In the early start-up stages of a new business, there’s often so much to do it can be difficult to know where to start. Spending time on developing an effective business model is important, as is making the appropriate financing arrangements for start-up needs. Early marketing and arranging the launch of a product or services is also key. It’s not surprising, therefore, that many new business owners are focused on recruiting staff, securing premises and buying equipment to the exclusion of any meaningful consideration of ongoing running costs and other business expenses. It can be very rewarding to create and manage a successful enterprise, but there are a few things to look for to avoid potential snags along the way.
After initial trading, it’s important to make regular checks on progress. Be aware, for example, of the level of spend on marketing, and determine how effective it is. Social media can be monitored using tools such as Google Analytics to help measure where online traffic is originating and its volume. Checking on progress also means taking action if something is not working as well as was hoped. Depending on the nature of the business, it may be of benefit to reassess marketing costs regularly so that finance is not being wasted. The same is true of staff costs – if employees are not generating new business or successfully dealing with existing tasks, then it’s time to think again about what their salaries are costing.
It may sound obvious that financial records should be ordered and transparent; however, many new businesses fail to set up adequate financial systems or appoint a suitable bookkeeper or accountant at the beginning. Most financial tasks, such as invoicing and cost management, can be accomplished using software or online programs. Smaller businesses can benefit from contractor accountants, who are able to steer owners towards suitable assistance, or undertake bookkeeping and accountancy services on their behalf.
Besides ongoing financial records and annual accounts, small businesses are liable for corporation tax, and individuals must calculate their personal tax liability. Disclosure and compliance are extremely important, and failure to address these issues can lead to a lot of trouble for a new business. There are specific deadlines by which each task must be completed.
When annual turnover or sales exceed £79,000, VAT registration is required, and this tax must be added to contractor invoices. Expenses incurred by the enterprise also include VAT, and this can be deducted from the VAT received before the balance is then repaid to the government, usually on a quarterly basis. VAT is a tricky area, and it’s always best to have professional advice about any queries or discrepancies that may be notified.
Good employees are worth their weight in gold if they drum up new business and boost sales, creating decent profits and developing new revenue opportunities. Naturally, they should be rewarded by being treated well, including being properly paid. Some new employers attempt to minimise staff costs by paying poor hourly rates or attempting to deal in cash. That is a bad idea. Income tax and National Insurance should be calculated on all employee payments. Deductions made are then passed to HMRC. Businesses must pay a share of National Insurance in addition to their employees’ shares, making this an important expense that is sometimes overlooked
To avoid the common mistakes of new businesses, don’t wait too long before setting up financial systems, ensure that information is accurate and consistent, and keep it simple and get expert help if struggling.
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