What is a start-up business?
A start-up business is a company that is still in its infancy stage in terms of operations. While typically self-funded, founders of a start-up business may try to gain outside funding from potential investors. According to an analysis of Companies House records, an estimated 93 new businesses were formed every hour in the UK in the first half of 2022.
Why is a financial strategy important for new businesses?
No matter the size of a business, a financial plan is essential to a company’s success. For new businesses, establishing a clear financial strategy from the offset helps to create a focused and forward-thinking approach that considers any potential risks your business may face.
For start-up businesses, having an effective financial plan enables you to successfully steer your company as it grows and your business goals continue to develop.
Money management tips for start-up businesses:
1. Establishing financial goals
During the initial stages of starting a new business, first-time entrepreneurs typically prioritise nurturing the concept of their product or service and neglect the importance of setting out their financial aims.
Invest time in developing realistic financial goals for your business, both short-term and long-term. It is important to revisit these targets to track your company’s progression over time.
2. Estimating your expenses
For a business to be lucrative, profits must outweigh expenses.
By clarifying your fixed and variable expenses early on, you can identify areas to reduce overheads and maximise capital.
3. Creating an annual budget
Effective budgeting is an essential way for start-up businesses to ensure they are spending efficiently, especially where finances are limited.
Creating an annual business budget allows you to determine how best to utilise your capital while staying within your company’s means.
4. Recordkeeping
In terms of recordkeeping, the more organised your business is the better. A detailed record of your company’s finances will provide you with greater insight into your current financial situation.
Taking a proactive approach to tracking your financial records allows you to be more informed when making important business decisions.
5. Utilising tax credits
In recent years, the UK Government have implemented measures to help support start-up companies by introducing tax relief schemes such as R&D tax credits, corporation tax reliefs and pre-trading allowances for new businesses.
When it comes to tax credits, many new business owners may not realise that government help is out there, or that they qualify for it.
Determine which tax credits your business is entitled to and take the necessary actions to apply for them.
Further information and guidance regarding tax reliefs and allowances for small businesses can be found on the government website.
6. Prioritising your taxes
For any business, falling behind on your taxes can prove costly. It is integral to understand your tax liability in order to comply and avoid penalties.
Paying your taxes correctly and on time should be high on your company’s priority list.
7. Consulting with an accountant.
It is easy for new business owners to get lost in the complexities of running a company.
An accountant can provide detailed financial insight and guidance regarding various aspects of operating a business effectively.
How can PKF Smith Cooper help?
At PKF Smith Cooper, we believe that entrepreneurship should be encouraged. We understand the financial challenges many first-time business owners face and are experienced in helping our clients navigate them.
PKF Smith Cooper offers tailored accounting and business advisory services to help you manage your finances effectively. We can guide your business throughout every stage of its lifecycle.
For more information on how our award-winning accountants can help your business, get in touch with us today. Our team of accountants in the Midlands has extensive experience in helping start-up businesses like yours succeed.