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10 practical accounting tips for startups

Our tailored accounting service for startups and new businesses

According to STARTUPS magazine, the number of new businesses incorporated in the UK broke a record in the first quarter of 2023.

Despite competition and numerous challenges – including rising inflation and interest rates – Office for National Statistics records show that 202,130 new UK businesses were registered with Companies House in the first 12 weeks of 2023. This represents a year-on-year rise of 6.5% and a 19.5% rise when compared to the last 12 weeks of 2022.

If you’re planning on launching a startup, you’ll know that accounting is an essential consideration for your new business. Here at Hartley Fowler, we offer comprehensive accountancy services, from everyday support to more tailored advice.

In this article, we will cover accounting tips for startups as well as deliver an overview of how our accounting services can help new businesses thrive.

Why is accounting important for startups?

Startup businesses are often founded by entrepreneurs and are characterised by a focus on innovation and disruptive business ideas.

By nature, startups seek rapid growth and scalability. However, they operate with limited resources which means that they also face higher levels of uncertainty and risk. This means that startups need to be agile and capable of securing external investment. With all of this being the case, it is crucial that startup founders establish robust financial management from the beginning.

Accounting is the linchpin of financial stability and the key to startup success. In order to flourish and enjoy long-term growth, a startup needs responsible management, informed decision-making, a solid business plan and meticulous accounts.

10 accounting tips for startups

1. Create a strong business plan

A detailed business plan – including projections, budgets and cash flow forecasts – will become the roadmap for your business. A sound business plan will underpin your business and ensure that you make good financial decisions. As your business expands, it’s essential to plan for growth.

2. Keep personal and business finances separate

Tempting as it might be, accounting and tax reporting are simpler when you keep your personal and business finances completely separate.

3. Keep up-to-date records

For tax compliance, audits and performance analysis, all financial transactions must be accurately recorded – this means all sales, expenses, receipts and invoices.

4. Use appropriate accounting software

It’s important to use accounting software that is straightforward and meets your needs. We can recommend the best option for you, but flexible cloud-based products – like Xero, QuickBooks, Sage and FreeAgent – tend to be suited to most modern startups.

5. Comply with tax regulations and deadlines

Being aware of UK tax regulations and obligations – e.g. income tax, corporation tax and VAT – is key. You should plan for taxes – ensuring you have the necessary funds aside – and consider the most tax-efficient structure for your startup.

6. Manage your cash flow

Track your cash flow closely, invoice promptly and have a clear payment policy. Healthy cash flow ensures you have sufficient working capital to run and sustain your business.

7. Analyse about key financial ratios

Knowing the current ratio, quick ratio and gross margin can help you determine the financial health of your business. This also impacts on future decisions.

8. Apply for tax breaks and grants

As a startup, you may be liable for tax deductions or small business rate relief to relieve your tax burden. There may also be government grants and funding available to support startups.

9. Decide on your business structure

You can structure your business as a sole trader, partnership, limited liability partnership or limited company. Each has different tax consequences and responsibilities. If you are unsure, you should take advice on the best option for your circumstances.

10. Ask a professional

Consulting a proactive accountant and tax specialist will help you to stay informed and compliant and implement a financial planning strategy.

Following these tips should ensure you build a sturdy financial foundation, remain compliant with regulations and make informed decisions.

The benefits of professional accounting advice for startups

Hiring a professional accountant offers many advantages. Our qualified accountants are experienced in working with startups and will be happy to share their expertise, helping you to navigate financial challenges and grow your business.

We can help with:

  • financial planning
  • structuring your business
  • day-to-day accounting for startups
  • record-keeping and software recommendations
  • tax planning and compliance
  • VAT, payroll and other obligations
  • meeting regulatory requirements
  • seeking investment
  • securing funding
  • applying for grants
  • franchising

Call for tailored accounting advice for startups

If you’d like to find out more, click here to see our helpsheets – practical resources for business startups.

Although there are standard processes and common considerations for any new business, we appreciate that every startup is unique and different. We are here to listen and provide tailored advice from the beginning of your journey.

We can offer expert assistance with everything from business plans to funding applications. We can set up a bookkeeping system and advise you on optimal tax planning strategies.

If you’re about to embark on a new venture, call us today and organise a free initial consultation:

Wimbledon office: 020 8946 1212
Brighton office: 01273 202311