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How accountants can set start-ups off on the right foot
According to research carried out by the ACCA (Association of Chartered Certified Accountants), the majority of start-up SMEs (small to medium-sized enterprises) do not seek professional financial advice in favour of cutting costs and doing it themselves. However, in the midst of a turbulent economy, accountants can be the nurturers start-ups need to grow.
ACCA used data from the BDRC SME Finance Monitor to calculate that in the UK, ‘17 per cent of SMEs with regular management reporting, a formal written business plan and financially trained staff had been able to sustain growth rates of over 30 per cent for three years running.’
In contrast, just 7.5 per cent of SMEs that failed to seek professional advice and support had managed to achieve and maintain growth.
Accountants can provide support through several key stages of a business’ development.
Firstly, before trading has begun an accountant can aid newly formed businesses with their financial business plan, which is critical for the business owner as knowing how much money you can spend on the initial start-up will enable you to forecast and plan for the first few months before revenue is generated. This could include:
- Investment advice and assistance, i.e. loans
- Advice on accounting software
- Advice and assistance on opening a business bank account
- Professional advice on how to ensure the business operates within the law
- Advice on how to keep the business activities’ expenses up to date.
Secondly, during trading, a new business in the early stages of its lifecycle may encounter some monetary issues. Accountants can assist by:
- Ensuring Pay-As-You-Earn (PAYE) and National Insurance Contributions (NICs) rules are fully complied with
- Ensuring taxes and all other paperwork is submitted to HMRC
- Explaining complicated financial statements.
As a new business exits infancy and enters adolescence, it could decide it wants to expand its operations. Accountants are key players in order to achieve smooth financial growth. Areas include:
- Identifying potential areas for growth, studying cash flow patterns and analysing the worth of stock quantities (if applicable)
- Preparing forecasts of future finance growth and how this can profit the company
- Advice on property, equipment, leasing and purchasing options.
While this is by no way an exclusive list, it does go to show how much of an integral role accountants can play in setting start-ups off on the right foot.
For any new start-up thinking about ‘going at it alone’, consider how important not only finance is to the business, but how important getting it right is; as poor planning can lead to poor performance and ultimately poor profits.
Visit the HMRC website for more information on starting up a new business: http://www.hmrc.gov.uk/startingup