What Should a Growing Business Look for in an Accountant?
As your business grows, what you need from your accountant often changes.
Preparing annual accounts and tax returns remains important, but growing businesses usually have more decisions to make. You may be employing people, managing higher costs, dealing with VAT, investing in equipment, taking on larger customers or simply trying to understand whether increased turnover is actually producing more profit.
If you're looking for an accountant for a growing business in the Isle of Man, look for someone who understands owner-managed businesses, can help you make sense of your financial information and is available to provide advice throughout the year - not just at year end.
Here's what to consider.
How Do You Know You've Outgrown Your Current Accountancy Support?
You don't necessarily need a different accountant simply because your turnover has increased.
The more useful question is:
Has your business become more complex than the support you're receiving?
Signs that you may need more from your accountant include:
You're making bigger financial decisions
You've started employing people
Cash flow has become harder to predict
You need better information about profitability
You're considering significant investment
Tax planning has become more important
You don't understand the figures you're receiving
You only hear from your accountant around year end
Sometimes the business hasn't outgrown the accountant at all.
It has simply outgrown the service it originally needed.
That's an important distinction.
Should a Growing Business Look Beyond Annual Accounts?
Yes.
Annual accounts tell you something important, but they are primarily a record of what has already happened.
If you're running a growing business, you also need to think about what's happening now and what might happen next.
That could mean regularly understanding:
Sales
Gross profit
Net profit
Cash
Costs
Money owed by customers
Payroll costs
Expected tax liabilities
You don't necessarily need complicated monthly management accounts.
You need enough reliable information to make the decisions your business requires.
Should Your Accountant Help You Understand Profit, Not Just Turnover?
Definitely.
Increasing sales can feel like a clear sign that a business is doing well.
But turnover isn't the same as profit.
Imagine sales increase by 20%, but at the same time:
Wages rise
Supplier prices increase
Software costs grow
More space is required
Additional administration is needed
You could be running a much bigger business without earning substantially more from it.
A commercially aware accountant should help you understand what is happening below the turnover figure.
That means looking at margins, costs and profit — and helping you understand what those numbers mean.
How Important Is Cash Flow as a Business Grows?
Very.
Growth can actually create cash-flow pressure.
You might need to pay for additional stock, employees, equipment or other costs before the extra income from growth reaches your bank account.
Customers may also owe you more money as sales increase.
That's why a profitable growing business can still experience cash-flow difficulties.
Good bookkeeping and current financial information can help you see:
What customers owe you
What's due to be paid
How much cash is available
What tax needs to be provided for
Whether upcoming commitments are affordable
Growth shouldn't mean constantly wondering where the cash has gone.
Should Your Accountant Help You Plan for Tax?
Tax planning becomes increasingly important as a business develops.
Rather than discovering your liability when a deadline approaches, it helps to have an idea of what you're likely to owe and when.
Depending on your circumstances, useful conversations might include:
Expected tax liabilities
How you take money from the business
Timing of expenditure
Business structure
Investment plans
VAT
Payroll and National Insurance
The Isle of Man Government provides official information on the Island's tax, VAT and National Insurance requirements.
Your accountant's role is to help you understand how the relevant rules apply to your own business and circumstances.
Do You Need Better Financial Reports as Your Business Grows?
Possibly - but more reports aren't automatically better.
A 20-page management pack that nobody understands isn't particularly useful.
Start with the decisions you need to make.
For example:
Can we afford another employee?
You might need information about profit, cash flow and payroll costs.
Which service should we concentrate on?
You may need to understand the margins generated by different types of work.
Can we afford new equipment?
You need to consider cash, finance costs, tax and expected return.
The right financial information should help answer a question.
If nobody knows why a report is being produced, it's worth asking whether it's needed at all.
Can Xero Help a Growing Business?
Cloud accounting can become increasingly useful as a business grows.
Software such as Xero can provide more current information about:
Sales
Expenses
Bank transactions
Outstanding invoices
Cash flow
It can also reduce some of the manual administration involved in maintaining financial records.
But having Xero doesn't automatically mean you have good financial information.
Records still need to be accurate and up to date, and somebody needs to understand what the figures mean.
A good Xero accountant should help you use the technology to make running the financial side of your business easier — not simply give you another piece of software to manage.
How Proactive Should an Accountant Be With a Growing Business?
Useful advice becomes more valuable when it arrives before you make the decision.
If you're considering an investment, changing how you operate or making another significant financial commitment, being able to discuss the implications beforehand can be much more helpful than discovering them at year end.
That doesn't mean your accountant should constantly interfere in how you run your business.
You're the business owner.
Their role is to give you the financial information and perspective you need to make your own decisions with greater confidence.
Does Your Accountant Need to Understand Your Business?
They don't need to know how to do your job.
But they should take enough interest to understand how your business makes money.
For example:
What drives your sales?
What are your biggest costs?
Which work is most profitable?
Is income predictable or seasonal?
How quickly do customers pay?
What are you trying to achieve?
Without that context, numbers are simply numbers.
With it, financial information becomes much more useful.
What Questions Should You Ask an Accountant if Your Business Is Growing?
If you're comparing accountants or reviewing the support you currently receive
If you're comparing accountants or reviewing the support you currently receive, try asking:
Do you work with other growing owner-managed businesses?
What financial information do you think I should monitor?
How will you help me understand my profitability?
Can you help me plan for tax during the year?
Who will I speak to when I need advice?
How often should we review the business?
Can you help me understand the financial impact of decisions before I make them?
How do you use Xero or other technology with clients?
How will your service change as my business becomes more complex?
What's included in your fee?
The answers should give you a much better idea of whether the accountant offers the level of support you're looking for.
Where Can You Find an Accountant for a Growing Business in the Isle of Man?
There are accountancy firms across the Island offering different levels of support, so the right choice will depend on what your growing business needs.
Look at professional qualifications, experience with owner-managed businesses, services, technology, fees, reviews and importantly the level of ongoing advice available.
Purple Accounts is a family-owned firm of Chartered Management Accountants based in Douglas, supporting small and growing businesses across the Isle of Man.
As well as accounts and tax, our fixed fee accountancy approach is designed to give business owners ongoing support with the financial questions that arise as their businesses develop.
You can find out more about Purple Accounts Isle of Man.
What Should a Good Accountant Do as Your Business Grows?
The fundamentals don't change.
Your accounts should be accurate.
Deadlines should be met.
Tax returns should be dealt with properly.
But as your business develops, you may reasonably expect more.
A good accountant should help you:
Understand what's happening financially
See potential issues earlier
Plan for tax
Ask better questions about your business
Understand the financial implications of important decisions
They shouldn't make those decisions for you.
They should give you better information with which to make them.
The Key Takeaway
Growth doesn't necessarily mean you need a more complicated accountancy service.
It means you need the right support for the decisions you're now making.
If your business has developed but your accountant relationship still consists largely of sending information once a year and receiving a set of accounts months later, ask whether that's giving you what you need today.
Your accountant shouldn't just be able to keep up with your growing business.
They should help you understand it.
Start with a chat with Purple Accounts on 01624 777018 or email:enquiries@purpleaccounts.com
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