STARTING RIGHT – 5 ACCOUNTING ESSENTIALS FOR STARTING YOUR BUSINESs
When it comes to starting a business, there is often so much to think about. You may not even have a specific ‘start point’, perhaps running your own business is something you fell in to by accident!
However, it is never too late to put in to practice some good book keeping and accounting habits to help you keep on top of your finances throughout the year.
Here’s my five top recommendations of financial things to consider when starting your business.0
1 – Open a business bank account
When running a business, finances can quickly get messy! Keeping track of your incoming and outgoings can be complicated enough (we’ll get to a solution for that in a moment), but the last thing you want is to get your personal money mixed up with your business.
You have to have a business account as a registered company. You don’t as a sole trader, but it is still good practice to have one.
There are many choices when it comes to business bank accounts and most do charge a small monthly fee, so it is important to shop around and consider the different offers and deals too.
Here are some things to consider and compare:
- Bricks and mortar vs online only – some banks do not have physical branches. Whilst online and phone banking can be very convenient, if you need to deposit cash regularly (although this can also be done at the Post Office) or have a complicated business model, having a local branch can be convenient. Weigh up the pros and cons for you.
- Types of transactions – consider the types of transaction you need to process. There are different charges from bank to bank for depositing cash, cheques and international transactions. Some also have certain limits.
- Functionality and features – most business accounts will have an online option, some apps are easier to use than others. Take a look at what different accounts offer and if they will suit you.
- Compatibility – you also need to consider integration with any other banking, accounting and budgeting software you may use in your business
2 – Choose accounting software
Keeping your book keeping in order from the outset can be helped dramatically by choosing (and spending out!) on accounting software. It may not be something that you wish to spend money on, but with Making Tax Digital, as well as common business tasks, such as sending out invoices, preparing tax returns, VAT, providing regular accounts or running a payroll, accounting software will make life a lot of easier for you (and your accountant!).
I use and recommend Xero. However, there are others available, including QuickBooks and Sage.
Like a business bank account, it is about comparing the features, usability and compatibility the software has for your business needs.
If you want to learn more about Xero and why I recommend it, get in touch. If you have chosen Xero already, but want some support and training in all it has to offer:
3 – Prepare for money coming in
This is one of the best bits of running a business, right? Receiving money in return for your goods and services. Be prepared for this and make the process as smooth as possible.
Your preparation can include any number of the following depending on your business type:
- creating sales invoices
- creating receipts
- setting up a till system
- card machines
- accepting online payments
- automated subscriptions or regular payments
You will also need to think about your terms of sales, refunds, returns, etc.
Remember that you will need to record all sales, using your accounting software. Importantly, all monies should go in to your business bank account.
4 – Prepare for money going out
The physical act of paying your bills and overheads may be as simple as setting up direct debits, standing orders, entering your bank details or using a debit card. You may also have a business credit card.
Importantly, just as with money coming in, you must record any money spent.
Any expenses should be documented and physical receipts kept, or at least, recorded. Some business bank accounts and accounting software will allow you to take photos of physical receipts and ‘attach’ them to the related expenditure.
Recording expenses are incredibly important when it comes to completing a tax return, so try to get in to a habit of regularly recording them. Also, don’t forget to record any business mileage.
5 – Understand your figures
First and foremost, if you are struggling with any financial elements of your business, please do not bury your head in the sand! Accountants like me are here to explain things in jargon free language. I want to help you and show you how you can use your ‘figures’ to help your business to grow and to make vital financial decisions in the early stages.
Having clear and easy to understand records is really important.
It means you can more easily keep track of your incomings and outgoings. It involves you putting money side for your tax bill, savings and any other potential (even unexpected) bill.
By keeping clear records and clearly structuring your figures, they will be useful to you too. Think about how you can use your business ‘numbers’ to inform your decisions. For example, you will be able to see what products are selling well vs those that are not if you have clearly labelled your sales transactions. This helps with pricing decisions, product lines, as well as where you should put your energy and effort.
As another example, if your figures are easy to understand, you can see what you are spending the most on if you have clearly grouped your expenses. Cutting outgoings can be one of the best ways to increase profit.
Starting right with a little support
Paying a book keeper or accountant may not be on your list of priorities when you start a business. You may think it is something that you are not willing to outsource at an early stage. However, if you do not have the time, the expertise or the commitment, it can be costly. Late tax returns end up in a fine. Incorrect figures being filed will lead to long term headaches.
You may not need to pay an accountant monthly at the start, but ensuring you are set up correctly and getting support at key times, such as the end of the tax year, is beneficial to almost all business owners.
For more information about my Start Up Services, book in a call. I am friendly, plain speaking and approachable. I want to help you to grow your business in the right way for you.
While this blog aims to provide helpful information, it’s important to remember that every business and person is unique. So, before making any decisions, we highly recommend seeking professional advice. We want to ensure that you have all the support you need to make the best choices for your situation!