Dos and Don’ts – Accounting and Tax Filing for Start Ups

Start up business owners have enough on their plates before attempting to navigate the choppy waters of bookkeeping, accounting and tax filing. Do the four letters HMRC send shivers down your spine? 

It doesn’t need to be that way, here are a few Dos and Don’ts to help make life a little easier for growing businesses.

Do – Use the technology available to you wisely

Finance tools like Xero and Receipt Bank are designed specifically with small businesses in mind, and together they can be a powerful combination. They are user-friendly, help reduce the paperwork, and will automate your processes where they can. Used correctly they will save you time, and give you an up to date view of your numbers wherever you are. Cloud based accounting technology has come on a long way over the last few years, so make sure your business is taking full advantage of this and you pair the right systems together. It’s definitely worth getting some advice here.

Don’t – Have a bookkeeper on your payroll

Your business is in it’s early stages, and hopefully it’s growing. Your accounting needs are going to change along that journey, perhaps faster that you know it. Having your own bookkeeper may seem like a safe option, but how well will they be able to adapt as you grow? If you find a good 3rd party provider you will buy yourself more flexibility, and they should be able to grow with you. Why have a single bookkeeper when you could have a whole finance team.

Do – Create a business Plan, upload it into your software and track to it monthly

You may feel like you’re struggling to see two weeks ahead, let alone a year. However distant it feels, if you want to maximise your chances of getting somewhere map it out beforehand. Creating a 12 month business plan focuses the mind, and forces you to consider your revenue streams, customers, and cost base. Make time to review your actual performance against your Plan and learn from this. This will get you into good habits for when you grow, and you’ll need to think like this if you ever need to raise any Investment

Don’t – Register for VAT too early if D2C is a major part of your strategy

You don’t need to register for VAT until your VAT taxable turnover goes over £85,000. If you are trying to build a D2C customer base, if you register earlier than you need to you are just increasing the cost of your product by 20%. You need to weigh this decision with your cost profile, but think twice about increasing your product cost for your customer before you have to.

Do – Think about your finance processes

The finance processes in your business, however simple or complex, will naturally overlap with your operations. By spending some time thinking about these, and working out how to best streamline – you will usually find you can make improvements to your day to day operations. This could be deciding to use a new Inventory management software system, changing how you invoice your clients, or just changing how you run your monthly payroll. If this stuff works well, you will free up valuable time, and importantly you will be able to scale your business more easily. If your processes are not working well now you will have a serious headache when you are 5 times the size.  

Don’t – Always think you can be paying less tax

Yes there are some simple things that every business should consider when it comes to tax. Get some advice and think about how these apply to your business, make the changes you need to and then crack on with winning new customers or clients and growing your business. Tax is often more black and white than you think, HMRC have been in the game for a while and the house usually wins. If you’re spending hours and hours trying to find the next big tax saving loophole – you’re probably ultimately wasting your time.    

Do – Find an accounting partner who speaks your language and understands your needs

Wouldn’t you prefer a partner over a service provider. You want to work with a firm who are prepared to understand your business and help you run it better. You need to be able to develop a good relationship with your accountant, and you need to be able to trust them. It helps if they have experience in your industry sector, and they focus on similar sized businesses to you. They should be a great source of advice if you find the right one, they will be a nightmare if you don’t.

Don’t – Bury your head in the sand and hope things will be fine

It most likely won’t HMRC know where you live, and they will find you. Knowledge is power, and it’s definitely better to know where you stand. You will sleep more easily for starters.

PennyBooks provide ‘all inclusive’ monthly accounting packages for small and growing businesses. We are Xero partners and all of our clients use Xero software, it’s the best in the market in our view. We understand the pain points start-ups feel with their accountants, and our service offerings are geared around our clients. For more information check out our website https://www.pennybooksuk.co.uk/ or get in touch with us – hello@pennybooksuk.com  

James Watson