Accounting for Startups
15 Tips on How to Start Your Own Business Accounting
Accounting is an essential part of running a successful startup. Startups need a solid financial foundation and a basic understanding of accounting principles to develop effective business strategies and make informed decisions.
Without proper accounting, startups may be operating at a loss or unable to measure their new business success accurately. Accounting helps start-ups track their income, expenses, and other valuable metrics that can give them the insights they need to manage their finances more effectively.
This post will give you the best tips for accounting for startups.
Do Startups need Accountants?
Accountants for small business owners can seem like an unnecessary expense in the early stages of development, but this decision can actually be very costly in the long run.
A qualified accountant can help you manage your finances and make sound business decisions that will help your company grow. It is important to remember that an accountant can provide invaluable assistance in making your business successful.
A good accountant can help a startup get set up, plan its finances, track expenses, and comply with tax laws. In addition, an accountant can help young businesses make smart financial decisions that will set them up for success.
Do I need a Bookkeeper for Startup Accounting?
If you decide not to use an accountant but still need help, the other option is to hire a bookkeeper.
A bookkeeper can help a startup business in several ways. Firstly, they can help set up accounting systems for the company. They will also be able to complete your bookkeeping, allowing you to concentrate on business activities.
This is a huge help for businesses that are just starting out and do not have the time or resources to do everything themselves. Having an experienced bookkeeper can make accounting and bookkeeping much easier and less stressful.
Can I complete the Accounting Myself?
Accounting is an important part of any business; startups are no exception. Although it may be tempting to outsource accounting to a professional accounting firm, there are several reasons why startups should do their accounting themselves.
One reason is that accounting is a critical part of managing your business. by keeping track of your financials, you can make informed decisions about how to grow your business and ensure its stability. Another reason is that accounting can be expensive, and hiring a professional accounting firm can be a significant expense for a startup. Doing your own accounting can help you save money and keep your business finances in order.
Finally, accounting is not as difficult as it may seem. With the right tools and resources, you can make accounting a simple part of your business. Several accounting resources can help you keep track of your money as you start and grow your business.
At Business Accounting basics, we offer guides on completing tasks, free bookkeeping templates and choosing the best accounting software.
Accounting for Startups Tips
Here are 15 of our top ideas for assisting you in meeting your accounting requirements as a startup:
- Plan your business
- Register your business
- Set up a budget
- Separate personal and business transactions
- Choose an accounting method
- Keep track of your expenses
- Set up a system for tracking income and expenses
- Keep track of your bank accounts and credit cards
- Claim all business expenses
- Keep on top of accounts receivable
- Get organised
- Keep accounting financial records up to date
- Learn about the financial statements
- File tax returns on time
- Don’t be afraid to ask for help
1. Plan your Business
When starting a business, one of the most important things you can do is to create a business plan. This document will outline your business goals, strategies, and how you plan on achieving them. Without a business plan, making informed decisions about your business and staying on track can be difficult.
There are a few key components that every business plan should include
– Executive Summary: This is a brief summary of your entire business plan, outlining your business goals and why you believe they are achievable
– Market Analysis: This section will describe your target market and how you plan on reaching them
– Business Structure and Operations: This section will detail the structure of your company and how it will operate
– Financial Projections: This is where you detail all of your business goals, such as revenue and expenses
There are lots of guides and templates available on the internet to assist with putting a plan together.
2. Register your Business
When starting a business in the UK, you must decide what type of company it will be. The three most common types are limited companies, partnerships and self-employed. Each type has different benefits and drawbacks, so choosing the one that’s best for your business is important.
Limited companies
Limited Companies are a common type of company in the UK. There are over 4 million registered on Companies House.
They’re a good choice for businesses that want to protect their personal assets from liability. Limited companies also find it easier to raise capital than other types of businesses, and they offer more tax breaks than others.
Partnerships
A partnership is a relationship between two or more people who work together to make decisions and share ownership of a business. There can be any number of partners in a partnership, but it is most common for there to be two (dual-partnership) or three (triple-partnership).
