Starting a new business can be an exciting and overwhelming experience. There are so many things to think about and plan for, from branding and marketing to operations and finances. One crucial aspect that often gets overlooked by entrepreneurs is accounting.
It’s essential to have a solid understanding of your finances and how to manage and monitor them effectively.
These are my 5 five top tips for entrepreneurs when it comes to accounting and starting a new business.
1: Get your business structure sorted
When you set up you can be a sole proprietorship, form a partnership, a corporation or a limited liability company (LLC). Each structure has its advantages and disadvantages, so it’s crucial to consult with an accountant or tax advisor to determine which one is the best fit for your business.
This decision will have a significant impact on your accounting and tax obligations.
2: Separate your personal and business finances
One of the most common mistakes new business owners make is mixing personal and business finances. It’s essential to keep these two separate to avoid confusion and potential legal issues. Have a separate bank account and credit card for your business.
Make sure you keep track of all business-related expenses accurately, so when it’s time to create your tax returns, you won’t suffer from unnecessary stress. It also gives you an ongoing picture of your business’s financial health.
3: Use an effective bookkeeping system
Bookkeeping is the process of recording and organising your business’s financial transactions. An effective bookkeeping system in place from the start allows you to keep track of your income, expenses, and profits accurately. You can choose to do it yourself using accounting software like QuickBooks. Xero or one of the other HMRC approved software packages, or you may decide to hire a professional bookkeeper to handle it for you. Whichever option you choose, make sure to stay on top of it to avoid any headaches later – or ending up paying too much (or too little tax).
4: Plan for taxes
Taxes are an inevitable part of running a business, and it’s critical to plan ahead. As a business owner, you’ll be responsible for paying income tax, self-employment tax, and VAT, depending on your business’s location and industry. If you’ve set up a limited company you’ll need to pay corporation tax too. It’s wise to consult with a tax professional to understand your tax obligations and set aside funds throughout the year to cover them so you don’t get hit with a painful tax bill.
5: Outsource to an expert
While it may seem like an added expense, hiring an accountant can be a game-changer for your business. As a business owner, you already have a lot on your plate – from managing employees to making important decisions, the last thing you want is to spend hours poring over numbers and trying to make sense of complicated financial statements. By hiring an accountant, you can free up your time and focus on other important aspects of your business.
Not only that, but an accountant can also help you save money in the long run. They have the expertise and knowledge to identify areas where you may be overspending or missing out on potential tax deductions. By keeping your finances in check, they can help you make better financial decisions and ultimately increase your profits.
Another plus for hiring an accountant is that they can provide valuable financial advice. They can help you create a realistic budget, set financial goals, and develop strategies to achieve them. They can also give you insights into your business’s financial health and help you make informed decisions for the future.
Having an accountant can also bring credibility to your business. When you work with a professional accountant, it shows that you take your finances seriously and are committed to running a successful and transparent business. This can be particularly helpful when seeking funding or partnerships with other businesses.
Sean Dowd owns Optimise Accountants & Tax Advisors. You can contact him on 07584 664693 or at SeanDowd@optimiseaccountants.com.
