Accountancy can be a veritable minefield – especially if you’re starting a business from scratch and are shouldering the responsibilities yourself, perhaps with limited or no experience. However, the importance of good accountancy cannot be underestimated. It’s at the core of your business and the money you have will influence future business decisions that could be ‘make or break’ choices. Here are seven top tips for navigating the often-choppy waters of accountancy:
1) Use accounting software. Accounting software (such as Intuit) is becoming standard practice in businesses of any size. It turns a manual task into an automated one, meaning you don’t have to devote significant sums of money or manpower into making sure your accounting system is efficient and accurate. In addition, you don’t have to be an accountant to use it; accounting software is designed to make the job as simple as possible, so there’s no jargon to bamboozle you on the way.
2) Learn about your product. Many businesses fail to make a profit because they don’t understand the true cost of creating their product. Have a look at all the costs, including labour, manufacture and shipping. That way, you’ll get a better idea of just how much you should be charging in order to make a reasonable profit.
3) When you’re starting out, keep your costs to a minimum. Perhaps it’s worth working from home to begin with, rather than spend out on office rent, or maybe you can get furnishings from eBay or charity shops. You don’t have to be flash to begin with, but you do need to be operational.
4) Manage your money. This harkens back to accounting software, but the importance of understanding your accounts, cash flow and payroll systems cannot be underestimated. You’ll be faced with unexpected financial decisions, and if you’re on top of the figures to begin with then you’ll be able to make those decisions a lot easier.
5) Know your limits. You need to know how much cash the company needs to operate at a base level, so write a budget and stick to it. It doesn’t have to cover every aspect of your business, but the more detail you’ve got, the easier life will be. It’s also worth reviewing that budget once every 3–6 months, just to check that you’re adhering to it.
6) Don’t ignore the Tax Office. It’s your legal obligation to complete and submit your tax return honestly, accurately and on time. Again, accounting software will help you here. Unfortunately, you can’t ignore tax and they certainly won’t ignore you. As a business, you’ll be registered with Companies House and HMRC will be aware of you, whether you like it or not. Stay on top of your tax and you’ll avoid any financial penalties that are levied at those who file late returns.
7) Outsource anything that you’re not qualified to do. Sometimes it’s more time and cost efficient to bring someone in who knows the ropes better than you do. It might mean hiring a tax specialist or a financial expert, but it could save your bacon. However, if you’re using accounting software, you’ll already have virtual experts on hand!