If you are starting a business, getting your finances in order is critical so you can stop cabot before it ever happens to you. Here are some tips to help you when you are starting out.
- Get organised. In the first few days and weeks of your business you are likely to have relatively few receipts and invoices. Use these to develop your own system for bookkeeping. Don’t leave them to pile up as it is harder to deal with a backlog!
- Business banks. Shop around for a bank that offers low cost or no cost services for start ups. There are lots of different business bank accounts, and you don’t need to pay high charges. Estimate whether you will be paying in lots of cash, mainly cheques, or needing online transactions as that will help you decide which bank to go with. Do you need to have a local bank manager you can talk to, or would you be just as happy with an impersonal online service?
- What system? You could opt for a bookkeeping programme like Quickbooks, Sage or Kashflow. Or, if your finances are straightforward you could choose to just use a simple excel database. Finance software can take a little time to learn and understand, but can help by generating formatted invoices and a range of reports. Before you buy, look for trials or see if you can see someone else using the system.
- Your financial support. Don’t try to do your business finances alone. Develop a support network early on to help prevent problems. Ask your local enterprise agency for help: mine supplied me with a range of excel spreadsheets set up for me. Talk to local bookkeepers and accountants to see what they offer and the associated cost. Surprisingly, the Inland Revenue is very helpful to start ups too. An adviser can explain what you can claim against tax, which will save you lots in the long run.
- Check your responsibilities. You need to let the Inland Revenue know you are starting a self employed business of ANY sort within 3 months of starting. You may need to pay tax: I use internet savings accounts to set aside money each month so I always have money for tax. Be warned – you may be asked to pay some tax IN ADVANCE once you have submitted your first year’s tax return.
- VAT or not? You have to register for VAT if your SALES are over £70,000 in any 12 month period. You can opt to register voluntarily which is a good idea if you have lots of big start up costs as you could claim VAT back on those. If you know VAT registration is on the horizon, make sure your prices reflect this as otherwise your customers could face a 17.5% price hike – or you could see your profits fall by this amount once you register.