When it comes to finances, short-term survival is usually the focus for start-ups. Jumping through financial hoops in the early stages of a business is hard enough without planning for the years ahead.
When you are new to the game in any business, it is difficult to know what the future holds. But, getting to grips with your finances at the start will stand you in good stead. With some forward planning you are more likely to be able to budget for contingencies and weather financial storms.
To keep your finances in order from the word go, follow these 7 shrewd tips. You won’t regret it. In fact, they might just help you squeeze through some difficult and lean times.
Cash really is king in the world of business, especially at the start-up stage when attracting investors isn’t easy. The most common reason start-ups fail is because they run out of money. Not tracking money is the biggest mistake entrepreneurs make. Spend control is crucial. It takes some effort, but being smart with finances could save your business from going under.
Keep costs low at the outset. There’s little point renting a huge office space in an upmarket office block when you are just setting out.
For more information on how to keep your cash spend under control, check out Startus magazine’s 10 essential tips on managing cash flow. Act wisely and you will be sowing the seeds for successful growth.
Forge a good relationship with your bank from the outset. If you are open and honest with them, they are more likely to offer you support by the way of an overdraft if you hit turbulent financial times. Choose a bank that has experience of supporting start-ups.
According to businessadvice.co.uk the UK banking’s newest entrants have revolutionised financial services for entrepreneurs. That’s not to say the big high street lenders aren’t trying to change. Research them all and go with the one you feel fits your business needs best.
In terms of tax, if you are a sole trader you will need to get to grips with self assessment. If you are not a sole trader, things get a little more complicated. You will need to manage corporation tax, VAT, national insurance contributions, PAYE and income tax. Seeking advice from an accountancy firm is essential. Select an accountant who can help with all aspects of finance, as well as tax and business growth.
To ensure your fledgling business gets off to the best start, check out this useful guide from Wellden Turnbull:
Budgeting and forecasting are accounting essentials for start-ups. Forecast for three years (no longer, as too many things can change). Update your forecast monthly and in addition when there is any significant change in fortune. Work out an expenditure budget and sales projection. Creating a budget and sticking to it is very important.
It is critical that you establish a system at the outset for keeping track of your accounts. While it may not yet be the right time to employ a bookkeeper, you will need to invest in some basic accounting software to keep expenses, sales invoices, purchase invoices, payments and receipts in order. You probably don’t need anything too complicated at this stage. Popular accounting systems for start-ups, which are easy to use, include Quickbooks, Sage and Xero.
While it is tempting to forgo paying yourself when you start up a business to keep costs down, it doesn’t help in the long run with the accurate forecasting of costs. It’s perfectly fine to pay yourself a smaller salary to minimise overheads at the beginning, but going forward pay yourself what you are worth and build that into your business plan. Pay yourself at least enough to cover your living expenses.
Business success depends on your customers. Find customers and ask them to give you feedback on your product or service. Ask for honest feedback and don’t ask friends or family, as they are likely to err on saying nice things about your business rather than offering constructive criticism.
Landing customers should come before getting all of your processes and systems in place. Without customers your business is going nowhere. Use friends and family to make contact with potential customers and be flexible. Don’t think you have to hire a sales team from the outset. You should be selling your product yourself in the beginning. No one will have as much knowledge and enthusiasm about your product as you. For some savvy advice on sales, check out The Medium’s guide on How to land your start-up’s first customer.
Smarta Tax Services - the perfect solution for start-ups or Sole Traders in need of tax and accounting support. Get a personal experience with a dedicated Accountant that will ensure you keep track of day to day operations of your business, and you've completed all areas required to comply with HMRC and Companies House. Our trusted accountancy software allows transparency and you'll have 24/7 access online, so you can keep track of your business performance.