Business Start Up & Accounting
Starting your own business is not easy and the line between success and failure can be fine. The vast majority of successful businesses were at one time a startup. One of the most important aspects of starting a successful business is Accounting. It is so easy to get caught up in the tasks of choosing a name, designing a logo, or a business card, yet paying no attention to the financials a key to business success
Choosing the Right Structure
One of the decisions you will have to make is choosing the type of structure for your business. This decision will have an impact on how much tax you pay, when you pay, the amount of paperwork, compliance requirements, ability to raise finance and most importantly the personal liability you can face. The main types of business structures are
• Sole trader
• Limited company
After you have made this decision you will legally need to register your business with HMRC and Companies House depending on the type.
Open a Bank Account
After you have legally registered your business, you will need to open a business bank account. If you are operating as a sole trader you are not legally required to have a separate account but having one will keep your records distinct and will make life easier when it comes to filing your tax return. Also in the event of an HMRC enquiry, all of your business transactions are in one place. Many banks offer 12 or 18 months free banking to start ups so do your research before walking into your local branch.
Set up an accounting system
You should set up an accounting system from the very start, some of the banks provide free accounting softwares. There are many cloud based softwares in the market such as Xero/Clearbooks/Sage instant accounts however, if you can’t invest in an accounting system, you can use spreadsheets to record income and expenses.
Claim for all business expenses
As a general rule you can claim for any costs which are incurred “wholly and exclusively for business”. Remember to keep records of your business mileage and keep all the receipts even for small items. Get yourself into the habit of keeping a note of everything (do remember your new hand bag or drink with mates is not a business expense).
Management Information and Advance Planning
Regular management information is vital to the continued business success. As a start-up you may think you have all the information worked out inside your head. It is paramount that every week you sit down, review your income, and expenses, debtors and creditors and take appropriate actions.
Plan for Tax
You may think that profit you have made is yours and its you who had to work hard to earn it, the reality is you have to pay some to the taxman. So you won’t get any surprise at the end of the year plan as you go, and ideally open a saving account to put money aside.