Running a business startup isn’t easy. If it’s your first time being your own boss, it will be a completely different experience. First, you need to know the basics of business accounting.
According to the Office for National Statistics, 57.6% of businesses that started in 2013 were gone by 2018. In other words, fewer than half of businesses in the UK make it beyond five years.
Meanwhile, 89% of startups founded in 2017 survived the first.
According to one survey, 42% of UK startups fail because their service or product didn’t get sufficient takeup in their market. Meanwhile, 29% said they ran out of cash, while 18% failed because of pricing and cost issues.
For businesses facing failure because of these problems, a setback for them could have been not looking for the best accounting practices, which is essential, not just to stay in line with the law, but to make your business more cost-effective and efficient.
Here is our accounting advice for startups.
Learn your obligations
First and foremost, you need to know your accounting and tax obligations so you know the laws that apply to your business and avoid hefty financial penalties.
Separate personal and business expenses
If you are a sole trader, as many new business owners are, then you have a very unique legal relationship in the eyes of HMRC in that you and the business are one in the same.
Therefore, what your business owes, you owe. What your business earns, you earn. And what your business owns, you own.
Because of that, it’s paramount that you separate your personal and business expenses – just how you would keep your business and personal life separate.
So, open a separate bank account for your business if you haven’t already done so.
Keep an eye on expenses
The most common problems faced by many entrepreneurs arise when they don’t keep close enough eye on their expenses. Mere expenses like team lunches and equipment can easily empty your pockets before you realise it.
With a positive cashflow – that is, more money coming into the business than is going out – you might not be able to invest properly for growth or even keep the lights on.
Therefore, you need to practise good bookkeeping practices and evaluate your cashflow regularly.
If you regularly buy stock, one tip is to make sure your cash isn’t being tied down in goods that you can’t sell off quickly, either by buying less or swapping the goods you sell.
Hire a professional
With experience and a willingness to learn, you may be able to get a foothold with the financial accounts of your accounts.
But as you grow, things become even more complicated and complex, escalating the need for expertise.
Hiring an accountant for only a few hours, a week or a month will make a huge difference – even if they just file your tax return for you.
Accountants can also act as your trusted financial adviser who can help you achieve your short-term and long-term business goals by looking at your financials.
Contact us to see how we can help your business.