How much does it cost to hire an accountant for a small business?

Even in your average small business (1-3 employees, less than $500k turnover) there will be a broad range of options for accounting and finance including getting specialise setup, tax structuring advice, finance systems and processes together with the everyday bookkeeping and accounting functions.

Is an accountant needed for a small business?

An accountant can offer comprehensive startup and ongoing small business advice, while making sure tax compliance is prepared and filed with the relevant authorities on time.

What is the role of an accountant in a small business?

Being a business owner can be a tough job, and it’s good to have a trusted advisor to lean on in times of complexity or uncertainty. An accountant will be able to help you navigate your business through these times, and help keep compliant with relevant tax authorities.

Xero is an integrated accounting platform that can complete all small business invoicing, receipts, bank transactions and reporting for the IRD. Being cloud based means your advisers can have access to your information in real time.

Is Xero Accounting any good?

Xero is a great tool for small businesses as it gives you real time access to the financial data of your business - information we couldn’t imagine being in business without.

Understanding Shareholder Current Accounts and Drawings

If you’re a business owner in a Company, you may have heard of a Shareholder Current Account, but what does it actually mean? In simple terms, it’s a record of any money you put into or take out of the company beyond your initial share capital, and works like an internal loan.

Increases to the Shareholder Current Account:

Any cash or assets introduced by the Shareholder will typically be Funds Introduced in the Shareholder Current Account.
While Home Office claims aren’t typically paid in cash by the Company, these can be offset as the shareholders have incurred these expenses on behalf of the Company, and the balance goes through the Shareholder Current Account
A Shareholder Salary may be paid from the profit accumulated by the Company in the period. Is often not directly paid, and balances through the Shareholder Current Account

Decreases to the Shareholder Current Account:

If you take money out of your company (without paying PAYE), these withdrawals are called drawings. Drawings are not a tax-deductible expense for the company. You won’t see them listed in the Profit & Loss, as they don’t impact taxable income. Instead, they’re recorded in the Shareholder Current Account.

What Happens if You Withdraw More Than You Put In?

Taking out more than you have contributed leads to an overdrawn Shareholder Current Account. When this happens, the company/shareholer have four main options:

Pay Fringe Benefit Tax (FBT) to Inland Revenue
Charge the shareholder interest at the IRD’s prescribed rate.
Repay the loan – The shareholder can simply return funds to the company.
Declare a dividend – The company can pay out retained earnings as dividends, which are also taxable to the shareholder.

Any solution must ensure the company remains solvent both before and after making the payment.

Managing a Shareholder Current Account properly is crucial to avoid unexpected tax implications. If you’re unsure how to handle drawings or an overdrawn account, seeking professional advice is always a smart move.

Disclaimer: This blog post is for informational purposes only and should not be construed as professional advice. It is recommended to seek the advice of a qualified accountant or tax professional regarding your specific circumstances.