keep you on the path to success.

Let's take a closer look at the advantages of having an accountant as a freelancer, the considerations for hiring one, and alternative options for managing your finances. Our goal is to help you determine if an accountant is the right choice for you and your business.

Whether you're just starting out on your freelance business journey, or have been in trading for a while, this information can help you make an informed decision and set yourself up for success.

Advantages of Hiring an Accountant

The obvious advantage of hiring an accountant to manage your freelance financial responsibilities is that they'll do (almost) all of the hard work for you. You will still need to keep accurate records, collect all your receipts and manage your money correctly.

But when it comes to the specifics of managing your self employed tax returns or other key financial obligations, a good accountant can be worth their weight in gold.

The advantages of hiring a specialist accountant include:

  • Tax Compliance and Preparation: One of the biggest advantages of having an accountant is that they can help you stay compliant with UK tax laws. This is especially important for freelancers and small business owners who may not be familiar with the intricacies of tax regulations and joy of tax returns. An accountant can help you understand your tax obligations and ensure you're filing your tax returns correctly and on time.
  • Financial Management and Planning: An accountant can also provide valuable support and expert advice in managing your finances. From developing a budget or keeping track of your expenses, to creating financial reports that provide a clear picture of your business's financial health. With an accountant's help, you can make informed financial decisions about your freelance career and plan for future growth.
  • Business Growth and Expansion: An accountant can also play a key role in helping your business grow and expand. They can provide insights into your financial performance, help you identify opportunities for growth, and provide guidance on how to invest in your business. With their expertise, you can make strategic decisions that drive business success.

Hiring an accountant brings a level of professionalism and expertise to your business finances. By working with a qualified accountant, you can take the guesswork out of managing your finances and focus on what you do best - running and growing your business.

Considerations for Hiring an Accountant

One of the main concerns for freelancers is that hiring an accountant is often seen as an expensive option. And yes, although hiring accountants is a business expense, there is value in picking the right accounting service. So how do you choose the right accountant for your small business?

  • Cost and Budgeting: One of the first considerations when hiring an accountant is the cost. Depending on the services you need, the fee for an accountant can range from a few hundred pounds to several thousand. It's important to factor in the cost of an accountant into your budget and determine if it's a feasible expense for your business.
  • Time Commitment and Workload: Hiring an accountant also requires a time commitment from you. You'll need to provide them with access to your financial records and work with them to ensure they have the information they need to do their job effectively. It's important to consider how much time you're willing to dedicate to working with an accountant and if it aligns with your business goals.
  • Expertise and Experience: Another consideration is the expertise and experience of the accountant you're considering hiring. Not all accountants have the same level of expertise, so it's important to do your research and find someone who has experience working with freelancers, sole traders, and small start-ups. Additionally, it's a good idea to check their references and read online reviews to get a sense of their reputation and work quality.

Hiring an accountant is a big decision and requires careful consideration. By taking the time to evaluate the cost, time commitment, and expertise of the accountant you're considering, you can ensure you're making the right choice for your business. With the right accountant on your team, you can take your finances to the next level and achieve your business goals.

Alternative Options for Managing Your Freelance Finances

Of course, you don't have to use an accountant to manage your business expenses and finances. There are other options which can save money, but will of course be more laborious.

So what can can you do instead of hiring an accountant?

  • Doing it Yourself: One alternative to hiring an accountant is to manage your finances yourself. This can seem appealing, especially if you're on a tight budget. However, it's important to consider the time and expertise required to do it yourself. As a freelancer or small business owner, you already have a lot on your plate and managing your finances can be a complex and time-consuming task.
  • Online Accounting Tools: Another option is to use online accounting tools to manage your finances. These tools can automate many of the manual tasks involved in financial management, such as tracking expenses and generating financial reports. However, it's important to remember that these tools are only as good as the data you input into them. You'll still need to dedicate time to inputting data and ensuring the information is accurate.
  • Hire a spouse or family member: Some small businesses owners will pay their other half to manage their business accounts on their behalf. While this is an option, and can be an appealing option for keeping your finances in your household, managing complicated financial tasks is not something to be taken lightly. If your other half isn't a financial professional with an understanding or tax regulations, this can cause complications in the long run.
  • Cheap offshore accountants: It's easy to find low cost accountants based in far flung countries such as India or Pakistan. While these do offer cheap accounting services, they do not necessarily provide the quality or local expertise that UK based accountants would offer. And although many freelancers might be comfortable working with remote business services, hiring a UK accountant for your UK business has many benefits beyond expense such as being able to contact HMRC on your behalf, working on the same time zone and understanding economics in your local area.

Of course when it comes to managing your finances, there are lots of options to consider. Each has its own advantages and disadvantages, so it's important to weigh the costs, time commitment, and expertise required to determine which one is right for you and your freelance business.

How much does a UK accountant cost for a sole trader?

The cost of an accountant in the UK varies depending on various factors. To give you a ballpark figure, professional bookkeeping services for freelancers will cost anything between £90-£170 per month.

Why the broad range?

The cost will depend on your accountants location, the size of their business and your business revenue too.

In general, large accountants based in big cities are the most expensive option. Brand name accountants have high overheads and will often provide a more general 'account manager' style accounting service.

In contrast, hiring a small local accountant will get you the same professional services, such as managing tax returns or reconciling expenses and invoices, but at a lower cost.

For example here at Henderson and Co Accountants we're able to keep our costs down as we are not a huge business with high overheads. What's more, our experience working with freelancers and sole traders means we are uniquely placed to offer advice and help your small business grow.

So if you're a sole trader or freelance worker, get in touch to ask how we can help you save money and grow your freelancing career.

Book a no-obligation discovery call today.

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