If you are bold enough to take the leap and start your own business, you will want to give yourself the best possible chance of success.
Good handling of finances is the bedrock that will allow your business to succeed.
Rather than wait until you have everything set up before you think about getting your finances in order, you should understand your best options now before your business gets going.
What are the most important things to know when handling accounting for a new business?
A lot of the specific concerns will largely depend on the type of business that you set-up but the broad strokes are the same.
If you have heard any of the chatter around Making Tax Digital (MTD), then you will know that there is a concerted push to get businesses better organised with their finances.
This means that utilising cloud accounting software is becoming increasingly important as letting boxes fill up with receipts is no longer an acceptable way of doing business.
In fairness, it never was, but the excuse of not having a better option has evaporated over time.
If you are acting as a sole trader, then you will need to pay attention to MTD for Income Tax and compliant software will be needed to fulfil this obligation.
For Limited Companies, the use of accounting software lets you have greater insights into the financial health of your business.
As your business grows, knowing exactly where the money is coming from and going to lets you be more decisive and responsive to factors beyond your control.
It is no secret that the domestic and global economies are both frequently rocked by uncertainty, so your business will stand a better chance of survival if you can be dynamic.
How important is it to get bookkeeping right when starting a business?
Getting bookkeeping right will be the difference between a business operating effectively and closing down before its time.
For new businesses, there is a question of when to work on getting bookkeeping straightened out.
You may feel that it is something that can take a back seat while you focus on getting the day-to-day running of your business squared away.
This is a mistake and your bookkeeping will only get more challenging as your business continues to operate and grow.
There is an opportunity to hit the ground running and get your bookkeeping accurate from the outset so that problems do not spring up later.
If you do feel that you lack the time or knowledge to get your bookkeeping straightened out, then you should seek the services of a trusted professional.
It is possible to outsource the management of payroll and your bookkeeping to an accountant who can give you expert guidance while you focus on running your new business.
Do I need to worry about MTD?
MTD for Income Tax is only applicable for landlords, self-employed individuals and sole traders.
If you are a sole trader, you will need to adhere to MTD from April 2026 if your income is over £50,000.
This threshold drops to £30,000 in 2027 and £20,000 in 2028.
All businesses should be aware of MTD for VAT as VAT registration looms on the horizon for all fledgling companies.
VAT registration becomes compulsory if a business’s taxable turnover crosses £90,000 in any 12 months.
If you see this is about to happen within the next 30 days, then you should register for VAT.
If you cross the threshold unexpectedly, you will need to register within 30 days from the end of the month in which you exceeded the threshold to register for VAT.
The extent to which you need to worry about MTD depends on the structure of your business and your annual income and taxable turnover.
What other accounting tips are important for new businesses?
Something that can be overlooked in the excitement of setting up a business is giving it a separate business bank account.
It is not a legal necessity, but it is incredibly wise to set up a separate business bank account.
This feeds into your accounting by letting you more easily see the finances of your business, as your personal transactions will not get muddled up.
What you are legally obliged to do is to keep records relating to your finances for at least six years.
If you are working alongside an accountant, they will keep records of the work they do for you, but you need to supplement this with your own record-keeping.
While there is the fact that you have to do this that should motivate you, you can also consider effective record-keeping as a way to strengthen the growth of your business.
Knowing what your finances looked like over previous years will help you figure out where things have been going well or when decisions hurt the business.
Obviously, those are considerations for later down the line, but they are only possible if you get things right from the outset.
The best tip that we have for getting your accounting sorted out when starting a business is to talk to a professional.
We work with businesses, both those that are big and those that dream of getting big, to handle their accounting concerns for where they currently are in a way that sets them up for the future.
Our team learn the specifics of your business so that we can continue providing tailored support as your business needs change.
