Did you know that in the UK, between 500,000 and 700,000 new businesses are created each year, with 77 new firms launched every hour? The start-up sector has expanded dramatically in recent years, with over 5.8 million small enterprises competing for success in their respective industries. Every year, the global start-up industry generates almost £3 trillion.
Starting a new business is thrilling, but any company that wants to grow must master all business operations, including accounting. According to a recent CB Insights poll, 29% of start-ups failed due to a lack of funds.
Accounting is the process through which new businesses record, organise, and comprehend their financial data. All financial data – records of all firm transactions, taxes, and estimates – will be included. Money and time are both limited resources. Keeping track of accounts helps start-ups to have real-time visibility into the financial health of their organisation, allowing them to make better decisions to maximise revenues and uncover growth prospects.
‘According to a recent CB Insights poll, 29% of start-ups failed due to a lack of funds.’
Accounting and bookkeeping may be a smooth component of your organisation if you have the correct expertise, tools, and advice. Entrepreneurs who are beginning new businesses will have many plates spinning, but accounting are one aspect of a firm that must remain in good working order.
Top 6 accounting tips for start-ups
#1 – Use the right software
It will be difficult to keep track of all financial transactions as a firm expands. Some larger businesses will employ specialised accounting software or enterprise resource planning (ERP). The emergence of off-the-shelf cloud-based accounting software systems, on the other hand, provides many start-ups with cost-effective, secure, and user-friendly choices that can function across many sectors.
Xero, for example, automates activities and is extremely versatile, allowing you to access your financial accounts whenever you need them. It features over 800 app connectors and updates in real time. Other possibilities include FreshBooks, QuickBooks, Sage, ClearBooks, and Crunch, among many more that may be tailored to your specific requirements. These items support data accuracy and tax compliance.
The government is also moving toward requiring all firms, start-ups, single proprietors, and self-assessment tax returns to be filed online. Making Tax Digital is a programme that is already in place for corporate and organisational VAT returns. Investing in this software at the start-up stage will ensure that any new firm complies with current and upcoming accounting, statutory returns, and finance regulations.
#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.