Setting up a business is an exciting process but one also strewn with potential pitfalls. Perhaps one of the biggest of these is dealing with finances, especially if figures have never really been your strong point.
However, it can be a lot easier to deal with business finances than you might think. After all, if you have the entrepreneurship to get your business idea off the ground, it won’t take you long to work out exactly what you need to put in place to work towards delivering your vision and achieving your goals.
To start with, you have to get the basics right. It’s all well and good to have an idea, but how are you going to put it into practice? Whether you are self-employed, setting up a limited partnership or a limited company, those basics are the key to your potential success.
You want to aim for high earnings so that you, and anyone who works with or for you, will get the benefit, and as often as not, success builds further success. It doesn’t matter if maths is not your strong point. You can quickly learn what’s needed in terms of bookkeeping and your general finances and get help from professionals who can guide you and, in many cases, take the burden of dealing with everything in house away from your day-to-day operations.
This is the base of your financial health, knowing what’s coming in and going out of the business and assigning everything to the appropriate section. You will know where your income is coming from, and you will know what the tax take is if you are registered for VAT. You need to be accurate in recording these incomings, and if you have savings related to the business, you also need to account for these, as well as any loans that you have arranged.
Your expenditure can be more complex. You should record all your outgoings so that they can easily be identified, especially if you get a tax inspection, but your accountant will also need this accurate information.
There are likely to be capital payments for equipment, possibly company cars but definitely IT gear (such as computers, tablets and mobile phones), rental payments for premises, raw materials depending on what your business does and, probably the largest outlay, wages.
You’ll also have to deal with expenses for yourself and employees in the course of their work and get your invoicing constantly up to date so that you can work to maintain a positive cashflow. Using modern accounting software that you can access and use online can save a lot of time as opposed to manual inputs, and consequently save money in the long term.
Still, there are many aspects to understanding and dealing with your business finances that can be hard to handle in-house if you don’t personally have the time or the backup support in terms of a finance controller to make sure that everything is in its proper place.
Help with the finances
Organising everything takes time, and so it’s well worth considering using a contractor who can deal with the month-to-month financial business that needs to be taken care of.
The UK tax system isn’t exactly simple, and if you get experts on board who understand the complexities of specific legislation and, for example, to get help with IR35, you can save yourself and your business a lot of trouble.
When you consider the number of financial hoops that you have to jump through, then employing a contractor to deal with all these issues makes good sense.
Issues to deal with
You will need to submit your business accounts annually, and your bookkeeping needs to be meticulous so that when you hand the information over to your accountant, it will reduce the time needed to deal with them, thus reducing what they will need to charge for their time.
You’ll also need to be on top of Corporation Tax, charged on any annual profit that you make, deal with Self-Assessment Income Tax for your personal income, and deal with VAT if your business has an annual turnover of more than £85,000 (as of 1st April 2017). The threshold may change during budgets, so you should keep an eye on it.
A contractor can deal with your PAYE and National Insurance obligations, giving you more time to devote to growing your business.
Weigh up your options, and move to a situation where you are comfortable that your business finances are in good hands.