10 SAVVY MONEY MOVES FOR START-UPS
Thought about ditching the 9-5 and going it alone? Check out this financial advice first
1 MAKE A MONEY PLAN
You need to get to grips with the nitty-gritty of how your business will work. Before you start, write down your short, medium and long-term business goals – then think about how you will achieve them. What do you need to sacrifice to get there? When you have a bigger goal, you’ll find the impetus to sacrifice the small stuff. If you want to secure a loan from a bank or investment from other sources, you’ll need to understand and articulate how much it costs to run the business, what your turnover will be and when you will make a profit. Need help? Find lots of advice at gov.uk/business-support-helpline.
2 FIND THE RIGHT BANK
You may be able to get a business loan or an overdraft from a bank if you meet its lending criteria (which includes having a good credit rating). For more information and advice, visit bba. org.uk/customers/business-banking. But you shouldn’t just head to the bank you have your current account with – instead, look for one that really meets your small business needs. See and compare options at businessbankinginsight.co.uk. This site also has info on credit cards and other services designed for small and medium-sized-business owners.
3 GET HELP FROM THE GOVERNMENT
As long as your business hasn’t been fully trading for more than 24 months, you can apply for a loan of between £500 and £25,000 from the Government. Mentoring services to new businesses are also offered. Go to gov.uk/apply-start-up-loan to apply.
4 CONSIDER OTHER FUNDING SOURCES
Loans aren’t the only way to source capital for your business. Crowdfunding lets you pitch your ideas to the general public and get investments from people who believe in your business. You can either offer potential investors an equity stake in your business or swap capital for benefits and discounts using a site like Kickstarter. Find out more at ukcfa.org.uk. You could also look into peer-to-peer lending, which is similar to, but not to be mistaken for, crowdfunding. It enables investors to lend funds directly to borrowers. Interest rates offered are typically at least as good as rates on loans provided by banks. Find out more at moneyadviceservice.org.uk, and check out lending platforms like zopa.com, fundingcircle.com and ratesetter.com.
5 ASK AN ACCOUNTANT
The right accountant will be an invaluable source of guidance as your business grows, and can make sure that your day-to-day book-keeping is up to scratch. Try starting with the Institute of Chartered Accountants for England and Wales (icaew.com), which has a search service and also lots of resources for new businesses.
6 INVEST IN GOOD SOFTWARE
Bills, VAT, PAYE, national insurance and staff costs… keeping track of all these is much easier with the right accounting software, such as Sage, Xero or Quickbooks. It will be money well spent in the long run, as having everything in one place will help your accountant spend less time pulling it together at the end of the tax year.
7 MANAGE YOUR FINANCES ONLINE
There are plenty of accounting packages to choose from, so be sure to compare and read reviews before you commit. It can be handy to choose one with an easy-to-use app, so that you can access your business finances anytime, anywhere, as well as generate invoices on the go.
8 GET TO GRIPS WITH TAXES
Different tax rules apply depending on whether you are a sole trader (you run your business as an individual) or a limited company (you’re the owner and an employee of the company). Getting on top of your personal and business tax, as well as national insurance, is crucial, or you’ll end up in trouble with HMRC. Visit hmrc.gov.uk, the definitive starting place for everything tax-related.
9 SORT OUT YOUR PENSION
If you’re self-employed and paying into a personal pension, you get the same tax advantages as if you were employed with a company pension. As a general rule, you should be paying at least 8% of your income (ideally closer to 20%, if you’re over 40) into your pension. One option if you’re self-employed is a flexible stakeholder pension so you can stop and start payments. Start researching at moneyadviceservice.org.uk.
10 BE A SMART EMPLOYER
If you’re taking on staff, you’ll need to make sure you have employment contracts in place, pay staff on time, deduct tax accurately and comply with other legal requirements, such as automatically enrolling them into a pension where appropriate. Check gov.uk/employing-staff for a rundown for first-time employers. Your accountant will be able to help with aspects such as payroll, but also involve a lawyer. Remember: late payments can be a big headache for small businesses. For advice, contact smallbusinesscommissioner.gov.uk.