Archive | August 2009
August 28, 2009  

Buying accounting software

You have just set up your first business venture. You don’t have enough money to pay an accountant to do all your bookkeeping. You do want to start off on the right foot by keeping good accounting records and decide to do the bookkeeping yourself using some accounting software. But which one do you choose? Here are some simple tips.

 Consider how much you know about accounting. If you know a little, then you may be more comfortable with software that uses lots of jargon. If you know nothing, look for software that is aimed at non-accountants.

  • What are your business needs? The more features you think you need in software, the greater the cost. It’s often best to start with a version of software which needs your needs now and for the next few years. But don’t overkill.
  • What is your budget? The more popular accounting software (e.g. SAGE, TAS and Quickbooks ) have versions ranging in price from about £75 to £500 and even more for larger businesses. The best tip is to get a reliable and reputable piece of software which is within your budget.
  • What help and after sales support is available. Some software vendors offer 30 days support from date of purchase. This can be really useful to help you get set up.

 The advantages of using software over manual accounting records are numerous. A good fit between your business’ needs and the software, will realise greater advantages. If in doubt, ask an accountant for help.

August 21, 2009  

A good business plan needs to address the finances too.

 

A good business plan is something like a map in that it should help you to navigate to where you want to go. It is a necessity not just for you but also for potential investors or banks that may finance your business. A good business plan needs many things, one of which is financial projections for income, expenditure, capital and cash requirements of the business.

 These financial projections will take some time to prepare. It’s worth it though as you need them to complete a business plan and tout it to banks and potential investors. You should first try to plan how much you can sell and at what price. Then, work out how much it costs to buy or produce what you hope to sell and any other costs. These plans won’t be 100% accurate, but they should be based on reasonable assumptions. You should also try to plan your capital requirements i.e. how much you need to buy equipment and other assets for the business. Plans for capital are very useful when approaching banks if you need to borrow to buy the equipment.

 Finally, you should also include a cash projection in your business plan. This involves predicting when cash comes in to the business and when cash needs to be paid to suppliers, employees etc. This can help identify any cash shortages which might arise and plans can be made to rectify this.

August 18, 2009  

Do I need to register for taxes?

Once you have set up your business, you will have to register for the collection and payment of various taxes. Here’s a very quick guide on what you need to watch out for.

 Income taxes

If your business operates as sole trader or partnership, you will have to register for income tax. This is typically in addition to income tax you pay as an employee under the PAYE system. If your business is a limited company, you will need to register for corporation tax, which is a tax on the profits of a company

 Value added tax (VAT)

VAT is a tax on goods and services. When the turnover of a business exceeds a certain amount (currently £70,000 in the UK), it is legally required to register. VAT is charged on sales and VAT on purchases can be deducted. Any surplus is paid to the tax authorities on a regular basis.

 Payroll taxes

If you have employees, you need to register as an employer and collect PAYE and National Insurance from employees and also pay an employer’s National Insurance contribution. You should register when you have your first employee.

 A good thing to do is look at the website of your tax authority. For example, HM Revenue & Customs provide simple guidelines for new businesses – see http://www.hmrc.gov.uk/businesses/iwtregister-a-new-business.shtml . Follow these guidelines and get your business registered sooner rather than later.