Accountant vs financial advisor: what’s the difference?

One of the most important challenges you’ll take on when running your own enterprise is managing your small business finances.This includes tracking income and expenses, paying taxes, and planning for the journey ahead – tasks that will only get more complex as your business grows.

It’s a lot to think about, especially amid all your other responsibilities as a business owner. That’s why many entrepreneurs seek out finance professionals like accountants and financial advisors for support and guidance.  

Accountants help you stay on top of your financial responsibilities in the present, ensuring records are accurate and taxes are paid. Financial advisors, on the other hand, look ahead to help you develop business growth strategies,make wise investments, and ensure your plans align with your long-term goals.

Having a good grasp of what each of these professionals can do for you – and when to seek their help – can make a big difference to your finances. In this guide, we’ll break down the roles of accountants and financial advisors and explore how they can benefit you.

Accountant vs financial advisor

As your small business ideas evolve, different financial challenges are likely to arise – from changing how you manage daily transactions to altering your financial strategies to accommodate new business goals.

This is where accountants and financial advisors step in. Each brings unique strengths to help you stay on a firm footing today and plan wisely for tomorrow. 

Accountants for small businesses

No matter the size of your business or its stage of growth, having an accountant on board is one of the best ways to ensure financial health and long-term success.

You can usually choose a package of small business accounting services that suits your needs – whether that means checking in with your accountant once a year to sort out your year-end accounts, or opting for ongoing support on a rolling basis.

Here are some of the specific areas where accountants can help:

Bookkeeping

Diligent bookkeeping for small businesses means properly recording all your income – for example, payments made through a card reader in your retail premises and online transactions through your online store – along with expenses like rent, utilities, and stock purchases.

You might be using accounting tools for small business like QuickBooks or Xero, or simply sticking with spreadsheets. Either way, an accountant can step in regularly to ensure records are accurate, reconcile bank statements, and manage accounts.

Consistent bookkeeping avoids last-minute tax scrambles and keeps you informed about your business’s performance. Plus, an accountant’s spot-checks catch errors and cost-saving opportunities early, saving you headaches and money later.

Financial statements

With your books in good shape, an accountant can prepare key financial statements such as profit and loss accounts, balance sheets, and cash flow statements.These reports give you a clear snapshot of your business’s overall financial health.

Even if your business isn’t legally required to produce these statements, they’re still really valuable. Whether you’re tracking cash flow trends, applying for a loan, or working out how to value a business for potential investors, these reports provide the clarity you need.

An accountant won’t just hand you the numbers – they’ll walk you through what the numbers mean and how you can use them to make better business decisions.

Tax compliance

When you think of accountants, the process of filing company tax returns may well be the first thing that springs to mind. But their expertise goes far beyond submitting forms to HMRC by the yearly deadlines.

A good accountant will advise on whether staying as a sole trader or setting up a limited company will be more tax-efficient for a business, make sure you claim all the small business tax deductions and reliefs you’re entitled to, and help you navigate taxes like Corporation Tax and Business Rates,so you never pay more than necessary.

Plus, if you ever face a tax investigation or audit, an accountant can help you ensure everything’s in order, reducing stress and helping you get things resolved quickly.

An accountant can also make life a lot easier if your business is VAT-registered. There’s no denying VAT for small business can be complex, especially if your business deals with different tax rates. For example, if you have a combined café and bookshop, where you’ll have to handle differing VAT rates for food and drink items and books.

Budgeting and cash flow management

Budgeting and cash flow management are vital elements of running a successful business. An accountant can help you create a detailed small business budget and cash flow forecast,projecting income, expenses, and potential challenges to give you a clear view of what’s ahead.

Throughout the year, an accountant will regularly compare your actual results against your forecast, helping you spot discrepancies and adjust your strategies where necessary. This helps ensure your budget stays on track.

On top of this essential financial analysis,they can also offer practical advice on how to improve cash flow.This might include speeding up customer payments by implementing new checkout solutions like QR codes, or using software to manage invoices more efficiently and encourage faster payments.

If you’re planning a new marketing strategy for small business or preparing for a seasonal dip in sales, having a strong budget and a clear cash flow forecast will help keep your business stable and ready for any challenges to come.

Paying yourself and your team

Compensating your team can get complicated as your business grows, but an accountant simplifies the process of how to do a payroll.

