4 Situations Where an Accountant is Required

In the main, two different types of accountants exist – those who are involved in financial records and those that work out costings for a manufacturer. Also, accountants will audit financial records to ensure financial standards are being met. So, we shall explore from all angles the role of the accountant and just where they are useful in business.

Sole Trader or Small Business

An accountant is an ally to a sole trader because the chances are that they will not have the financial skills needed, but more likely, skills in other areas such as selling. They may, for instance, have started up the business because they have specific knowledge about the product that it is predominantly what they now sell or deal in. Financial skills can then either be learned, involving expense and time, or an accountant can be hired to take care of the accounts, the VAT, and matters involving taxation so that returns are submitted on time to avoid any fines.

Accountants will show businesses how to layout their accounts in a standardized way and then they can be easily finalized at the year-end by the accountant who can work out what tax is owed. If a business is over the VAT threshold for turnover ( 85,000 at the time of writing) then things are a little more involved day-to-day. It might be worth hiring a book-keeper who will record transactions daily or weekly, deal with invoices, and complete VAT returns.

Limited and Public Limited Companies

Generally, larger companies will employ in-house accountants and financial teams to take care of their invoicing, bank reconciliations, VAT, end-of-year returns, and tax affairs. It is invaluable to have an accountant on board who knows about how best to reduce a company’s tax bill by knowing about the different government schemes and tax incentives. Better still, accounting service providers like Dua and Co. (read up more about them at – dua.co.uk) could help them not only with their taxation but could also give them insightful business advice.

Factory

Manufacturing businesses will employ cost accountants. They will calculate the breakeven figures in respect of the production. This will take into account fixed costs, which do not change however much you produce, and work out how many items need to be made before the costs of production make it viable. This kind of accounting is about the day to day profitability. It is what works out the gross profit as opposed to the net. These firms will, of course, still need to employ or call on the services of accountants at the year-end to sort out their finances. Generally, this same accountant will not do both and their production accountant will be specialized in cost accounting only. It is, after all, a full-time job in itself if a factory is to be run efficiently.

Auditing

Accountants, like those from this Phoenix CPA firm, are also used for auditing accounts. This is required by law in the case of, for example, a public limited company, and is also required when it comes to regulating charities. Firms will often want to do it periodically themselves to make sure that accounting procedures are being correctly followed and nothing dishonest is taking place with the company’s money. Financial roles are responsible ones and positions of trust. It is for this reason that financial work is paid at a higher rate than general office work. It is partly the skills required to do it and also the increased responsibility of managing the money.

For those interested in auditing, audit regulation is concerned with five elements. These are setting standards, formal adoption, implementing in practice, monitoring the compliance, and then enforcing. Auditors, to ensure this takes place, will take a sample of transactions and make sure that the money received ultimately ends up in the bank of the business concerned. The accounts should be laid out in either computerized or manual ledger form so that an auditor can easily follow these transactions. Clarity is important to quickly eliminate suspicion. Financial records should be held securely and copies made as a back-up, as authorities will generally require them to be kept for at least 5 years after the tax submission deadline.

So, at least four situations where an accountant will prove useful whether it involves the financial or manufacturing side. Auditing is something that accountants also get involved in to ensure companies are complying with financial standards and that nothing irregular is taking place.