As a new startup owner, you’ll probably want to be more focused on sales and doing what you’re good at than looking after your books but managing the money side of things is essential if you want to be successful. After all, you don’t want your business to fail because you failed to keep an eye on your cash flow or forgot to invoice a whole stream of clients.
But knowing what you should focus on can be tricky, so here are some easy tips to ensure you get your accounting right from the start.
Automate your accountancy work
When you start a business, you’ll have a hundred and one things to do, so the last thing on your mind will be making sure your books are up to date. But as we’ve mentioned previously keeping a record of your business income and expenditure is imperative if you want to keep track of exactly what’s happening in your business. The last thing you need is to forget to invoice someone, lose track of important bills you need to pay or not know whether you have the funds to buy that shiny new piece of equipment.
Accountancy software is the best way of automating your accountancy workflows, and with Making Tax Digital moving us to a fully digital tax system, it makes sense to get on board sooner rather than later. But remember, while software automates some tasks, ultimately, it’s only as good as the person using it. It’s wise to put aside some time each week or each month to carry out regular accountancy tasks, such as reconciling bank statements or reviewing transactions. That way you’ll stay on top of everything and also spot any errors early on.
If you’re not sure which accountancy software to choose, we’ve put together some handy tips. Alternatively, give us a call and we can have a chat about your needs.
Separate your business and personal finances
If you’re working through a limited company this is pretty easy, as you’ll already have a bank account set up and chances are you’ll also have a debit or credit card. This makes it a lot easier for any purchases to be made through the company and any income to go directly into your business bank account.
It’s why we would always recommend getting a separate business bank account if you are a sole trader. While you don’t have to, it makes it a lot easier when it comes to doing your Self-Assessment tax return, and allows you to keep a better handle on how well your business is actually doing. Also, it tends to look more professional, which can be an advantage especially when you’re just starting out.
Sort out your invoicing
Invoicing people for work you’ve done and getting paid is one of the joys of working for yourself, but it’s good to have a process in place before you start sending them out as it will save you time in the future. Give some thought to:
- When are you going to invoice? Is it as soon as the work is done or at the end of the month?
- What are your invoice terms? Is it on receipt of invoice or 15 or 30 days later? Determine what works best for your cashflow and remember to factor in that people won’t always pay on time.
- How will you accept payment? Bank transfer, card payment, cash?
- Will you be providing receipts for paid invoices?
Once you have decided on these answers, you will need to create an invoice template. This must include:
- a unique identification number
- your company name, address, and contact information
- the company name and address of the customer you’re invoicing
- a clear description of what you’re charging for
- the date the goods or service were provided
- the date of the invoice
- the amount being charged
- VAT amount if applicable
- the total amount owed
In addition, if you are a sole trader, you will need to include your name and any business name being used, while if you’re working through a limited company you will need to include your full legal company name.
Decide how to keep your financial records
We’ve spoken before about what financial records you need to keep as a business, and now is the time to decide how you are going to keep them. While most of them will be digital, there will always be items such as receipts or bank statements, that will be in hard copy, so make sure you’ve got a good filing system in place.
And remember, if you are a limited company you will need to keep them for 6 years, while sole traders have to keep them for 5.
Set up financial statements
Monitoring costs, reviewing how quickly your customers are paying, working out if you can afford to grow the company – financial statements answer all those questions, while giving you an overview of the financial condition of your business. Set them up from the outset and you’ll find it a lot easier to manage the financial aspect of your business.
And if you’re not sure which financial statements you need, this handy list tells you which ones they are as well as why they are so important.
Pay people on time
There is nothing more frustrating than doing work for someone, only for them to delay paying you. Not only can it impact on your cash flow, but it can also make relations a little bit tricky.
So, make sure from the outset, that you are not one of those people! Be clear about your payment terms, have a process in place to keep track of when payments are due and keep a close eye on your cash flow. There is nothing worse than promising to pay a bill only to find you don’t have the necessary funds.
Need further help?
Hopefully, this has given you some useful tips on how to get your accountancy right from the start, although we would add one other thing to the list – get an accountant! Not convinced? Then take a look at the 5 reasons why you should seriously consider it, or give us a call to discuss how we could help you.