7 Accounting Tips for Start-Ups
Starting up a new business is a really exciting time but there are so many aspects to think about that it can also become somewhat overwhelming. If you are starting out fairly small you might also be carrying out every aspect from marketing to CEO to accountancy all by yourself.
While this is fairly common, accountancy is one of the areas which can have the most negative impact on a start-up business due to the lack of understanding and knowledge of this specialist field.
Saving unnecessary costs and making as much profit as possible is certainly the goal of most start-ups but cutting back on using professional accountants for your business might end up being an own goal if you are not careful.
Here are our seven accounting tips to think about if you are running a new start-up business:
- Don’t forget about the financial side
Many entrepreneurs start up a business because they have a great idea, or a great product to sell and they get so excited about the opportunities that the financial side is almost irrelevant.
When setting up a start-up business you need to look at the figures and make sure it’s going to work and make money. Don’t get so caught up in creating a product and building a website for it that you haven’t even looked at the costs and expenses as well as potential sales.
Ideally you should have carried out some customer research before setting up the business, so that you know for sure, what kind of price people are willing to pay for your products and that there is a demand – otherwise you won’t have any accounting to do at all.
- Get your accounting right from day one
Once you have considered the financial side you need to get your accounting right from day one, after all, you want to give your business the best possible chance of success, so make sure you have a business bank account set up and ways to record income and outgoings.
If you are planning to do it yourself, make sure you have a system in place that works for you, whether online or manual and don’t forget to register your business with HMRC so that you can file tax returns when required.
- Use a professional accountant
If your business is on the larger side or you have investors then you should definitely seek the services of a professional accountant for your business. They can help with all kinds of areas, for example, they can offer ongoing financial advice to your business, they can spot problems in your finances, they can help with legal issues such as taxand they can make sure you are up-to-date with legislation.
A good accountant doesn’t just do your books, they can become a long-term advisor helping to make sure your business stays on track financially and advising of any potential issues before they become major problems. There are a number of sources online where you can get this service, you can try something like Crunch.co.uk to see if meets your needs.
- Learn about business accountancy
While you should use a professional accountant for your business that doesn’t mean you hand over all financial responsibility to them – you are the business owner so you need to take on responsibility for understanding your business finance as well.
Your business won’t work if you don’t understand the numbers – you need to know what profit and loss, income and revenue, and tax all mean and how they impact on your business
The more you learn about accountancy yourself the more you can lean on your accountants for expertise and get the upper hand on your competitors by analysing their annual financial accounts.
- Understand the different business set-ups
When you are planning a new start-up one of the things you need to consider is how you want to set up your business – is it going to be a limited company, or will you operate as a sole trader. Both need you to register with HMRC but there are different financial implications which you need to understand before you decide.
Most businesses start out as a sole trader because it is the easiest way to set up in business – you just register with HMRC and pay tax on any profits you make. There is no need to publish company accounts and it is all very straight forward.
However, it does mean that if the business doesn’t survive you are personally liable for any debts from the business and creditors can seize your personal assets to pay them back so there is a lot less protection from this set up.
Becoming a Ltd company is more complicated and involves registering with Companies House and having lots of rules to meet, however, doing this means your business is a legal separate entity to you and you are not personally liable for any company debts.
You need to publish a financial report every year which is open to anyone to see and you are responsible for the tax and NI of any employees which you may take on but you are more protected so there are pros and cons for each choice.
Deciding on your business set-up choice
You can change the business structure which you choose although if you aim to do this it would be best to do so at the end of the tax year to make your accounting life easier. You need to think about which is the right option for you and make sure you look into all of the financial and tax implications before deciding.
- Decide on your approach to accounting
There are all sorts of ways to do your accounting – the most important thing is to make sure it’s accurate. You need to decide how you are going to manage and keep track of all of your information.
It might be worth employing a book keeper to look after your accounts for you, or else look at whether you can use a simple spreadsheet, or a handwritten record of income and expenses – you need to decide on your system and make sure you keep it updated at all times.
It’s important that any record of accounts which you keep match exactly with what goes in and out of your business back account so that you know your business records are always up-to-date.
If your accounts are simple every month, with regular money coming in and out each time then it might be that all you need is a straightforward spreadsheet and a folder to store all of your receipts and invoices for the records.
Keeping records doesn’t have to be incredibly complicated – it just needs to be done regularly and kept as up-to-date as possible so that you can be confident when you submit your tax returns to HMRC.
There are also options for using cloud computing – keeping all of your records online which will help if you want to complete your tax return with HMRC online and use the extended deadlines for doing so.
- Consider using accountancy software
It may be that as a start-up you would rather do your own accounting to start with, and perhaps look to use an accountant once your business is up and running successfully. In this case it might be worth considering accountancy software.
There are many accountancy programmes out there designed specifically for use by smaller businesses so do some research and have a look at how much it costs to run and what it can do – it’s important to choose software that will suit your business into the future as well as currently.
The other important aspect to consider is that accountancy software is only as good as what you put into the program. If the figures you input are wrong it won’t matter how good the program is, your books and records will end up in a muddle.
There are many software solutions out there, some of which cost the earth and others which are only a few pounds per month – you just need to make sure it meets your own particular business accountancy needs.
If you are not confident with numbers and don’t have any kind of financial know-how then the best solution for your business accounting has to be to outsource it to a professional – either an accountant or a book keeper, so you know that all your records are up-to-date and accurate.
If you are more confident then investing in some appropriate accountancy software will certainly make your life much simpler and easier, allowing you to keep and store electronic records as well as complete your returns online as well.
For all start-ups, getting the accountancy right at the beginning is the most important aspect;however you choose to run it. Having accurate records, understanding the money that is coming in and going out of the business every single month is vital to the success or failure of any start-up.
If your book keeping records or other financial management goes wrong you could be subject to fines or legal action and it could be the difference between your business surviving and thriving, or failing very quickly.https://www.completeconnection.ca/accounting-tips-for-start-ups/https://www.completeconnection.ca/wp-content/uploads/2018/11/New-Picture-11.jpghttps://www.completeconnection.ca/wp-content/uploads/2018/11/New-Picture-11-300x300.jpgBusiness