Accounting mistakes are all too easy to make in the startup space, but they can have a huge impact on your fledgling business.
Below are four of the most common accounting mistakes made by startups, and how an accountant can help you to avoid them.
- VAT registration
VAT registration is a legal requirement for businesses that earn more than £82,000 for an consecutive 12 month period. There are other scenarios where VAT registration becomes compulsory too, and an accountant can advise whether your business is obliged to register.
If you fail to register on time, you may incur penalties or other interest and surcharges for late payment if your business is liable for VAT.
There is also the option to voluntarily register for VAT. Victoria Kelly, practice manager at specialist startup accountancy firm Nixon Williams, said: “Some businesses find themselves in a refund position with the HMRC, so the company is actually better off being VAT registered. Others choose to be VAT registered if their customers are predominantly VAT registered. An accountant can advise when it is necessary or if it makes financial sense for your business to be VAT registered.”
- Important dates and legislative changes
Your business will have certain tax and administrative obligations to meet throughout the year. It’s important to keep on top of these dates and deadlines. Kelly added: “Not only can an accountant flag these dates up, they will fill out all the necessary paperwork and can advise on the best tax planning solutions.”
Your accountant can also advise and keep you in loop on any legislative changes that affect your business. For example, the Automatic Enrolment pension law means all business owners must help employees save for retirement. An accountant will not just make you aware of any legislative changes, they will create an action plan to monitor and forecast any additional costs.
- Expenses claims
Many startups fail to monitor their expenses – and this could cost them dearly. Kelly said: “In the early days of a business, every penny counts and an accountant will monitor your expenses and advise you on expenses you may be failing to claim.”
For example, some businesses can claim expenses for their home office, internet usage and their mobile phone bill. Applicable expenses attract Corporation Tax relief at 20% and therefore reduce your Corporation Tax liability quite substantially.
Whatever your field of business, it is essential to get the right insurance cover. Some insurances are compulsory so it makes sense to ask an accountant to identify the core cover that your business requires.
It may also make sense to consider some non-compulsory insurance and an accountant can advise on the best route to take. “Those businesses that choose not to insure to save a few pounds in the short term, could go on to regret this decision in the long term,” Kelly added.
If you do want to avoid these mistakes and others, then it makes sense to hire a specialist startup accountant. They will not only take all that cumbersome paperwork off your hands, but will become your small business’s financial advisor – keeping your startup afloat and aware of all the accounting responsibilities you must adhere to.