Knowledge Centre

Financial guidance for start-ups

Contents

  1. Managing Your Finances
  2. Cash Flow
  3. Tax

Managing Your Finances

Starting out in business can be an exciting time, whether you're employing a small team or a one-man band. But though the ink may still be drying on your business cards, now's still a good time to think about how you're going to manage your finances.

No matter how well prepared you are, starting a new business can still be a steep learning curve, particularly when it comes to money matters and you'll need to work out how you're going to manage your finances, deal with cashflow issues and handle the dreaded tax bill. MORE TH>N BUSINESS is on hand with some advice. We'll even give you a rundown on some of the tax breaks you may be entitled to without even knowing it.

Managing your finances

How you deal with your day-to-day accounting will vary from business to business, but one thing remains the same - if you're the owner, it's up to you to keep accurate accounts. Even if you weren't obliged to keep some financial records by law, it would still be in your interest to do so because this can help your business run much more efficiently.

There are two types of accounts you'll need to keep - financial and management. Let's deal with these one by one, and then find out whether it would make sense for you to hire an accountant.


  1. Financial accounts
    Financial accounts describe the performance of your business and, if you're a listed company, you are obliged by law to file them with Companies House within 22 months of starting up.
    They show how your business performed over the past year and normally include a profit and loss account, a balance sheet (a snapshot what you own and what you owe), a cashflow statement and a record of any other gains and losses (for example, changes caused by currency fluctuations, property revaluation or anything not included in the normal accounts).
  2. Management accounts
    While financial accounts are done for the benefit of others who have an interest in your company, like shareholders or the tax man, management accounts are purely for your own benefit. They're not a legal requirement, but are so useful that it's very hard to run a successful operation without doing them either monthly or, at least, quarterly.
    Great advice on budgeting and business planning can be found on the Business Link website, but good management accounts should include data on sales (how well you've done over the last month and how much you're still owed); purchasing (how much you've spent, how much stock you have and what you owe) and fixed assets (like company vehicles).
    While management accounts are great at telling you what's happened in the past, they're also invaluable in helping you look forward and avoid any potential pitfalls. For example, by examining past figures you'll find out what stock or services are selling well, and what's doing badly, plus it will draw your attention to any customers who are persistent late payers.
  3. Should you hire an accountant?
    Unless you're a real financial whizz kid, an accountant really can save you a lot of money, by knowing all about the different tax reliefs and allowances you could be entitled to. If you haven't got a head for figures they'll also free up valuable time which can be used on making your business a success.
    If you're still not sure whether they're worth the expense, it's worth remembering that the law will require you to do some regular bookkeeping work, like keeping VAT records, submitting an annual tax return and filing your accounts with the Registrar of Companies. It's worth considering whether you really have the skills to do this yourself, or whether it would be more efficient to outsource this work to a professional.
    If you do decide to hire an accountant, look for the words 'chartered' or 'certified' in their title or use an official body, like the Institute of Chartered Accountants in England and Wales (ICAEW) to find the right person.

Next:
Cash Flow

Business insurance is issued by Royal & Sun Alliance Insurance plc, which is authorised and regulated by the Financial Services Authority (Reg No. 202323). All offers subject to availability. For your protection, telephone calls may be recorded or monitored. Discounts based on prices available for like-for-like RSA policies.