It is exciting to start a business. Areas like product development, fundraising and marketing take the most attention of entrepreneurs and boring old accounting is normally left behind for someone else to deal with.
It can seem overwhelming to entrepreneurs who are not good at numbers to go through all the financial paperwork. You should realise that accounting is the only way to get a clear picture of your company’s financial health and ignoring it is one of the most common reasons for a businesses failure.
Even the most innovative ideas can’t keep a business running if there isn’t enough cash. Proper bookkeeping is crucial to any startup’s success. Here are ten ways to keep your startup’s finances in good order.
When managing the finances of your startup, the first thing you need to do is learn about the laws applicable to it. If you don’t know why the skill of good bookkeeping is so important, you will never learn it.
As a bare minimum, you should know the answers to these questions and one’s like it:
When are taxes due to be filed?
What information are required to record your revenues and expenses?
How long should invoice copies be kept?
It’s better to plan ahead than panic during tax season.
It is important to separate your personal and professional lives. This principle applies equally to your personal and business expenses. If you can’t see your startup cash flow separately, it is difficult to manage its cash flow.
If you haven’t already, open a separate bank account to your business.
For any entrepreneur running a startup, the most difficult problem is to keep an eye on expenses. It is easy to forget about the small expenses such as office stationery and team lunches.
If you are not careful about tracking your expenses, it is very difficult to manage your household.
You can use a business credit card for expenses, and then link it to good accounting software. This will save you the hassle of looking through receipts.
You can also earn points and rewards by using a credit card. Correct bookkeeping is a great way to save money and track your expenses.
Not everyone is comfortable managing financial accounts. If you’re not a good at numbers, it may be worth investing in accounting software to help you start your business.
There are many options on the market but it is best to choose cloud-hosted accounting software like QuickBooks. This is because of its numerous benefits such as collaboration between employees, data security and automatic backup of financial data.
Accounting software allows you to connect your bank account directly within the program. The software will track your income and expenses and send you invoices and reports on the startup’s financial health.
Accounting software can help you leaps and bounds to not only keep track of your finances, but also improve the efficiency and productivity in your business.
You may become proficient in managing your startup’s financial accounts with a bit of experience and some learning, but if you’re serious about growing your business, then you’re going to need the help of an experienced accountant.
They can make a big difference, helping you save money, time and avoiding expensive fines from HRMC.
An accountant will be your trusted financial advisor. By looking at your finances, they can offer expert advice about how to achieve your business goals.
Make sure your accountant explains everything to you clearly and don’t be afraid to ask questions if you’re not sure about anything.
Around 70% of your company’s total budget will be spent on employee pay. People often work overtime or on holidays in order to meet tight deadlines. It is important to pay your employees accurately.
It can be tedious to manually track overtime and leave of employees. By linking your accounting software to a attendance program, you can accurately track hours worked and the salary earned by your employees. Payroll taxes are different than income taxes and are best calculated by your accountant.
Although it may sound cliché, entrepreneurs should remember that “Hope for success but be ready for the worst”. A bank study found that 82% of businesses fail because of poor cash flow management.
If your invoices aren’t paid by the due date, or if work is not completed on time, you could face cash problems. If you don’t have enough cash, you could miss an opportunity to invest in a great investment opportunity.
To avoid these problems, it is important to have sufficient savings to support your business for at least three months, but the more the better.
Thefts happen and can throw off your bookkeeping. Even if you track all the details, including prices and stock numbers, you can avoid missing goods.
You can automate large inventories by purchasing separate inventory management software. Your accounting software might also be helpful.
Clients who are late paying can cause cash flow problems. It increases your chances of getting prompt payment by sending invoices immediately after the job has been completed.
You should not only send an invoice on time but also ensure that they are clear and easy to understand. A bill discounting or incentive program can be offered to clients who pay their bills on time.
Accounting software can assist you in setting up efficient tracking of invoices. This will give you information about the status of each invoice. You can send gentle reminders to customers who owe you invoices.
You can help your clients with a payment plan if they are unable to pay their bills on time.
You can make your startup a million-pound business by setting clear goals. You will be unable to achieve great things if you don’t have measurable weekly, monthly and quarterly goals.
The problem with not having goals is that you could spend your whole life running up and down the pitch without ever scoring!
Financial forecasting is a great way to set short-term and long-term goals. It also helps you estimate the growth potential of your startup over the next quarter, or for the next two or three years. It can be difficult to predict how inflation will affect your expenses and client decisions, but your accountant or accounting software can help you with this.
A good start can be half the job. The other half is keeping your startup profitable over the long-term. Follow these 10 top accounting tips for startups and you’ll have a head start on your competitors.
Keep a tight reign on your financials and you are already halfway to the success you deserve.
For a FREE tax review of your business, call Quest Chartered Management accountants Birmingham at 0121 235 0315. We can help you reduce your tax bill and grow your business.
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If you want to discover how we can help your business, Quest Birmingham Accountants offers the following services: Tax Services, Self-Assessment, VAT, Payroll, New Business, R&D Tax Credits, Annual and Management Accounts, Tax Returns, Self-Employed Accounts, Business Planning, Business Tax, Accounts Services, Bookkeeping, Pensions, and UK Tax Deadlines.