It can be a tremendously exciting time when you start working for yourself. You have customers to look after and a business to build. But behind all this you really do need to make sure that you have the a sound foundation for your accounts, tax and administration.
Here are some tips to help you through these early days. Please note that these tips assume that you are starting business as a sole trader. If you are planning to start up with your own limited company then there are is a separate list of key points.
1. Your accounts. A lot of people leave their accounts until after their first year end. However this means that you can’t really know how successful you have been until it is too late for those important financial decisions which you will need to make. The usual alternative is to prepare accounts on a monthly basis and this is what your bank manager will normally ask for. However you could also prepare accounts quarterly or based around particular activities or seasonally. The important this is to know how you are progressing during the year and not just after it is finished.
2. VAT. If your sales are more than £79,000 per year then you must register for VAT. This total needs to be checked monthly and not just once a year. You can also decide to register for VAT if your sales are less than this. Take care though as you need to look at
How this impacts your customers ( can they reclaim the vat?).
Will it save you money? Are you buying goods and services with VAT included?
Will you be able to handle the extra administration and avoid the stringent rules and penalties that come with being registered?
3. National Insurance. You will be liable for class 2 NIC and depending upon your profits class 4 as well. You should register with NICO.
4. Income tax. You will need to advise the tax man that you are trading and ensure that you set aside enough money to pay him.
5. Your bank account. You will eventually need a separate bank account just for your business.Whilst it is technically possible to run your business through your private account you have to ask if you really want your accountant and possibly the tax man checking through your private life.
6.Accounting software. Do you need accounting software? And if so which package should you buy? We live in an age when it is expected that you will use a computer for everything. However your accounts can still be kept well on just a simple cash book. If you want to take the step up to buying an accounting package then do taker advice before you choose. Once you have made your choice it can be quite costly and time consuming if you decide that you want to change later. Sage is the market leader but it is expensive and there are lower cost equally good packages available.
7.Will you employ people? What usually happens is that you start off by having part time help or maybe you pay someone for the odd job now and then. But you need to be careful as both these examples could land you into a world of regulations and unexpected costs. Best to take advice at the start.
8. Legal obligations. Simple things like public liability insurance and registering with your local council if you are in one of the trades where they keep a record such as animal breeding establishments, taxi drivers and licensed premises.
9. Your website and optimising for Google. There will come a time when your customers will expect to see you on the internet. It might be just a Facebook account or for business to business they will probably look for you on Linked in. Whatever business sector you are in it will pay to start early. There are some fairly simple rules to get established.
10. Budgets and the bank manager. Very few new business owners will start out with a budget. It doesn’t need to be overly complex but we think it best to have one at the start.There will probably come a time when you need to discuss your finances with a bank manager and being able to refer back to a budget and show that you monitor your progress will be invaluable.
Whatever business you are in there are many small points to consider when you start trading. Don’t leave it until it is too late.
Would you like a free consultation to discuss these issues and many more? Why not call me on 01228 562667 for a no cost/no obligation discussion?