How an accountant can help manage your debt

A qualified accountant can do more than handle your books. They could improve your business in several ways.

There are a number of ways in which a qualified accountant can help make your business more efficient, especially when it comes to managing your debt.

Of course, no two businesses are alike, and the information we provide here is only general guidance. If you’re struggling to manage your debts, it’s best to seek professional advice for your particular business.

Garry Mumford, founder and managing director at specialist accountancy firm Insight Associates, advises business owners who are experiencing financial distress. “If you don’t feel comfortable with the financial side of your business and you don’t really understand it, don’t ignore it, get help,” he says.

It’s certainly worth taking the time to ask your accountant if they can offer guidance on the areas we discuss below, if you think it might benefit your business.

Or, you can seek advice from a reputable accountancy practice that’s specifically geared towards helping small businesses with issues such as debt.

While many small businesses tend to focus on profitability alone, they should keep in mind that cash is what keeps a business moving. A lack of profit won’t necessarily kill a business, but a lack of cash will.

An accountant can help you understand how cash moves in and out of your business (known as the cash flow cycle). “Understanding the cash cycle is vital to predicting the cash flow in your business, and how much cash you need to keep it running smoothly,” says Garry Mumford, managing director at Insight Associates.

By creating a cash flow forecast, an accountant can also help you understand what can delay your cash flow cycle and so prevent your business from being unable to repay its debts.

This should let you spot potential problems early and take action before they become severe.

If you’re finding it difficult to pay your business taxes, an accountant can help you put together a stronger case for a ‘Time to Pay’ arrangement with HMRC. This is when you work with HM Revenue & Customs (HMRC) to negotiate an affordable monthly payment plan.

If you need to approach HMRC to make one of these arrangements, Garry Mumford has some tips for how to do it.

  • Be prepared for HMRC to challenge you, especially if you’ve gone to them about this before.
  • Tell them the reason you can’t pay, and that you have a clear plan to get through this problem.
  • Tell them you’ve done the financial forecast and how much of your debt you can pay each month.
  • Before you jump into a Time to Pay arrangement, do your homework and be really confident that you’ll be able to meet the payments.

An experienced accountant may be able to give you some pointers on how to keep your spending under control.

If they’re producing good management accounts for your business each month, they should be highlighting where you’re spending money, and asking probing questions about the reasons for such expenditure.

As Garry Mumford explains:

“Good management accounts provide context – enough detail for you to really understand what’s going on, and help you make decisions. It’s management accounts that will give you a true picture of your business.”

For example, if you find that your expenses are high, you might want to carry out an audit of your recent spending in this area and possibly impose stricter controls.

Ideally, you want to foster a culture where all staff pay close attention to what they spend.

It’s easy to lose perspective when the business in which you’ve invested so much time and effort is having financial difficulties.

Whenever this happens, an experienced accountant should act as a candid friend who looks dispassionately at the business and gives you the hard facts. You need those facts if you’re to understand why your business is struggling to deal with its debt.

Beware taking advice from an unqualified accountant

Learn more about the risks of getting advice from an unqualified accountant and what qualifications to be aware of when looking to hire someone.

Zero-based budgeting

Find out more about this method of budgeting that allows you to create a culture of cost management within your business.

Institute of Chartered Accountants in England and Wales – Business Advice Service (BAS) Link opens in a new window

This connects entrepreneurs, start-ups and small and medium-sized businesses with ICAEW-regulated accountancy firms that will provide a free initial consultation without obligation.

How to improve your cash flow cycle – YouTube video Link opens in a new window

Garry Mumford, managing director at specialist accountancy firm Insight Associates, has produced a video explaining the cash flow cycle in simple terms, and ways for small businesses to better manage the cash they have coming in and going out.

Appoint someone to deal with HMRC on your behalf – GOV.UK Link opens in a new window

You can authorise someone else to deal with HM Revenue & Customs (HMRC) for you, such as an accountant, friend or relative. GOV.UK offers guidance if you want to do this.

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