Recently I heard that new business start-ups have increased by 25% in the last year compared to the year before, which is very exciting news as it means there are more people deciding to take the plunge and try to forge their own path.
Unfortunately, 20% of businesses fail in their first year and 60% don't make it past year three. So more than half of those exciting projects won't make it to 2024.
Having had lots of conversations with business owners throughout my career, one thing that I have noticed is that many of the people brave or crazy enough to start out on their own are doing so because they've had an idea which they can't stop thinking about. They are generally focussed on the idea, the delivery, the marketing and the excitement of getting started. They are often not that focussed on the admin, the accounts, the tax or the financial management – especially cash flow.
A lot of the time, the idea of having to sort out these areas, which they've not had much involvement with before, is too daunting for them to even consider.
So they don't.
They put their head in the sand and ignore the brown envelopes that come from companies house and HMRC. They shy away from looking at the financial information, because they are concerned about what it will tell them. They find a way that works for them to keep the books up to date, or not too far behind, and they accept that as good enough.
The problem with this approach is that the issues don't go away, they get bigger. A step in the wrong direction early on can take you a long way from the right path by the time the business eventually decides to talk to an accountant.
It's ok. Stay calm. Accountants are not scary people.
There are lots of accountants who will happily have a call with no fees and no strings attached, so you can run through where you are up to and they can point out some key risks for you to consider.
Here are some things to do, as soon as you can:
Speak to an accountant!
Make sure you are keeping proper records - track all of your income and expenses
Xero, Quickbooks and other systems are available to help you but all cost money.
If you want something free that does the job, check out Bokio,
Track your mileage, it may not all be claimable but if you don't track it, you can't claim it,
Get a bank account for the business and put everything through it (if you are a sole trader then this is best practice, if you are a limited company then it's a legal requirement),
There are plenty of banks that will do a free account, google will help you find one.
Get your bank linked to your bookkeeping software - they all link up now and it makes everything else easier and quicker to do,
Speak to someone who knows how to work your new software (see the first point on this list!) and find out the quick wins to make your life quicker and easier,
Start thinking about what you want from the business
income for you;
a bigger business that will make you rich;
a project for a few years that you can then sell on;
or something else.
Understand when your reporting and tax returns are due - this will depend on whether you are a Sole Trader or a Limited Company
Also don’t forget to Register with HMRC - if you have to. Check out https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
Accountants don't have to cost much; you can probably afford one.
But can you afford not to have one?