They’ll ensure your team is paid accurately and on time, while also managing PAYE and National Insurance contributions. Whether you use payroll software or do things manually, an accountant keeps everything in order with HMRC

They can also help you figure out how to pay yourself as a business owner – no matter if you’re a sole trader, part of a partnership, or a director of a limited company. An accountant will make sure you’re paid according to HMRC regulations while staying as tax efficient as possible, so you can keep more of your money.

Financial advisors for small businesses

While accountants help keep your business running smoothly with essential financial tasks, financial advisors bring a different perspective.

They focus on the future so you can map out strategies for growth, investments, and long-term success. Whether you’re weighing up a big purchase, thinking about expanding, or eyeing retirement, financial advisors help shape your next steps.

As with accountants, you can choose how much support you need from a financial advisor – be it occasional advice or frequent check-ins.

Here are some of the key areas where financial advisors can help:

Planning for growth

If you’re thinking about how to scale a business,a financial advisor can help you plan strategically. From opening a second location on the high street to targeting new markets with your online business ideas, they’ll work with you to figure out how profitable your ideas could be and create a plan that fits your goals.

Financial advisors will also regularly review your business plans to make sure you stay on track and adjust course if needed.

Investment advice

A financial advisor helps you put profits to work, guiding you through options like reinvesting in your business, exploring new business opportunities,or setting up retirement savings.

For example, they can help you navigate tax-friendly investment options like ISAs or pensions and explain the impact of Capital Gains Tax when selling shares or investments. Their aim is to tailor their advice to your needs, so you can grow your wealth while staying financially stable and tax efficient.

Financial advisors can also help you find the right financing to fuel your business’s growth – be it traditional loans or small business crowdfunding. For example, if you run a busy bakery and sandwich bar, they might help you secure a loan to invest in self-service kiosks.

Risk management

Protecting your business is just as important as growing it. A financial advisor helps you identify potential risks – whether financial, legal, or operational – and develops tailored small business risk management strategies. This could include finding the right insurance or introducing measures to safeguard against potential threats.

For example, if you’re in the hospitality sector,your financial advisor might provide guidance on public liability insurance and how to prepare for potential disruptions like equipment breakdowns. They can also highlight ways to maintain cash flow during these disruptions, ensuring your business is ready to cope with setbacks.

Financial advisors don’t just focus on immediate risks – they also help with long-term planning, like building an emergency fund for unexpected expenses or preparing for economic downturns.

Balancing business and personal finances

For small business owners, managing both business and personal finances well is crucial. If you’re a sole trader, your personal credit score can directly impact your ability to secure a business loan. For limited companies, maintaining a strong business credit score is essential for accessing new lines of credit and supporting growth.

A financial advisor can help you manage both subsets of finances, offering advice on improving your personal credit score while keeping your business cash flow stable, especially if you’re expanding or investing in new equipment. 

If you’re a limited company director, your financial advisor can help you strengthen your business credit score, increasing the likelihood that your enterprisequalifies for better financing terms to support future growth.

Exit planning

Planning for the future isn’t only about where you see your business going – it’s also about figuring out how to exit when the time is right. Whether you’re considering selling your business, passing it on to family, or simply extracting value as you step back, a financial advisor can guide you through the process.

When planning your exit, you might be wondering whether to turn to a personal accountant vs financial advisor. While accountants focus on tax efficiency – such as helping you take advantage of Entrepreneurs’ Relief – financial advisors focus on crafting a comprehensive exit plan.

Do you need an accountant or a financial advisor?

Having considered the financial advisor vs accountant differences, it’s time to think about what’s right for your situation. 

Barring very simple side hustle and passive income ideas, having an accountant is highly recommended for almost every kind of commercial enterprise. 

As well as letting you focus your time and energy on core business operations rather than wading through numbers, it will give you the peace of mind that comes with knowing your finances are in the hands of a professional who knows HMRC regulations inside and out.

Financial advisors aren’t as much of a “must”, especially if your business is fairly straightforward and your growth plans are modest. However, if you have ambitions to expand, diversify or undertake an exit, it’s well worth having an advisor on hand to help you set clear goals and make smarter moves.

In the end, it’s often not about choosing one over the other – you’ll likely benefit from both. Accountants keep your finances in check today, while financial advisors help you plan for tomorrow. Together, they offer a well-rounded approach to your financial health.

Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.