Did you know that between 500,000 and 700,000 new businesses are started each year in the United Kingdom, with 77 new companies beginning operations each and every hour? In the past few years, there has been a significant expansion in the start-up industry. Currently, there are over 5.8 million small businesses striving for success in their different fields. The worldwide start-up business is responsible for roughly three trillion dollars’ worth of annual revenue.
It’s exciting to start a new business, but in order for a firm to expand, they need to become experts in all aspects of running a business, including accounting. A recent survey conducted by CB Insights found that inadequate financial resources were the primary cause of failure for 29% of new businesses.
Accounting is the act of recording, organising, and making sense of a company’s financial data. This procedure is essential for new organisations. All of the company’s financial information, including records of all of the firm’s transactions, tax information, and estimations, will be included. Both monetary wealth and free time are finite resources. Start-ups may gain real-time visibility into the financial health of their organisation by maintaining accurate accounting records. This provides them with the ability to make more informed decisions that will allow them to maximise revenue and identify opportunities for expansion.
‘According to a recent CB Insights poll, 29% of start-ups failed due to a lack of funds.’
If you are equipped with the necessary knowledge, tools, and assistance, the accounting and bookkeeping functions of your organisation could run smoothly. Entrepreneurs who are starting new firms will have a lot on their plates, but accounting is one component of a company that has to stay in excellent functioning order at all times.
Top 6 accounting tips for start-ups
#1 – Use the right software
As a company grows, it will be challenging to monitor all of the financial transactions that take place. There are certain larger companies that will make use of enterprise resource planning or specialised accounting software (ERP). On the other hand, the introduction of off-the-shelf cloud-based accounting software solutions has provided many start-up businesses with options that are user-friendly, cost-effective, and secure. These options can also be applied to a variety of industries.
For example, Xero is an exceptionally adaptable accounting software that can be programmed to carry out a variety of tasks automatically and gives you access to your financial statements whenever you want them. Over 800 different app connections are supported, and it offers real-time updates. Other alternatives include of accounting software such as FreshBooks, QuickBooks, Sage, ClearBooks, and Crunch, as well as a great number of others that can be adapted to meet your particular needs. Accuracy of data and compliance with tax laws are supported by these elements.
In addition, the government is working toward the goal of mandating that all business tax returns, including those from start-up companies, sole proprietorships, and individuals filing their own taxes, be submitted electronically. Making Tax Digital is a scheme that has already been implemented for VAT returns submitted by corporations and other organisations. Any new business may secure its compliance with existing as well as future accounting, statutory return, and financial rules by making an investment in this software during the beginning stages of business operations.
#2 – Have a financial plan
Without a blueprint, it’s difficult to know how to go where you want to go, thus having a sustainable financial infrastructure entrenched in business operations is critical. You must define your company objectives as well as the cash, labour, and other resources necessary to achieve them.
This sort of financial planning enables prudent cash flow management, prudent budget allocation, risk minimization, and transparency. For example, if you anticipate seasonal swings in sales or overheads, your planning allows you to budget accordingly. There are several expenditures associated with beginning a new business, ranging from professional fees, insurance, facilities, and employees to stock and technological costs, all of which must be considered.
A sound financial plan will keep you on target, especially when difficulties come. It is also a wise idea to undervalue revenues and overestimate expenditures while creating a safety net. Entrepreneurs should assess their financial strategies on a frequent basis to ensure that their goals and objectives are met.
#3 – Be organised
All UK firms are required to preserve proper financial records for a period of seven years. Your finances are the foundation of your business. Reliable accounts allow you to access information and financial data as needed, saving you time. Quickly producing invoices and quotations might mean the difference between earning and losing new business.
With the proper organisational structures in place, you will be able to measure progress by analysing financial data such as income, costs, profit margin, sales, purchase, vendor details, and taxes. Most businesses will have negative cash flows throughout the start-up stage, thus financial organisation is critical at this time.
The correct tools and organisation may help you eliminate mistakes, collaborate seamlessly with your colleagues, produce particular reports, and make strategic choices.
#4 – Use an accountant
You may contemplate conducting your own accounting as a start-up business owner, but a qualified accountant who has helped other organisations in your circumstances would be able to give cost-effective assistance aid. They will also make certain that you avoid typical hazards.
In the early stages, it is frequently more practical to delegate the majority of “non-core” tasks to others. Do you, for example, desire or require a full-time accountant available five days a week? Most likely not. Outsourcing work to a specialised accounting company ensures that you develop strong accounting practises and structure from the outset, allowing you to focus on other strategic aspects of your organisation.
You will also obtain impartial financial advice and insights into your financial data, avoid costly HMRC fines, and have confidence that your financial record-keeping is accurate and organised if you use an accountant.
#5 – Make the most of the financial help available
Many freshly formed firms may require some early finance, and a lack of cash is one of the most prevalent reasons that start-ups fail. Grants or tax breaks may be available depending on the kind and location of your firm. However, many businesses are unaware that they are qualified or postpone the application procedure. Any accounting company that specialises in start-ups will be able to provide you with the essential grant information and other information.
You may also be eligible for business counselling and workshops to help your company develop and prosper. Again, what is offered will vary according to location.
#6 – Achieve a premium exit valuation
As exciting as it is to establish a business, many entrepreneurs want to sell it at some time. As a result, selling a start-up requires meticulous planning, and business owners must have a clear concept of the worth of their start-up in order to communicate this to potential purchasers.
When it comes to an exit, companies with appropriate financial systems usually command a premium. It gives you confidence that you have created a well-run business. Entrepreneurs can demonstrate regular engagement, substantial data, and organic development, all of which are critical components in developing a valuation.