We are super excited to be launching a new accounting support package aimed at those involved with start up businesses! Designed to provide you with all the key tools and resources to get you off to a flying start, contact us here for more details...
It is for you? Have a look at our FIVE questions every start up should ask themselves to get a taster...
1. How you are going to get paid.
How will you invoice your clients? Will you ask for payment up front or on completion? What payment methods will you accept? Are you set up to take direct debits or card payments? How much will it cost you to do this?
What do you do if someone doesn't pay?
2. How much money do you need to take home from the business. Bills. Hobbies. Kids. Pets. We all have costs associated with living that don't go away. If you are operating as a limited company you will need to plan how you take money out of the business. I posted a blog about this back in September 2017.
3. How do you want to structure the business? The most common question we get from start ups is whether or not they should set up a limited company or operate as a sole trader. The answer will always depend on your individual circumstances and there are pros and cons to each approach. Make sure you understand what you're signing up to in each case - further information is available in my blog on the subject.
4. What expenses will you have and what can you put through the business. Getting set up in business has all sorts of costs associated with it. The specifics vary but generally speaking, most people will need a web presence (website, domain name, email provider all cost money) and some equipment e.g. a computer or a phone. There are costs associated with going to networking events, travelling to meet clients and that's before you've even got anyone on board! Business expenses can be offset against profits before corporation tax (or income tax, if you are a sole trader) is charged meaning you "claim back" the tax on your costs. Whether or not something is a genuine business expense is a slightly grey area and I wrote a about this for sole traders a little while ago.
Most businesses will need an upfront cash injection (referred to as "Capital") to cover their running costs and keep things going until they actually start getting paid. If you are setting up on your own, make sure you have enough cash to live on, and to run the business until you start making a profit. This can be quite a large sum and it is unnerving watching your hard won savings start rapidly disappearing. There are a lot of organisations across the country providing free and low cost support to startups and there are sometimes grants available. The local ones in Hertfordshire are Stanta and Wenta.
5. Do you really need an accountant?
The answer to this really depends on your business, your skill-set and how you want to spend your time. Cloud-based accounting systems like Xero have made day to day accounting more accessible for small businesses, but there will still be times where you are unsure, or feel you could benefit from a bit of steer from a finance professional. If you have a lot of transactions going through the business, there can be quite a lot of administrative time required to keep things up to date. Contracting this out to a book-keeper can be a really efficient way of managing it (and cheaper than an accountant), and freeing up your time to focus on what you're good at. Generally speaking, it is more common for limited companies to engage professional accountancy support (to deal with more complicated things like corporation tax) but lots of sole traders use us too.
Most accountants will offer you a free consultation to discuss your needs before you sign up, and talk through your business with you. If you're unsure, I'd suggest taking advantage of this - you should see pretty quickly whether they will add value to your business or not!