You don't need to be an accountant to understand the finances behind your business. But you do need to understand the basics.
One thing I've noticed more and more is that business owners can sometimes feel embarrassed about asking financial questions.
Maybe you've recently started a business and don't know what you should be asking your accountant.
Maybe you've just incorporated your business as a limited company and aren't sure what changes.
Maybe you've been trading for years but still aren't completely sure about the difference between profit, cash and the money sitting in your bank account.
Or perhaps you've simply nodded along when your accountant has used terminology you didn't understand because you didn't want to ask.
Please ask.
There is no such thing as a stupid finance question.
Your accountant or bookkeeper should be there to help you understand your finances, not make you feel like you should already know everything.
So, here are some of the questions I think every small business owner should feel comfortable asking.
Becoming a limited company is a big step, and there are some important differences compared with being a sole trader.
Ask your accountant:
• What are my responsibilities as a director?
• What records do I need to keep?
• What are the important filing and tax deadlines?
• How should I pay myself?
• What's the difference between salary and dividends?
• Do I need to register for PAYE?
• When can I take money from the business?
• What expenses can the company pay for?
• What happens if I put my own money into the business?
• What shouldn't I be paying for from the company bank account?
You don't need to remember all the answers.
You just need to understand what applies to your business.
Don't wait until your tax bill arrives to find out.
Ask your accountant how your tax works and, where possible, what you should be putting aside.
Depending on your business structure, this might include things such as:
• Income Tax
• National Insurance
• Corporation Tax
• VAT
• PAYE and employer liabilities
The important thing is understanding which taxes apply to you, when they're due and how much you may need to budget for.
This is one of the biggest things business owners can misunderstand.
You can have a business that is profitable but still feel like there isn't enough money in the bank.
And you can have plenty of money in the bank without necessarily having made a profit.
Ask your accountant or bookkeeper to explain:
Turnover, how much your business has sold.
Profit, what's left after your allowable business costs have been accounted for.
Cash flow, the money actually coming into and leaving your business.
Understanding these three things can completely change how you look at your business finances.
Don't rely on what another business owner tells you they claim.
What is allowable depends on your circumstances and how your business operates.
Ask:
“What expenses can my business legitimately claim, and what records do you need from me?”
And don't be afraid to ask about something simply because you're unsure.
It's much better to ask before assuming something is or isn't allowable.
Your accounts aren't just there for your accountant to prepare at year end.
Ask your accountant or bookkeeper:
• What should I be reviewing each month?
• What does my profit and loss actually tell me?
• How is my cash flow looking?
• Are my margins healthy?
• Are my costs increasing?
• Am I charging enough?
• What should I be keeping aside for tax?
• Is there anything in my numbers that concerns you?
Your accounts should help you run your business, not just tell you what happened last year.
This is another question worth asking early.
Depending on your business, you may have deadlines for things such as:
• Corporation Tax
• VAT returns
• PAYE
• Confirmation Statements
• Annual Accounts
• Self Assessment
• Making Tax Digital requirements
• Other Companies House or HMRC obligations
Ask your accountant to explain which deadlines apply specifically to you and whether they will be dealing with them on your behalf.
Don't assume that because your accountant normally handles something, everything is automatically covered.
Know what you're responsible for and what they're responsible for.
This might be my favourite question of all.
Your accountant has access to information about your business that can help you understand how it's performing.
So ask them:
“If this were your business, what would you be looking at?”
It opens up a completely different conversation.
Your relationship with your accountant shouldn't just be about submitting returns and telling you how much tax you owe.
It should help you understand your numbers and make better decisions.
Running a business doesn't mean becoming an expert in accounting, tax, payroll and financial legislation.
You're the expert in your business.
Your accountant and bookkeeper have their own areas of expertise.
That's why asking questions matters.
If someone explains something and you don't understand it, ask them to explain it differently.
If they use terminology you don't recognise, ask what it means.
If you don't know what you should be doing, ask.
And if you're worried that your question is too basic?
Ask it anyway.
Because good financial support shouldn't make you feel stupid.
It should leave you feeling informed, confident and in control.