Self-Employed
Self-employed workers are people who work independently. They can be freelancers, contractors or a sole trader.
There are several reasons why individuals decide to start their own business. Perhaps they desire greater job flexibility and freedom, or perhaps they enjoy the independence that being their own boss offers. Whatever the case, self-employment can help you achieve work-life balance while achieving personal objectives.
Self-employment in the UK is a growing trend. In fact, there are now more than 4.2 million self-employed people in the UK, accounting for 15% of the workforce. This number will only grow in the years as more and more people choose to become their own boss.
3. Set up a Budget
When you’re starting a new business, it’s important to set a budget and stick to it. Your budget should include your sales and expenses. Make sure you are realistic about the figures.
Your sales should include the money you plan to make from your products or services. You should also include any money you receive from investors or loans. Make sure to track your sales carefully so you can adjust your budget if needed.
Your expenses should include the money you plan to spend on things like marketing, production, and employee salaries. Make sure to track your expenses carefully so you don’t run out of money before your business is profitable.
We offer a free Budget Template in Excel with full instructions. It also allows you to enter the actual figures from the accounts and compare them. This can help you keep track of your finances and ensure your startup is on track.
4. Separate Business and Personal Transactions
One of the most important aspects of accounting for startups is to keep business and personal financial transactions separate. This will help you to accurately track your business expenses and profits, and it will also make tax season a lot easier.
There are a few ways to keep your business and personal transactions separate. One is to use a separate bank account for your business. This will make it easy to track your expenses and income. You can also use a separate credit card for your business.
5. Choose an Accounting Method
Cash basis accounting is a simple accounting method that records the cash inflows and outflows during a specific accounting period.
Accrual accounting is a system of accounting in which revenues are recognised when goods or services are provided, and expenses are recorded when incurred.
An example of both accounting methods is that a business issues an invoice in July for services of 500.00 which is paid in September. In accruals accounting, it will show on the income statement in the month issued – July. Cash accounting is the month the money is received – September.
When it comes to accounting for startups, it is important to choose a simple and easy-to-understand accounting method. The cash accounting method is the easiest option, but it will not give a true picture if you sell or buy on credit.
6. Keep Track of Your Business Expenses
It’s important to keep track of your expenses so you’re not spending more than you’re making. If you’re not careful, you could quickly find yourself in debt and struggling to keep your business afloat.
There are a few different ways to keep track of your expenses, and it’s important to find one that works best for you. Some people prefer to use a paper spreadsheet, while others prefer to use accounting software.
7. Set up a System for Tracking your Income and Expenses
If you’re starting a new business, it’s important to track your income and expenses in a methodical way. This will help you keep tabs on your financial status and make sure you’re on track to meet your goals. You can use accounting software or spreadsheets to do this.
When setting up your accounting system, be sure to include all of your business-related expenses. This includes everything from office supplies to marketing costs. It’s also important to track your revenue, so make sure you include all sources of income in your accounting records.
By keeping accurate records, you’ll be able to see exactly how your business is doing financially. This information can help you make informed decisions about your company’s future.
8. Keep Track of your Bank Account and Credit Cards
When you’re starting a new business, it’s important to keep track of your finances. This includes tracking your bank accounts and credit cards. A great way to do this is by using accounting software.
The accounting software is often flexible enough to allow you to set up multiple accounts, so you can track each one individually. This can be done using banking feeds, which will speed up the process.
Make sure that you always complete a bank reconciliation to check the accounts software to the bank statements. Furthermore, this will help you to keep track of your finances more easily and efficiently.
9. Claim all Business Expenses
When you’re starting a business, every penny counts. So it’s important to claim all of your relevant expenses on your taxes. This includes things like the cost of equipment, supplies, travel, bank fees and advertising.
Be sure to keep track of all of your expenses throughout the year so you have everything ready when it comes time to file your taxes. And if you’re not sure whether or not an expense is tax-deductible, be sure to consult with a tax professional.
We have developed an expenses claim form template if you need to make reimbursement for any personal expenditures that you’ve made.
