It’s fun to charter an accountant!
One of the best things I ever did as a freelancer was to ask around to find an accountant. My brother found one through a friend of his, and he came highly recommended, and now he does my tax return for me every year.
Accounts can be a scary part of running your freelance business but they needn’t be. If you’re a sole trader, you can do it all yourself; you just need to do a tax return at the end of every year. So why splash out on an accountant? How do you pick one? And how do you get the most from them?
Why get one
Because, in simple terms, they’ll often save you as much in tax as they’ll cost you in fees. Without a complete understanding of what is and isn’t a deductable expense as a freelancer (your car might be; proportions of household bills, too) you’re likely to miss something. Depreciation is a pain to work out. And an accountant will spot the mistakes in your books that you’ll struggle to see.
They’ll also save you a lot of stress and hassle. You don’t need to worry about making mistakes, the possibility that you’ll have to go back and re-check things. Remember that your accountant will probably be a lot faster than you at doing them, and more accurate; while your hourly rates may be comparable, remember the cost to you of not doing paid work and compare that with the outlay on your accountant.
How to pick one
Ask around. There are plenty of big, corporate accountant services out there, but to them you’ll just be another nameless client; they won’t be able to take the time to understand your business and what may or may not be deductable to you. While this may be fine for fairly standard businesses like shops, for a freelancer things are less clear cut.
Once you find someone who’s been recommended, meet up with them or talk to them on the phone before you commit. You need to get on with your accountant and feel that they’ll take the time to understand you; you also need to know that they’re willing to do you little favours now and then, like answering questions on what may or may not be allowable or writing a letter to a bank. The best business relationships are long-term, so don’t just approach your accountant as someone who’ll do your accounts once and that you’ll find someone else next year.
Always remember that someone who you consider a friend in business – whether a supplier or a client – is one of the most important resources you can have.
Make the most of your accountant
To make the most of your accountant, you need to do some work yourself. If you turn up with a big bag full of receipts and nothing else, it’ll cost you a lot to have everything sorted. You’ll not save very much at all. Your accountant will probably hate you, too, for making things complicated.
If you turn up with your neatly laid out double-entry bookkeeping files, everything on a CD-ROM, neatly filed household bills and a good idea of what’s expected of you – and you do this as soon as you can after the end of the tax year so there’s less pressure on your accountant – then you’ll reduce the workload for your accountant and reduce their cost. Much more than this, however, is that by keeping on top of your accounts you can understand your cashflow and know exactly what’s going on with your business.
The best way to learn how to do your books is by going on a short course (normally a half day) with Business Link or similar business support organisation. They don’t cost much to do, and as a bonus you get to meet other new business people just starting out – and can maybe get some work from them. Actually doing your books is pretty simple: all it requires is a reasonable level of organisation, a big ring-binder, and remembering to always keep receipts. In fact, keep any bits of paper which relate to income and expenditure – your accountant may ask for them.
In conclusion…
It may seem like an accountant is a needless expense at times. Doing a tax return is just filling in a form, right? And you’re not going to claim anything which isn’t in your books, because that’s cheating, right? Well, yes. But a good accountant will remove all the stress from doing your tax return; they’ll do it far faster than you ever could; and they’ll spot the things you really are eligible to claim for but which you’re not.
If you’ve got any comments about accountants or saving money as a freelancer (or in any other aspects of your life) then please add a comment below.