According to the latest data, the number of new businesses launched in the UK is skyrocketing. If the latest data is to be believed, then the number of new companies established in 2021 increased by around 14 per cent.
In fact, according to a separate study by iwoca, almost 80 new businesses were created every hour across the UK in the first half of last year.
With so many start-ups emerging in the last year they need to ensure that they have the right accounting systems and processes in place – as well as an accountant they can trust.
For many entrepreneurs this may be the first time that they have run a business, so here are our seven basic steps that they can follow to set up a successful finance function:
Open an online business banking account – One of your first steps as a new business owner should be to set up a new online business account. This will be necessary to receive and make payments but will also be essential in managing your accounting processes and evaluating, amongst other things, your cash flow.
Keep records – From the very first day, you must make sure that you keep accurate records of your business’s payments, invoices and other records. It is best to do this using the latest cloud accounting platforms so that your data and information are secure and so you can easily access records when you need them – the days of receipts in a shoebox are gone.
Separate your expenses – During the early days of running a business, the line between your personal finances and the finances of your business can be blurred, especially if you don’t initially set up a distinct business bank account. Try to make sure you have a clear line between the personal and commercial aspects of your life to make your accounts and tax records simpler.
Don’t forget your tax obligations – As a new business owner your focus is inevitably going to be on growing your income and customer base, but you must be aware of your tax obligations, both as an individual and for your business. Take time to understand what tax may be due on any transactions or income associated with your business, including checking whether you may be able to access tax reliefs.
Invoicing and credit control – The money going into and out of your business is your lifeblood, so it is important that you establish strong invoicing and credit control systems early on so that you not only get paid on time but also meet the deadlines for other suppliers.
Keep it simple – In the beginning, you want to keep your accounting systems simple and easy to understand. You will need to choose an accounting method that suits your needs.
Most start-ups will use an accruals method for their accounting, which records income and expenses at the date of the invoice.
As a company grows some businesses choose to move to cash accounting, which records information on the date when you receive or pay the money.
Cash accounting is only available if your turnover is £83,000 or less but can ensure you don’t pay tax on the money you haven’t received.
Take to the cloud – Most businesses will use accounting software to maintain their records. There are a wide variety of platforms out there, but most companies are moving to cloud accounting, as it offers many benefits – not least being compliant with the new Making Tax Digital rules.
If you need assistance setting up an effective accounting system or help with the latest accounting cloud technology available for your business, we can help. Please contact our accounting team at enquiries@stca.co.uk or 01494 552100 or your usual Seymour Taylor representative today.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 13 March 2022.