Harland Accountants managing director David Harland offers some essential advice to anybody thinking of starting their own business
Spring is here and you might be starting to think about starting a business formally, particularly if you have been doing something part time or home-based for a while and want to make a real go of it.
Here are my Top 10 tips:
1. Who do I need to inform that I’m starting up a business?
You should inform HMRC of your new selfemployed status and complete a CWF1 form (available on www.hmrc.gov.uk). You also need to consider whether you have to pay the self-employed person’s Class 2 National Insurance.
2. I’m only beginning so do I need to open a separate bank account?
It can be easier to setup a business bank account or at least a separate account of some description. Many of the high street banks offer free business banking for the first couple of years, so it is worth shopping around.
3. What sort of records/receipts do I need to keep?
You will want to keep records for two principal reasons – firstly, so you know how the business is doing and secondly so you comply with the taxman’s rules. Both of these can probably be handled in the same way either with a manual cashbook system or a simple spreadsheet.
4. Will an accountant be able to help me with these records?
An accountant can assist by explaining how to keep the records, complete a spreadsheet or accounts programme. He or she will be able to tell you what expenditure is legitimately tax deductible and what you can claim for against the profits of your business.
5. If I use an accountant or financial advisor how often will I need to see them?
See if you can find an accountant willing to give you the first consultation for free – this will help with the setup and given your impending success, should be least they can offer!
Thereafter, a fixed fee for the first year should be agreed, so you know what your financial commitment is.
6. What is the best piece of advice you can give me about handling the money I hope will start to come in?
Remember that there is a big difference between cash and profit! When you receive cash, you may need to keep some back for a rainy day, the taxman and other expenditure that you haven’t paid yet. Anyone can generate sales – the key is to doing it at a profit!
7. Can an accountant help me to get a small loan from my bank?
Yes certainly. Accountants should be able to produce business plans that can be used by banks and other financing organisations to assess whether they want to loan you money.
8. If I need to take on staff will an accountant be able to help with advice on salaries and national insurance, things I know nothing about?
Now we are getting into the exciting stuff as you get bigger! Some accountants also run a payroll bureau, which can advise on how to complete PAYE, wages, etc. This is an area where you can really go wrong, so it’s well worth a small investment. There is also VAT to consider once your turnover starts to reach around £70,000 per year.
9. An accountant could cost me a lot of money surely?
This is a difficult question and depends on the accountant. Most small businesses would benefit from using a qualified accountant. I would hope that in the early years the accountant’s fee would be less than the tax saved or funding identified etc.
10. What’s the key piece of advice for a new business?
Don’t overstretch yourself financially. You may be able to keep an eagle eye on the cost of running the business but you cannot control the revenue and this income can make or break and new venture.