Moved from self-employed for the odd side gig, to UK LTD co, to VAT registered UK LTD co.
The "business services mafia" will like to frighten you into believing you have to drop hundreds of £ on their services - plus £120/yr for an accounts package, more for payroll, business banking, etc.
Because your mind is too tiny to comprehend the ways of the priests. e.g: Don't ever ask a question in a business forum, you'll get swamped with the clergy telling you the question implies you're definitely going to prison because you're going to get it all wrong.
Do not believe them.
It is perfectly possible - perhaps even 'easy' - and if you understand the basics of double-entry accounting, all entirely learnable without too much effort. And best of all, you can do it almost for free!
Don't drop hundreds per year on Xero, use https://www.quickfile.co.uk. Cost: £0 (upsell on receipt scanning, but I don't use that). Does VAT, with electronic submission. I literally don't understand why you'd spend money on Xero - the extent to which it's advertised over here is insane; you're just paying for TV advertising.
Payroll (and all the tax calculation): Free, for up to 3 users. https://www.shapepayroll.com
Business banking: Tide. 20p/per transaction (no monthly fees!)
The hardest parts are - discipline of entering the transactions and not letting them build up - in the UK, understanding capital allowances vs depreciation - when doing payroll how to split the payments into the correct accounts (shape does the sums, you have to account for it correctly) - Make sure you pay all your HMRC bills - Doing the year end as a micro-entity (the CT600 corporation tax return) is actually surprisingly easy, and amounts to putting numbers in about 6 boxes.
By all means pay for all of this stuff if it isn't of interest to you. For me, as I intend my co to run long after I finish working, I didn't want to have annual fees for services that I really wouldn't be getting the use out of.
It's even worse in the UK if you mention gas. If you so much as mention a boiler you'll be pounced on by the cartel inventing their own legislation.
It seems like these fields are filled with people who can't stand DIY and just try and get everyone to pay for professional services.
When I try and replace a burnt fuse and ask for help, I accept that I'm not a professional and might burn my house down. Just tell me the risks and how to do it. I'm not a child, and I'm not going to sue someone when I've said upfront that nobody becomes liable just because they gave me advice.
You can file your accounts (which are trivial for a micro entity) directly with Companies house, or, when you do your CT600 corporation tax return (which is the 6 or so numbers) there's a checkbox marked "also file to companies house".
You absolutely do not need an accountant.
You also get a great deal of time (extra on your first year) between year-end and when you have to submit, so there is no panic.
My mother was an accountant for years, I learned a lot of accounting, but there is a MASSIVE difference between knowing how to basically bookkeep and the tax code.
I'm in the US - so might be easier in less tax-lobbied countries.
When I started my second consulting firm (after closing down my first when I took a "real job"), I initially tried to go at it myself, but payroll is a complex process, so I decided to outsource that. Cost me $20/mo, but saved me hours of work. Then when the end of my first tax year hit, I started trying to figure out how to do my corporate taxes myself. Downloaded all of the tax forms I could find that I needed, and printed the couple hundred pages of information. 4 weeks into filling out the forms and 2 weeks before a filing deadline, I gave up. To the best of my knowledge I had underpaid my quarterly estimates by $30k.
I reached out to a small business accountant (brother of a good friend), and for only $1200, he handled the 112 page tax return, found out I had only underpaid by less than $2000, also found a whole bunch of write offs I didn't even know to look for, and did a full reconciliation of my accounts for that.
It was at this point that I decided I will always pay for professionals to do the part of this job that I am not proficient at. All of my various accounts-related services add up to less than 1% of my revenue, and if it were even 5 or 10% of my revenue, I'd probably still pay it, just to know it was done correctly.
The dividends paid by having basic accounting knowledge were twofold.
It definitely helped me run the business better-- particularly when it came to working with the CPA who handles our taxes. It also helped me in communicating the operation of the business to the partners who have less of an accounting background. I've ended-up doing all the bookkeeping for the business and I think we've saved a ton of money versus hiring an accountant to do that basic work. (We still hire-out for tax-related work because I don't want to sink time into learning those intricacies.)
The other major benefit, and arguably a larger one than the first, is giving me credibility when I talk to Customers' finance and accounting people. Properly using the terminology they're comfortable with to describe their business problems feels like it has helped me land relationships and projects. Obviously, I can't spin-up a "scratch universe" to test that hypothesis, but I do know that I've seen tech-heavy and accounting-light presentations by other vendors go over very badly with some of the same people.
Finally, I'd argue bookkeeping and accounting is, arguably, the oldest "information technology" discipline in humanity. Much of IT springs from the history of bookkeeping becoming computerized ("automatic data processing"). I think knowing the history of IT, be from the dawn of computer science birthing from logic and mathematics, or the first practical applications of IT to human problems, is valuable to its practitioners.
> The other major benefit, and arguably a larger one than the first, is giving me credibility when I talk to Customers' finance and accounting people.
I also have benefited a lot from the accounting subjects I took in college have also been an advantage in my professional career as I can 'speak the language' of my workplace's financial department.
> Finally, I'd argue bookkeeping and accounting is, arguably, the oldest "information technology" discipline in humanity. So much of the discipline springs from the history of bookkeeping becoming computerized ("automatic data processing"). It's a good background to working in IT to know about where it came from.
- Definitely. The software used at my family's the accounting office was older than any other I had used. This year I helped them migrate from an MSDOS Fox Pro 2 application to a newer app.
The MS-DOS It worked well, it is even still supported by the developer (!), but the work around required to make everything work in a Win 10 environment was too much of a hassle.
It felt like doing digital archeology when opening files created between 1989 and 1994 to see how data was stored. Even this newer app still uses an older tech stack: Visual Fox Pro 9. Accounting software seems to run in an alternate timeline.
I am also a freelance consultant but in the cloud infra space. I appreciate the freedom it gives me and the insight on the operations of running a business are invaluable.
As a software engineering I always looked suspiciously at accounting and finance, but I have to admit I've been wrong. I discovered a practical and theoretical elegance that is very pleasing for someone like me.
I ended up enrolling in an MBA because I wanted to learn more about the business side of things. I had a few courses about corporate finance, valuation and accounting which filled many gaps I had.
I still don't trust myself running my own finances completely, so I do pay an accountant to take care of the details. But I am very happy I know financially what is what when deciding where to take my little business.
Knowledge is power, especially when it comes to finance.
About 10 years ago I brought on an outside accountant to handle my small business stuff. They do the final 'paperwork', but it's forced me to become a bit more diligent about financial housekeeping stuff - documenting purchases, keeping tax forms, etc. And I try to never let things go more than a few weeks before reviewing (primarily expenses). Part of the 'dread' of financial stuff was having to wade through a year's worth of paperwork. Keep ahead of that and working with an external accountant has made all this more of an annoyance than anything else.
Same goes for basic infrastructure and configuration knowledge to a certain extent:)
IIRC it has a SQL Schema that can be imported into most databases.
Learning account is great - it helps you to understand P&L and BS etc - but what you really need is managerial accounting knowledge. I made a mistake of thinking bookkeeping was accounting and ended up not doing good tax planning etc - let's just say I'm still paying for it. Painful lesson!
I would highly recommend still keeping a CPA around - make sure they're truly into Managerial Accounting.
During these years I started playing with the idea of training myself in basic/intermediate accounting and/or finance. The motivation is twofold: run my own business better (and maybe stop paying an accountant to do my taxes) and maybe work on software projects in finance (where I suspect there is good money to be made).
I'd be interested hearing stories from fellow software engineers who did similar training!