Although starting a new business can be both fun and exciting, says Marcus Turner-Jones, there are a number of risks you must ensure your business survives any potential upcoming storms. These factors include: the state of the economy, managing cashflow, finding the perfect accountant, and understanding how to reclaim VAT. Here, we discuss each in turn.
Understanding the Wider Economy
Before you attempt to turn your business dreams into reality, you must first understand the wider economic context. At times, government incentives can help small business, and entrepreneurs feel empowered.
However, now does not seem to be one of those times. For example, in the UK, a survey of 900 SME owners by Close Brothers recently found that only 38 per cent of UK business owners feel like the UK actively fosters and encourages an entrepreneurial environment, signalling that much more work has to be done to help encourage entrepreneurship and help small businesses succeed in the country.
As a result, you must be aware of the risks associated with starting your business. This could be countered by starting your business on a smaller scale, a smaller product base or waiting to increase your business’s chances of survival. Some businesses are more recession-proof than others, so do the research to ensure yours can weather any storm that could be on the horizon.
However, if you decide that the climate is right for you to start your business, then there are a number of other essential factors you should also consider before you begin.
Accurate cashflow management is vital for any start-up or growing business. Plus, with a little help, there are a number of ways that you can manage your cash flow. These include:
- Keeping books accurate and up to date
- Hiring a professional accountant (we’ll go through this in a little more detail later)
- Ensuring your customers understand your invoice requirements and payment dates
- Considering alternative forms of financing
- Building a cash reserve
- Ensuring your business and personal finances are separate at all times
The phrase “cash is king” may be a bit of a cliché, but it’s actually also a vital mantra for small businesses. By following these tips, you can ensure that your cash serves you.
Finding the Perfect Accountant
Choosing an accountant is like choosing a new business partner. You need someone that you can trust and depend on, providing you with invaluable advice and guidance as your business grows. But, what should you look for?
- Consider their location: some people prefer face-to-face meetings with their accountants, but more companies are now collaborating online, using cloud-based systems. Choose what’s best for your business.
- Ensure they have the correct qualifications.
- Look for an accountant with relevant experience: ideally, you want an accountant who has experience of preparing tax returns and financial documents for companies of a similar size to yours. It’s even better if they’re used to working in sectors like yours, too.
By spending your time finding the perfect accountant, you’ll save money year after year.
Claiming Back VAT
As a business, you can claim back VAT paid on goods and services purchased for business use. In order to claim back the VAT, you must keep accurate records and VAT invoices.
You cannot claim back for anything intended for personal or private use, However, you can claim the business portion of VAT on a purchase that’s for both business and personal use. For example, if half your mobile phone calls are private and half are business, you can reclaim half the VAT you pay on your bill.
You can log in to your HMRC online account to see any VAT refund you’re owed and can claim by submitting your VAT Return.
You’ll usually get your refund within 10 days of HMRC receiving your return, but it may take longer on some occasions. Only contact HMRC if you haven’t heard anything for 30 days.
You can find more information on reclaiming business VAT here.
To conclude, there are a number of essential factors you must consider before starting your business. These are not insurmountable hurdles, but should always be under consideration both before you start your business and while you’re running it.
Marcus Turner-Jones graduated in Economics from the University of Sheffield before pursuing a career as a Market Analyst in London. He has his own website, Turner Jones Finance, and writes freelance from Buenos Aires with his dog, Luna.