10. Keep on top of Accounts Receivable
When you’re running a startup, it’s important to keep on top of your accounts receivable. This means collecting debts on time and using accounting software to help you stay organised.
Not only will this help you keep track of your finances, but it will also improve your company’s cash flow. For accounting software, you’ll want to use something that fits your accounting needs and is user-friendly. If you’re still starting out, FreshBooks, QuickBooks Online or Xero are good options to consider.
11. Get Organised
When starting a new business, getting organised with accounting paperwork is key. This means setting up a system for tracking expenses, income, and bills. One way to do this is to use cloud storage to keep all your documents in one place. This makes accessing and sharing information with your accountant or bookkeeper easy.
Another way is to scan your receipts and bills directly into the accounting software as soon as you get them, it will then automatically track the expenses and income. This is a great way to keep on top of your accounting paperwork and avoid letting any bills or expenses slip through the cracks.
12. Keep financial records up to date
Maintaining accurate accounting books is critical for any small business. Not only does it help you keep track of your expenses and profits, but it also provides a snapshot of your business’s financial health, which can be helpful when seeking funding or making important business decisions.
You can do a few things to ensure your accounting books are up to date. First, create regular accounting procedures and stick to them; this might be daily, weekly or monthly bookkeeping tasks. This will help ensure that all transactions are accounted for in a consistent manner. Second, make sure you have reliable accounting software or spreadsheets and use it to track all financial activity.
Completing accounting little and often might be less time-consuming than attempting to do everything before the end of the year.
13. Learn about the Financial Statements
When starting a small business, it’s important to be aware of the financial statements that are available to you. The three most common financial statements are the balance sheet, cash flow statement, and income statement.
The balance sheet is a snapshot of your company’s financial position at a specific point in time. It shows your assets (what you own), your liabilities (what you owe), and your shareholders’ equity (the difference between your assets and liabilities).
The cash flow statement shows how much cash your company has generated and used over a specific period of time. This can be helpful in determining whether or not your company has enough cash on hand to cover its expenses.
The income statement or profit and loss shows your company’s revenue and expenses over a specific period of time, giving you the company’s profitability. It is essential to run a P&L account regularly so you can keep track of your performance and make adjustments where needed.
There are accounting ratios that may be used to interpret financial reports. These include the liquidity ratios, which measure a company’s ability to pay its debts; the profitability ratios, which measure how well a company performs; and the activity or efficiency ratios, which measure how efficiently a company uses its assets.
14. File Tax Returns on Time
Filing your self-assessment tax return, VAT and corporation tax on time is essential for small businesses to avoid penalties.
The types of returns required will depend on the business type; a Limited Company will have to file annual accounts and corporation tax returns (CT600). All employers will have to complete payroll and self-employed, self-assessment tax returns.
It’s important to be aware of the deadlines for filing your returns and to plan ahead so that you have enough time to gather all the information you need.
Don’t forget to include the payments in your cash flow and pay business taxes on time.
15. Don’t be afraid to ask for help
Starting a new business can be a daunting task, especially when it comes to accounting. Many new businesses are afraid to ask for help from an accountant or bookkeeper, but this is actually the best thing to do in order to keep your books in order.
By using bookkeeping or accounting services, you can ensure that your books are accurate and up-to-date. This will help you stay organised and ensure you’re meeting all of the requirements for your business.
There are other people who can advise startups; a good place to start is by speaking to other successful entrepreneurs in your local area. You may want to consider joining an accelerator program which offers mentorship and guidance for those looking to start their new business.
Conclusion on Startup Accounting Tips
As a new business owner, accounting is challenging, but you can take some simple steps to stay organised and ensure that your accounting books are accurate.
The first step in accounting for startups is establishing accounting procedures so everything stays consistent. Next, it’s important to track all of the financial activity with reliable accounting software or spreadsheets on an ongoing basis. Finally, if you need help working through any parts of your accounting books, don’t be afraid to ask for assistance from an accountant or bookkeeper who will make sure that things are up-to-date and accurate!
