We’re excited to introduce our brand-new Frequently Asked series, where we reach out to experts to answer the most common questions we get from North East SMEs. Kicking off our series is accounting expert Blu Sky!

Successfully managing your finances is one of the key fundamentals to running a business. If you don’t know your numbers, you won’t be able to prepare for new campaigns or even your product launch.

We sat down with Dave from Blu Sky Chartered Accountants to discuss the questions we frequently get asked by entrepreneurs.

Hi Dave. What is the difference between an accountant, a bookkeeper, and a payroll company? Is it best to have one do them all?

So, accountant tends to be an umbrella phrase that describes a person who handles multiple, or all aspects of a company’s financial and accounting processes.

When we say accounting processes, we mean anything from paying your employees on time, to helping you make key commercial decisions and financial forecasting.

It’s important to note that anyone can call themselves an accountant, but not everyone can call themselves a chartered accountant!

A chartered accountant is someone who’s registered with a regulated professional body such as the ICAEW. Being part of a regulated professional body, means that they will be bound to a strict code of ethics.

To put it simply, bookkeeping means keeping records of all your financial affairs (think invoices, receipts and general record keeping!). Some accountants specialise in bookkeeping or only offer bookkeeping services. You can work with an accountant that handles all your processes, but if you only need support with keeping records, a bookkeeper may be the right fit for you.

Payroll and pensions are very important. A payroll company or accountant specialising in payroll will look after paying your employees on time. They take care of statutory payroll liabilities such as PAYE, NIC and Student Loans, ensuring that they’re correctly deducted from employee payslips each month.

If you only need help with paying your people correctly, then a payroll specialist or company may be right for you!

Other accountants will also provide more in-depth analysis of your numbers and your business performance, providing board-level reporting and helping you with financial and business strategies.

And what is cloud accounting?

Everything accounting-related but digital!

Cloud accounting has the same functionality as desktop, online or traditional book-based accounting. But the processes, files and software are all stored on a cloud server.

Cloud accounting basically means that everything sits in one place digitally, and that systems and processes are online.

Cloud accountants’ day-to-day tasks revolve around reconciling clients’ accounts. As well as making sure management accounts, VAT returns and board packs are produced in accordance with planning and quality requirements.

Isn’t accounting more for limited companies? What about sole traders?

Accounting processes should apply to all businesses, whether you’re a sole trader, partnership, or a limited entity! Whether or not you need to outsource your processes or ask for support from an accountant is ultimately your decision.

Every business owner is responsible for things like their tax returns and recordkeeping, and sole traders aren’t excluded from this.

So long as you know your numbers, feel confident in your ability to run your company’s accounts, and have a good idea of what’s next financially - you may feel you do not need an accountant to support you on a month-by-month basis! But using a trained professional will definitely benefit you in long run, they’ll help by providing additional support, advice, and assurance. Leaving you to grow and manage your business.

If you are using an accountant to keep an eye on your accounting processes internally, don’t be afraid to also seek legal and human resources advice to ensure that you’re ticking all the boxes. Outsourcing support functions that you’re not an expert in is always a smart move.

I’ve just started out and am not making much money yet. Do I need an accountant? Is it value for money?

This all comes down to whether you feel confident and comfortable in your ability to handle your financial and accounting processes vs freeing your time up to focus on growing your business!

If you have no financial knowledge and you’re not even sure where to start, you will benefit from assistance.

If you’d prefer to invest your time into establishing and managing your company over setting up your accounts, you might want to get some help in.

An accountant is there to make your life easier - the pros should outweigh the cons!

You need to find a firm or individual that you’re comfortable with and trust. This is a long-term relationship that is intrinsic to helping you make key financial decisions with confidence.

A good accountant should:

  • Free up your time, so you can reinvest the time you were spending on your company accounts, back into your other responsibilities
  • Install confidence, so you can rest easy
  • Help educate, every day is a school day and whilst you don’t need to know the full ins and outs, they should be able to help you understand processes and answer any queries

I’m in a chicken-and-egg situation: to make money, I need to first build a prototype - but I don’t have the finance to build this. What options do I have? 

You should explore your funding options! There are lots of different funding bodies out there, offering various options for people who’ve found themselves in your exact situation!

You can explore them by speaking to local funding bodies/providers or even your bank.  If you already have an accountant, you could ask for their support too. They should be able to point you in the right direction and have knowledge of the latest government and local funding schemes. 

One from us.. What would be your number one accounting tip for young tech companies?

Know your numbers! Don’t assume that you’ll have X amount left in your bank account each month! Make a conscious effort to know your income and outgoings as it’ll help you stay on track financially and you’ll know what’s coming next.

Trust us, it’ll make your life so much easier.

Finally, can you tell us about the start-up support package you can offer? What does this entail? 

Well, we know how hard it is to get a new business going, we were there too once! And things are even harder given the current climate…

That’s why we created the Start-up Club. A place you can come to get all the sound advice and support you need, so you can focus on kickstarting your business.

We cover topics like:

  • The best tech to help you manage your accounts
  • Raising investment
  • R&D
  • Share options

There’s more info over on our website for anyone who’d like to learn more!