The word ‘start-up’ has truly entered the public lexicon in the last decade. Some of the world’s most influential companies, from Airbnb to Uber, began as start-ups and today there are hundreds of thousands founded every year – each one seeking to solve our problems and break it big.
According to StartUpBritain, in 2019 over 650,000 start-ups were founded in the UK, which is no small number! But amongst the excitement of developing a new product or innovation and watching your business expand, it can be easy to lose sight of the basics which are essential to any business, new or old; big or small.
Rebecca Coles, part of the Accounts Team at Bulley Davey, explores the common mistakes start-ups make when it comes to accountancy; and how they’re looking to help with a series of drop-in sessions this Spring.
Limited company or sole trader?
“Surprising though it may seem, a lot of start-ups don’t think about accountancy from the get-go. This is understandable, because many people might feel they can’t afford it initially; or think it isn’t essential. But having your new start-up grounded in good accounting could save you lots of time and money in the long run!
“As accountants, one common problem we encounter with start-ups, is understanding whether you should register as a limited company or a sole trader. Many people think sole trader is the best option because they don’t think they’re big enough to be a limited company.
“However, very often registering as a limited company is more beneficial and there are no requirements in registering as one. Benefits of taking the limited company approach include risk protection and tax planning opportunities”.
Breaking down the basics
“The beauty of start-ups is that anyone can start one – and many of the biggest have been started by people who aren’t necessarily in the business world (think Mark Zuckerberg as a university student creating Facebook!). But what this also means is that, if you don’t have that business understanding you might fall into some simple mistakes.
“For example, we encounter businesses not setting aside the money to pay their tax – which can be easy to forget when you may only see the good revenues coming in. Equally, understanding the difference between the money you have coming in and the profit you will make is important – so that you can make accurate and informed business decisions and not over-invest.
“Finally, there’s knowing what expenses you’re entitled to within your business. We see a lot of start-ups claiming on the wrong things, or not claiming at all – which means missing out on funds you could recuperate and reinvest.
Get your accounts in order and focus on your business
“All of these are things that can be easily missed if you don’t have an accountant or have just never spoken to somebody about it. At Bulley Davey, we support our clients through this process of understanding and learning – keeping them on the straight and narrow while they focus on the things that matter to them; building their business and developing their ideas.
“All of this is part of why we’re running free drop-in sessions this Spring, that will allow start-up and small business owners to speak to qualified accountants about their business. Whether it’s ensuring you’re VAT registered, giving you an understanding of bookkeeping and accounting software – or just some forward-thinking advice, from our years of experience – we want to help!
“Start-ups are shaping our future and to be part of that with your own business is exciting – but knowing your financials from the beginning, could be the difference between scaling up or getting stuck in a rut.”