As a start-up business, one of the hardest areas to control is spending, particularly in the first year. You will have fees, tax, stock, rent and wages to pay even before you have any actual money coming in, not only can this be very stressful but it can easily get out of control, leading to financial difficulty before you have even got started. It is worth taking the time to sit down, itemising all of your expenses and seeing if it possible to cut costs without affecting the quality of the service you are offering. Here are a few suggestions on what to focus on:
Cashflow & Payment Terms
The key area to look at as a new business is cashflow, having good cashflow enables you to collect money, pay your suppliers and have enough left over for any unexpected expenditure. Many new business owners feel intimidated when talking to longer running, more established businesses and agree to whatever they request. In reality, you are just as entitled as anyone else to request payment terms that suit you i.e. they could be 3 weeks or even 4 weeks. This enables you to get your stock, sell some of it and then be able to pay suppliers back without being totally out of pocket, you can also control stock levels in a much more efficient way.
Accountancy & Solicitors Fees
One of the first things you are told to do as a start-up business is get an accountant and a solicitor. Realistically speaking, solicitors aren’t needed unless you happen to be moving premises, have a legal issue with a client or are doing some form of shareholder’s agreement/buyout. Only pay for solicitors as and when you need them, and always go to ‘out of town’ solicitors rather than large, city centre ones.
From an accountancy point of view, accountants can provide useful advice to start-up businesses on where to save money, ways of taking your money out of the business and how to save on tax. However, most of this information is now available online as long as you take the time to research it and there are pieces of software, such as Accountz bookkeeping software, that enable you to run all of your income/expenditure through a program that links in to your bank account online. It is an easy to manage, simple program that can save you time, money and assist you with tax returns and invoices.
Wages & Expenses
One of the worst things you can possibly do as a business owner is pay yourself a large salary, you are paying needless tax and costing yourself a lot of money. Take out around £600-£700 per month as a salary and then pay yourself supplementary amounts as a dividend which work out at a much lower tax rate until you get to the next threshold of higher earners. If you need to buy a new computer, TV or printer for your office, don’t take the money out of the business and then buy it. Buy it through the business and claim the 20% VAT back so that you have saved money on the purchase.
Hopefully some of these tips have assisted those with start-ups to avoid unnecessary costs and given you more chance to succeed.
This post was written on behalf of Accountz bookkeeping software by Roman Winter. Roman specialises in small business issues and likes to pass on some of the advice he has been given over the years to help new entrepreneurs.