Why Doing Your Own Accounts Can Cost More Than Hiring an Accountant

do I need an accountant for my small business?

When you’re running a small business, it’s completely understandable to want to keep costs down.

For many sole traders and small limited companies, one of the first things they consider doing themselves is the bookkeeping and accounts.

After all, accounting software is easier to use than ever, bank feeds can automate transactions, and there are plenty of videos online explaining how to submit returns.

So why pay an accountant?

The problem is that doing your own accounts can sometimes end up costing you far more than the accountant’s fee.

Saving money… or creating a bigger bill?

The biggest misconception is that accounting is simply about adding up your income and expenses and submitting a figure to HMRC.

In reality, good accounting is about making sure that:

• you are claiming everything you are legally entitled to claim
• expenses are treated correctly
• tax reliefs and allowances are not being missed
• VAT is calculated correctly
• deadlines are met
• your business structure is still tax-efficient
• you are planning ahead rather than discovering your tax bill after the year has finished.

Sure, you may be perfectly capable of submitting your own tax return.

But the more important question is this:

Are you submitting the most tax-efficient and accurate return possible?

Missing allowable expenses

One of the most common issues we see is business owners simply not claiming everything they are entitled to.

Examples could include:

• business mileage
• use of your home for business
• mobile phone and internet costs
• professional subscriptions
• software
• training
• business insurance
• accountancy costs
• equipment
• pension contributions
• certain travel or subsistence costs

Not every expense is allowable in every situation, which is precisely why professional advice can be valuable.

Missing £2,000 or £3,000 of legitimate expenses over a year could easily mean paying hundreds of pounds more tax than necessary.

Claiming something incorrectly can be even more expensive

The opposite problem also happens.

Someone may see online that an expense is "tax deductible" and assume it automatically applies to them.

Cars are a good example.

The tax treatment can depend on whether you are a sole trader or limited company, whether the vehicle is purchased personally or through the business, whether it is electric, how it is financed and how much private use there is.

Getting this wrong could result in additional tax, VAT corrections, penalties or interest later.

VAT mistakes can quickly become expensive

VAT is another area where small errors can create surprisingly large problems.

Common issues include:

• reclaiming VAT when there is no valid VAT invoice
• applying the wrong VAT rate
• incorrectly treating purchases from overseas
• misunderstanding reverse charge rules
• missing VAT on business income
• failing to register for VAT when the registration threshold is exceeded

A mistake repeated every month can become a significant correction when HMRC eventually identifies it.

Your time has a value too

There is another cost that business owners often forget:

your time.

Imagine you spend five hours each month dealing with bookkeeping, payroll, VAT and trying to work out whether transactions have been entered correctly.

That is 60 hours per year.

If your time is worth £40 per hour to your business, that represents £2,400 of your time.

Could those 60 hours have been better spent:

• finding new customers
• completing paid work
• improving your services
• following up leads
• simply having more time away from the business

Sometimes outsourcing accounts isn't just about tax.

It is about allowing the business owner to concentrate on the part of the business that actually makes money.

Accounting software doesn't replace accounting advice

Xero, QuickBooks and other accounting packages are excellent tools.

We use accounting software every day.

But software records the information it is given.

It does not necessarily tell you whether the transaction has been treated in the most appropriate way for your particular circumstances.

Having accounting software is a bit like having a calculator.

It can help you calculate the numbers, but you still need to know which numbers you should be calculating.

You could be missing opportunities to reduce tax

An accountant shouldn't simply tell you what tax you owe.

Where appropriate, they should also help you understand what you can do differently.

Depending on your circumstances, this could involve considering:

• salary and dividend planning
• pension contributions
• timing of purchases
• capital allowances
• VAT schemes
• whether to operate as a sole trader or limited company
• remuneration for family members working within the business
• director's loan accounts
• planning when profits are unusually high

Tax planning generally works best before the end of the financial year.

Once the year has ended, some opportunities may already have disappeared.

Fixing accounts often costs more than preparing them correctly

We regularly speak to business owners who initially prepared everything themselves but later need an accountant to correct it.

Unfortunately, correcting historical bookkeeping, VAT returns or accounts usually involves more work than preparing them correctly from the beginning.

The accountant may need to:

• review what has already been submitted
• identify errors
• reconstruct accounting records
• correct bookkeeping
• amend returns
• correspond with HMRC
• potentially calculate penalties or interest

What originally looked like a saving can suddenly become a much larger professional fee.

The cost of getting it wrong

The real cost of DIY accounting isn't necessarily the accounting software subscription.

It could be:

• unnecessary tax
• missed tax relief
• HMRC penalties
• late filing charges
• interest
• incorrect VAT
• hours spent fixing mistakes
• the stress of trying to understand tax rules while also running a business

For some very small businesses, preparing your own records may work perfectly well.

But as your turnover grows, you register for VAT, employ staff, buy assets, take dividends or your personal tax affairs become more complicated, professional advice becomes increasingly valuable.

Good accountants should save you more than just time

At Partridge Accountancy Services, we don't believe accountancy should simply be about submitting forms to HMRC once a year.

We work with small businesses, sole traders and limited companies to help them understand their numbers, stay compliant and make better financial decisions throughout the year.

Sometimes the biggest saving an accountant provides isn't a clever tax trick.

It's simply making sure you don't make an expensive mistake in the first place.



Need help with your accounts?

If you've been managing your accounts yourself and would like someone to review how you're currently doing things, we'd be happy to have a conversation.

Whether you need ongoing bookkeeping, VAT, payroll, Self Assessment, limited company accounts or simply some advice, Partridge Accountancy Services is here to help.

Partridge Accountancy Services
Helping businesses stay informed, compliant and prepared.

Simple.