Often, when you’re starting out in business, simply putting money in the bank is a huge achievement and represents your entire initial financial goal.
You’ll quickly realise that just having money in the bank doesn’t tick all the boxes that are required – especially not for HMRC – and that a more considered approach is needed if you want to be in full control of your business finances moving forward.
We’ll outline everything that’s needed to give your business a solid financial underpinning – so you can focus on making the products or services you provide the best they can be.
Book keeping
Book keeping represents most of what you’re going to be doing financially on a day to day basis – and while that might sound like something that’s going to take up a lot of your time, in actual fact, a few minutes dedicated to maintaining money each day prevents a huge amount of time needing to be spent monthly – or even annually.
To make sure your book keeping is in order you should have the following:
- A cash book
This is essentially a record of everything that comes in or goes out of the business money wise. Sure, you can do the same with your bank account – but keeping a cash book alongside it gives you an overview of your money that a bank account won’t.
There are some great tools online and available as apps that allow you to do this. You can categorise every transaction then glance back over them to see how much money you’re spending or receiving and which tasks or clients it’s allocated to.
In the future, a cash book can provide some great financial forecasting too – letting you know areas or times in which it may be worth adjusting your business practices for maximum return.
- Receipts and invoices
You should keep receipts and invoices for literally everything you buy for your business – from vehicles to staples. It’s much easier to amass this information as you go – rather than having to spend sleepless nights putting it together when the HMRC request it.
- Bank statements
Being in the habit of checking bank statements is a sure-fire way of maintaining financial health. The chances are that you’re going to find nothing out of the ordinary – but mistakes, fraud and other anomalies are possible.
Some of the most successful business owners make it a priority to know how their money situation looks on a day to day basis – and continue to do so even when the business grows to a place where dedicated staff can handle finances entirely. Understanding your spending habits is key to mastering them for maximum business impact.
Accountant
When it comes to filing a tax return, having an accountant onside is vital – in fact, most will make or save your business more money than they cost, making it an easy decision to bring one on board. Although it often makes sense to find an accountant that’s close to you – an increasing number of online services are available – and virtually all of these provide video or telephone conferencing support and discussion.
Personal recommendation is the way most people find an accountant – and the way we’d recommend you go about finding one too. There’s a lot to be said for working with someone who understands you and your business, a good accountant should do both.
Bank account
It’s considered absolutely essential to have a business bank account when you’re starting up in business – doing so keeps your finances clean and uncomplicated.
In reality, if you’re set up as a limited company money that comes in is not personally yours – instead belonging to the business. As such, if the bank account that underpins your business has personal expenditure coming out of it, then your accountant’s job is going to be made much harder. Much harder for your accountant means more costly for you – so talk to your bank about getting a business account set up as quickly as possible.
Procedures
Book keeping is a task that’s generally performed by just one person in the organisation – this is because different ways of working can often will often confuse systems, leaving you trying to make sense of messy financials.
To make the job as easy as possible for this person you should implement set procedures for how finances are handled. Need records daily? Set that expectation. Want people to scan and spreadsheet their expenses? Send them the spreadsheet and a ‘how-to’ of what you expect.
People have a tendency to think that money-matters handle themselves – which is very definitely not true. Don’t let employees dictate how much time and effort you end up putting into keeping finances neat and efficient.
Payment terms
When you’re starting out in business cash-flow is king – and with some businesses adopting a culture that seems to accept overdue payments as par for the course, you’ll need to run a tight ship to make sure you’re not caught out.
Invoicing software is extremely useful for this – and is often tied in to book keeping software and apps. Set clear payment terms and chase up invoices before this date – most applications have some kind of ‘reminder’ function you can use to keep the amount of time you spend on the phone to a minimum.
We always suggest asking businesses if there’s likely to be any issue for them that would prevent your invoice being paid on time. It’s not uncommon for big business red-tape to put barrier in the way – and accounts teams may be upfront about this. This knowledge obviously gives you the information you need to act accordingly, whether than accounting for any potential delay in your projections – or finding a client who’ll pay more promptly.
Options for finding capital
It never hurts to have knowledge about finance streams that may be open to your business – whether that’s investment, loans, crowd-funding, grants or many other possibilities.
While you might not be poised to agree to these options on a daily basis, you might find yourself in a position where quick expansion or market responsiveness is key to your business success – and if that’s ever the case, it’s helpful to know where you can access the funds that will help you to react.
