Accounting tips for Startups: Managing finances and maximising growth

Starting a business can be exciting, but you need to focus on multiple topics like product development, marketing, sales, financing, etc. All these consume most of your focus, time and resources, leaving accounting behind.

But, as a startup owner, you must have an accurate image of your financial health to stay stress-free from financial burdens and have sufficient capital to conduct business. It is primarily because startups have an unpredictable nature, and access to accurate financial information allows you to identify opportunities and threats in business.

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Additionally, these insights help you make strategic financial decisions. However, if you are new to these, we are here to share a few accounting tips for startups.

Table of contents

What is startup accounting?

Startup accounting refers to the process of how you can record and organise your financial information. These processes include reporting, summarising, analysing, and projecting your business transactions using different financial statements.

In the UK, most businesses use three statements, including cash flow statements, income statements, and the balance sheet, to manage their company.

Profit and loss and cash flow statements summarise your financial transactions over a particular accounting period. In contrast, the balance sheet is a snapshot of a moment in time.

Top 10 accounting tips for startups

Launching a startup can be a difficult journey filled with opportunities and challenges. You will have to operate in a dynamic work environment that requires flexibility, innovation, and faster decision-making. It is where our top accounting tips for startups come into play.

They will help you match the intricacies of startup operations and ensure your business grows and evolves over time.

1.  Make a clear business plan

Startups need a business plan that determines their current situation and projects the next few years.

It must detail how you need to manage finances in business and other activities, what capital you need, and from where you can get the funds.

You must spend sufficient time making a good business plan because it is the first thing potential investors will want from you.

2.   Separate business and personal expenses

Startups must separate their business and personal expenses to avoid financial burdens. You can have a separate business bank account to help you stay organised and make recording financial transactions easier.

It also allows you to keep track of your income and expenses, taxes and other financial data. Additionally, it makes tax preparation easy and provides accurate information to investors while seeking funds.

3.   Monitor your financial health regularly

You must keep track of your business’s financial position regularly. It ensures you have sufficient capital for business, making proper financial decisions, and avoiding financial burdens.

You must know how much money you have in your business account, how many sales you make, your income and expenditure, and your stock levels.

4.   Set aside a startup budget

Financial management in startups is essential to survive the competition in the market. For this, you need to prepare a budget that forecasts your income and expenses.

This number is crucial to keep track of your business spending and ensure you won’t go bankrupt or fail to meet your debts.

In addition, it helps you set reasonable prices for your products and services to achieve your most expected profit margins.

5.   Choose a proper accounting method

Choosing an accounting method can be difficult for startups and requires expert knowledge and advice. There are two main accounting methods used in UK businesses: accrual accounting and cash accounting.

In the accrual accounting method, you record all transactions in real-time, including your upcoming revenue that you have billed but the customer didn’t pay or your upcoming debt that your suppliers have charged but you didn’t settle.

On the other hand, for cash accounting methods, you record transactions when funds enter or leave your business.

6.   Understand what financial records to maintain

You must create, organise, and manage your business records regularly. This means you must keep your business’s three main financial statements accurate and updated. These statements are mainly your balance sheet, income statement and cash statement.

Your company’s balance sheet shows all your assets and liabilities; the income statement depicts your profit or loss during a specified period; and the cash statement determines your cash movement in and out of your business.

7.   Proper tax planning

Every business, regardless of size, must think about its tax planning, but it can be complex for startups. Not only do you need to prepare your tax returns accurately and pay your taxes before deadlines, but you also need to concentrate on tax deductions.

The UK government has levied numerous tax relaxations on startups, including employee compensation, equipment purchases, travel expenses, etc.

Numerous other complex require expert advice, like VAT planning for marketplaces.

8.   Automate your accounting processes

Certain accounting tasks can be repetitive and error-prone, which wastes your time and money, like copying large volumes of financial data across multiple systems, calculating taxes, etc.

You can use top-notch accounting and bookkeeping software to automate these processes and help you with bookkeeping, payroll, invoicing, and inventory management.

However, you must research the tools that fit the best for your startup and look into their prices before getting one for your business.

9.   Know your tax and regulatory requirements

Every business in the UK must abide by certain tax and regulatory requirements and accounting standards as laid down by the government.

This protects your business from legal issues and penalties and, in the worst case, closes down your startup. You can either read the evolving regulatory requirements or hire a professional to help you stay updated with the changes.

They will help you to focus on your business without worrying about compliance and regulations.

10. Prepare for funding support

Getting the right funding is a hurdle for most startups, but it is necessary for their growth. If you are looking for venture capital, angel investment, or other funding types, you need an accountant to present your startup in the best way possible.

They mainly ask for your financial projections and check how the business performs to ensure risks related to their investments.

Hire startup Accountants

Work with UK-based Experts for tax, audit, accounting, payroll, & EIS/ SEIS needs.

Have a question? Call us on
0203 983 8100
Monday to Friday 9am – 4:30pm

Conclusion

Starting a business is only half the battle while ensuring it stays profitable in the long run is the other half. Accurate accounting and bookkeeping are essential for your startup’s survival through all the financial complexities. If you aren’t sure about where to start or save time for core business activities, hire an accountant.

Experlu Editorial Team
The editorial team at Experlu is comprised of seasoned financial professionals dedicated to providing high-quality content on accounting and finance. With a wealth of experience and diverse expertise, the team produces insightful articles that have established the Experlu blog as the UK's leading financial and accounting resource. The team includes accountants, auditors, and business advisors who stay updated with the latest industry developments. Their commitment to excellence ensures that Experlu remains a trusted source of information, helping readers stay informed about audit, business, finance, and tax matters.