05 Jul Five Tips for UK Startups
A lot of work goes into a startup business. Regardless of where you establish the foundation of your company, it’s important that you do not disregard your finances. Accounting is a major area of business, just as marketing, product development, and logistics are. You need to know how much revenue you are generating as well as how much you are putting towards your expenses. Knowledge is power, and financial data will help you figure out just what you need to do to grow your business and solidify its foundation.
Five Tips for Startup Business in UK
Without a solid grasp of cash flow, you are running your business blind. Beyond cash flow and financial models, however, you also need to put painstaking effort into your taxes in order to avoid penalties from the HMRC. If numbers and taxes aren’t exactly your thing, your accounting is something you should leave to a professional. Whether or not you have a professional on board, knowing the following accounting tips can be helpful for startup owners like you:
1. Know the tax rules
Taxes can break your startup before it even breaks even. Thus, it is essential to know the tax rules to which you will be subject. Your startup’s operating structure, kinds of products sold or services offered, location, income, and other factors can affect the amount of taxes you pay. You also need to know the rules on tax exemptions so that you can cut on your mandatory payments to the HMRC. Strong knowledge of tax rules can also help you avoid making mistakes in your tax returns. An accountant can advise you on taxes and on the ways you can reduce them. They can also prepare your tax returns for you if you have no more time to scrutinize these forms yourself.
2. Use separate bank accounts for your business
Creating a bank account for your business that’s separate from your personal account is a matter of fiscal practicality and discipline. Not only will you be able to monitor cash flow more easily, but you will be able to control spending as well. With a separate bank account, you also make fund organizing, transaction recording, and tax planning more convenient. For even more organized tracking and better grouping of your business money, you could set up a separate account for withdrawals and a separate account for deposits. An accountant can help set up these accounts for you and find the best banks for your business.
3. Identify your financial goals and milestones
What do you want your startup business to accomplish in the next few months or years to come? Financial goals set the direction into which you will take your business to make money. These goals should be “SMART” — specific, measurable, attainable, realistic, and time-bound. Thus, not only do you say, “I want to get rich,” but you say “I want to earn £1,000,000 by the end of the year.” Beyond that, you should list down the specific steps you need to take to meet this goal. Each step should have a corresponding unit of measure, such as the number of items sold.
Your goal doesn’t have to be too ambitious, like reaching £1,000,000; it could be as simple as to break even within the next six months. Having simple, yet SMART goals such as these would encourage you to be bolder in your business. If you are finding it difficult to sort out your financial goals in the SMART way, an accountant can help you find your bearings. They would also help you track progress on the goals and milestones you have set.
4. Monitor your cash flow and inventories
Startup owners are frequently too engrossed with getting new customers that they forget to enter every transaction they’ve made. In the process, they lack data that would be able to tell them if their financial goals were met. This makes them prone to making costly mistakes in their tax returns as well. Thus, part of your obligation as a startup business founder is to have at least a ledger where you can write down your transactions at the end of each day. Indicate the date, the amount that someone paid you (or you paid someone), and the person involved in the transaction. Aside from cash flow, you also need to track your product supplies. Since these tasks can consume a lot of your time, having a qualified person such as an accountant with keen attention to detail will save you quite a bit of time and allow you to avoid the hassle that arises from mistakes.
5. Use accounting software (and hire someone who will use and interpret its data)
Modern businesses, whether a startup or established, need to have a set of accounting software for their cash flow and inventory monitoring requirements. Accounting software reduces mistakes and makes it easy for business owners to see trends in cash flow. However, it isn’t enough to have the software. Businesses also need an accountant to gather the relevant data, sort it out, and analyze it so that the output of the software becomes meaningful.
Accotax specializes in accounting for small businesses, get in touch today to see how we can help.