Financial Management for Start-Up Businesses
Managing a business’ initiation stages is one of the most demanding periods in order to ensure sufficient cash flows, profitability and growth. A substantial amount of businesses liquidate due to lacklustre financial management.
After incorporation, it is ideal that a business creates a bank account solely for business operations. Although a sole proprietor is not requested by law to have one, it is paramount that a business’ finance is kept separate from personal finances.
Successful businesses keep track of their expenses, and so should start-ups if they are to achieve high levels of commercial success. Keeping receipts organised is of paramount importance to maintain records and analyse expenses.
Starting out business operations from one’s home is an excellent way to reduce overhead costs, and can be beneficial in terms of Tax reductions. A bookkeeping system should also be established. A business may use two methods of bookkeeping, the cash and accrual methods. In the first method, revenues and expenses are recognised only when they are received whilst in the accrual method they are recognised once the transaction occurs. ARQ Accounting prepares accounts on an accrual basis. This is due to the fact that it leads to the most accurate representation of a business’ financial standing. The accrual method is best for those organisations that want their financial statements to be audited. If this method is not applied, Auditors will not provide feedback.
A payroll system must also be put in place. A new business may outsource some of its departments, which is why a clear distinction between an employee and someone independent from the organisation must be made to ensure appropriate Tax payments. One must also familiarise himself well with the Tax procedures of that particular jurisdiction that he is operating within. This is due to certain taxes which may apply.
Another important step is to create a procedure on how payments will be delivered and processed. Being paid through instalments or an E-Commerce platform provides different types of payment which will influence at which stage revenue becomes available. One must also analyse his tax obligations out of each sale made, meaning that out of every transaction, an amount has to be paid for tax purposes. Apart from this Tax procedure, a number of other Tax regulations are to be accounted for. In order to earn more income, a business must comprehend its Gross Margins in an appropriate manner. This is done through the calculation of the Gross Profit Margin which indicates how much income is received after deducting the costs to make the product.
ARQ Accounting provides a variety of services which are beneficial for start-ups. These services include appropriate measures of Management Accounts, in-depth accounting, VAT compliance and bookkeeping. Close by its side are services which include, Corporate Administration, Payroll, Direct and Indirect Taxation advice.
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David is a Chartered Accountant and a Fellow of the Association of Chartered Certified Accounta... More