When you’re starting your business, you’ve got a lot to be thinking about. You need to find affordable suppliers, market your business effectively, bring in paying customers, and perhaps even hire staff to get your fabulous idea off the ground.
Although they’re not the most exciting of these topics to think about, your business finances and how to best manage them should be at the top of your list. Get them right from day one and you can worry less about those smaller details and focus on making your business a success. Get them wrong, and you could be creating unnecessary stress and worry that could potentially harm your business.
With this in mind, here’s a useful introductory guide to business finance that can help you navigate the basics.
Find the right business bank account
Choosing a business bank account is a key decision that could either save or cost your business money. It will help you keep your personal and business finances separate, budget effectively, manage your accounts and complete your tax returns more easily, even if you’re just a sole trader. You may also be able to access financial support that has been specially tailored to your business needs.
However, business banks offer different services and charge different fees compared to your personal bank account. That’s why it’s worth finding out which account would be best for your business needs.
According to leading small business advisors Informi, “The high street banks (Barclays, HSBC, Lloyds, NatWest) have all upped their game in order to keep up with the digital-only offering of the so-called challenger banks (Monzo, Starling, Tide Business).”
Keep track of everything
Whenever your business spends money or earns money, you should make sure you’re making a note of it and keeping the information somewhere safe.
Getting organised early will simplify your bookkeeping and accounting process, form great business habits and help you stay financially in the black. Depending on your business structure, this may also be a legal requirement.
This should include, but not be limited to:
- Incoming and outgoings
- Invoices sent (including invoice dates, numbers and full client information)
- Inventory details including dates purchased, stock numbers, purchase prices, dates sold, and sale prices.
Understand your tax obligations
Starting a brand-new business is an exciting time and the last thing you want to think about is taxes. However, you also don’t want to be hit with a large, unexpected tax bill at the end of the year. That’s why you should always be clear what your obligations will be and budget for it accordingly.
What you need to pay depends on whether you’ve registered as a sole trader or as a limited business:
Sole traders (self-employed): You’re liable to pay tax on all your income after your personal allowance is deducted. You’ll also need to pay your own national insurance contributions.
Limited companies: You’ll need to pay corporation tax and make employers’ national insurance contributions. Any employees must pay tax and national insurance on their income via a PAYE scheme. If you’re hiring freelancers, they may need to take care of their own tax.
This needn’t be confusing if you’ve kept financial records from the beginning and you’re clear on what you need to pay. For more information on UK government business taxes, visit their website.
Consider whether you need finance
Paying for your new equipment, premises, advertising, wages and other overheads can soon add up when you’re in the initial stages of starting your business.
If you don’t already have enough funding, you could get extra support from the government or bank. This may be in the form of a loan or grant such as the UK government StartUp loan.
However, be careful about taking on too much debt, especially during these unpredictable times of the coronavirus. Consider how much you can repay and make your decision accordingly.
Summary
Take care of your business finance basics and it will be much easier to start and sustain your new business during these challenging times.
Make sure that you choose the best bank for your needs, keep detailed records, understand your tax obligations and consider whether you need extra finance to help get your business off the ground.
But most of all, have fun! This is the start of an exciting new era in your life.
Sources
‘Choosing the best business bank account’ – https://informi.co.uk/business-administration/choosing-best-business-bank-account
