First of all, it’s important to clarify the question here. Hiring an accountant and using an accounting software are not mutually exclusive options. In fact, many businesses hire accountants and also use accounting software. Many companies in London hire accountants in Central London for example and spend for accounting software at the same time.
This post focuses on the situation of small businesses, those that either relies on external accountants to prepare their financial documents or invest time and money to use an accounting software so they can prepare their compliant financial documents on their own.
The Need to be accurate
It’s important for financial documents to be accurate for two main reasons: compliance and proper management.
Compliance entails that your business has to submit financial records that comply with what government regulators require. At the same time, you need accurate financial documents in relation to your taxes. If you commit mistakes, it can create dire consequence for your business. If you understate your income, you would be understating your tax obligation. This can land you in serious legal trouble. The failure to comply with what government authorities require can destroy your business and have critical repercussions in your opportunities to operate a business again.
On the other hand, you need accurate accounting for your business operations to properly guide the management of your business. You can’t come up with sound business decisions if your financial records are inaccurate. You can’t make sensible projections or estimates if your business records don’t reflect the correct financial situation of your business. You need accurate accounting to ascertain that you are properly managing your business.
Hire an accountant or use a software?
Both options (hiring an accountant or using an accounting software) can help you achieve accounting accuracy for your business. However, these two entail different setbacks. The former means having to pay for the accountant’s fee (which can be quite expensive) while the latter requires you to spend time and effort to learn how to properly use the software (you can use a good accounting software for free). It’s up to you which one can be considered a more convenient option.
For many small businesses, it is advisable learning to do your own accounting with the help of a reputable accounting freeware. This is a good way to become better acquainted with your business. However, if your time and effort are more useful in other areas of your business (in planning and marketing for example), it may be better to just rely on an external accountant to do accounting for you. Sometimes, you can be more productive and certain things. If doing your accounting only drags you down, it would be better to get a competent accountant to make sure you produce accurate and timely financial documents for your business.