Starting a new business is an exciting venture, but managing finances effectively can be daunting. Good accounting practices lay the groundwork for stability and growth, so it’s worth taking the time to get things right from the beginning. At P B Syddall & Co, we specialise in helping businesses set up strong financial foundations, offering a blend of traditional accountancy and modern business advice.
Here are practical accounting tips to help your startup thrive in the year ahead.
Implement accounting software
Keeping track of your finances manually is not just time-consuming – it also increases the risk of errors. Implementing accounting software streamlines processes such as income tracking, expense recording and payroll management, all while reducing the risk of mistakes.
Platforms like Xero, QuickBooks, and Sage are popular among UK startups. They provide a variety of features, including automated invoicing, integration with bank accounts and real-time reporting. Choosing the right software depends on your business’s size, industry and budget, but investing early can save you headaches later.
And don’t forget – some software platforms integrate directly with HMRC, simplifying VAT returns and compliance with Making Tax Digital (MTD) requirements.
Monitor expenses diligently
Every penny counts when you’re starting a business, so keeping a close eye on expenses is essential. Accurate expense tracking ensures you understand where your money is going and makes it easier to claim allowable expenses at tax time.
For example, UK startups can claim expenses for items such as business travel, office supplies and software subscriptions. Use tools like receipt-scanning apps to log these expenses in real time. Many accounting software options offer features for categorising and storing receipts, so you’re always ready for an audit.
Reviewing your expenses regularly can also highlight opportunities to cut unnecessary costs, freeing up funds to reinvest in your business.
Manage cashflow effectively
Cashflow is the lifeblood of any business, particularly during the early stages. Research by UK Finance shows that 82% of small business failures are due to cashflow issues. Keeping on top of your cashflow ensures you can pay suppliers, meet payroll and cover other expenses on time.
Here are a few ways to improve cashflow management.
- Invoice promptly: Don’t delay sending out invoices – your cashflow depends on getting paid on time.
- Offer incentives: Consider offering small discounts for early payments.
- Negotiate terms: Work with suppliers to extend payment terms where possible.
- Build a buffer: Aim to keep a cash reserve for unexpected expenses.
Updating your cashflow forecast regularly helps you anticipate any shortfalls and take corrective action before it’s too late.
Understand key financial statements
To make informed decisions, you need a clear understanding of your business’s financial position. The three main financial statements every startup owner should know are the following.
- Profit and loss statement (P&L)
This shows your revenue, costs and profits over a given period. Regularly reviewing your P&L helps you spot trends and identify whether you’re making a profit or operating at a loss. - Balance sheet
A balance sheet provides a snapshot of your business’s assets, liabilities and equity at a specific point in time. It’s essential for understanding your financial health and is often required by lenders or investors. - Cashflow statement
While the P&L focuses on profitability, the cashflow statement tracks the movement of cash in and out of your business. This is crucial for understanding liquidity.
If you’re unsure how to interpret these statements, seeking professional advice can make a big difference.
Stay on top of tax deadlines
Missing tax deadlines can lead to penalties and unnecessary stress, so make sure you’re aware of key dates for the 2024/25 tax year.
If your business is VAT-registered, you’ll also need to submit VAT returns quarterly under MTD rules. Setting calendar reminders or using accounting software to track deadlines can help you avoid last-minute panic.
And don’t overlook tax planning – working with an accountant can help you identify allowances and reliefs that may reduce your tax bill.
Maintain accurate records
Good record-keeping isn’t just a legal requirement – it also makes life easier when it’s time to prepare accounts or file tax returns. HMRC requires businesses to keep detailed records of income, expenses and transactions for at least six years.
Key records to maintain include:
- sales and purchase invoices
- bank statements
- receipts for expenses
- payroll records (if applicable).
Using cloud-based storage solutions ensures your records are safe, organised and accessible whenever you need them.
Maintaining accurate records also makes it easier to track your financial performance, helping you identify opportunities for growth.
Budget for growth
Planning for growth is vital, even in the early stages of your business. A detailed budget can help you allocate resources effectively and avoid overspending. When creating a budget, consider:
- fixed costs (such as rent and insurance)
- variable costs (for example. materials and marketing)
- one-off expenses (for example, equipment purchases).
Regularly comparing actual figures against your budget helps you stay on track and adjust as needed.
Seek professional accounting support
Running a startup often means wearing many hats, but trying to manage every aspect of your finances yourself can lead to mistakes or missed opportunities. An experienced accountant can help you:
- ensure compliance with tax regulations
- identify tax-saving opportunities
- create financial forecasts
- develop strategies for sustainable growth.
At P B Syddall & Co, we provide tailored support for startups, from initial set-up to ongoing advice. Whether you need help with tax planning, payroll or financial reporting, we’re here to guide you.
Final thoughts
Starting a business is no small feat, but implementing these accounting practices can set you up for success. By staying organised, using the right tools and seeking expert advice when needed, you’ll build a solid financial foundation for your startup.
Are you a startup in need of expert accounting help? Then we have the tips for you. Get in touch with P B Syddall & Co.