The Best Time for Startups to Hire Accountants is Day 1. The Next Best Time is Right Now
If you’re the owner of a tech start-up, you’ll know it can be challenging to manage your company. In the initial days, you’ll probably be very conscious about costs and not want to spend your money needlessly.
You might prefer the idea of taking care of your own accounting and tax affairs yourself as well as making your own investment-related decisions.
While this may seem like a cost-effective solution, it’s actually quite the opposite. DIY accounting can be risky
, as any errors in these important financial areas could prove costly.
Don’t believe us? Read on to discover what an accountant can do for your tech start-up. The reality is you’re probably going to have to hire a professional accountant
for your business at some point down the line.
Manage Your Tax
Attempting to do the accounts and tax yourself while building your tech company can mean you’re taking on too many tasks. That means insufficient time is spent on the important mechanics of getting the business off the ground, making you increasingly stressed. It might be best to utilise a professional advisor who can manage these laborious and difficult matters on your behalf.
An accountant will prepare your tax return to save you having to do this yourself. Tax returns can easily be neglected – or even forgotten entirely – when you have numerous other tasks to complete while managing your tech start-up.
If you miss the tax return deadline
, this can lead to considerable fees and penalties. Even worse, this could mean a decline in your company’s credit rating which can damage your chances of obtaining finance or negotiating an extension on your overdraft capability.
If you submit a tax return punctually but it contains mistakes or abnormalities, this will likely raise HMRC’s suspicion. This may mean a tax investigation which could cost a lot of money and last for quite a number of years which is obviously to be avoided at all costs.
An accountant will advise you on a wealth of ways to reduce your tax bill, methods that can both be used on tax return day and throughout the year. As a tech start-up owner, it’s unlikely you have the time or the knowledge to utilise such methods, so their ability to reduce costs should not be underestimated.
Accountants can reduce your tax bill successfully, so money is freed up to either be invested in your business or yourself.
Research and Development (R&D) Tax Credits
One such relief that an accountant will suggest that’s available to all UK tech start-ups is Research and Development (R&D) relief
. It applies if a business is spending money on pioneering research, predominantly in the technology and science industries.
Most tech businesses will spend on Research & Development (R&D) at some point in the company’s life.
The relief obtained under the R&D scheme is above the line. In other words, it can be treated as income above the profit before tax line in the profit and loss account, usually included within other revenue.
An accountant may suggest this as a non-compulsory treatment, as the ability to report higher profit before tax figures is extremely useful, especially where exterior capital may be needed, or where prospective investors are evaluating the accounts.
For instance, for every £2,000 of qualifying expenditures, your business could have the revenue that’s eligible for corporation tax to be lowered by £2,600 as well as the initial £2,000 spent.
The new scheme also comprises a tax credit on the amount of qualifying R&D costs, owed to the business in certain situations.
R&D capital allowances are also on hand to offer 100% tax relief on investment assets developed for R&D purposes.
To qualify, a tech start-up’s R&D project must incentivise innovative technical or scientific activity for commercial purposes rather than academic research and universities.
An accountant will handle both R&D and R&D capital allowances for you, saving you the time and effort and claim through your company’s annual tax return.
Accounts and Bookkeeping
Whether you’re the CEO, CFO, or you have another responsibility within your tech start-up, an accountant will take all the onerous and complex accounting work off your hands so you can concentrate on what you do best.
They’ll help you manage and take care of your business finances, plan for progression and ensure your accounts are completed professionally, conforming to the correct processes and controls, ultimately reducing your accountancy and bookkeeping fees.
An accountant’s bookkeeping and accounts services usually include the organisation of:
- Monthly or quarterly management accounts
- Yearly statutory and management profit and loss accounts and balance sheets
- VAT returns
- Cash-flow and budgets estimates
- Everyday bookkeeping
- Handling payroll and admin
- Yearly accounts and bank settlements
- Providing cloud accounting software specific to your field and financial reporting needs.
Poor bookkeeping and record keeping will mean your tech start-up won’t survive the financial inspection of an audit or due diligence investigation, should you want to boost funding or sell. While you might have an extremely wholesome and sustainable company, incorrect financial statements will portray quite the opposite image to investors, other companies, a buyer or even the taxman.
Managing Complex Business Software
Chances are, you may be using advanced management software in your tech start-up. From the get-go, you need someone who can handle such systems. An accountant will learn how the systems work and help during the implementation of this software.
Accountants have sophisticated technical and financial skills, both of which are crucial in business. They know how to utilise the most cutting-edge technologies on the market. If you’re obtaining software for report or statement preparation, an accountant is the first person to consider. They can help you take advantage of new financial technology.
Business Plan Support
Accountants are much more than just number crunchers. If you have a lack of knowledge on how to grow your tech start-up and growth feels impossible or out of control, this is where an accountant can really help. They’ll offer an in-depth market research or focus on cash-flow forecasts, formulating your plan around your company and your goals.
They’ll make sure you don’t grow too quickly, as planning and funding will be put in place to enable you to expand in a maintainable way.
Accountants are pros in business and will be able to provide you with advice on everything from everyday business operation to financial attainments. They’ll also be able to look at the numbers and offer advice to help your tech start-up succeed long term.
With the help of a chartered accountant, tech businesses should be able to make steadfast decisions for growth, investments and major purchases centred on things like break-even analysis, margin analysis, cost-benefit analysis, scenario modelling, and so on. This enables business owners to concoct a plan for their resource management and financial tactics, guaranteeing future profits and business growth opportunities.
As you can see, a chartered accountant can help you throughout every stage of your tech start-up’s growth. That doesn’t mean to say you have to appoint one, but the right accountant can make life a whole lot simpler for you, so you can focus on what you enjoy doing. Your forte is concentrating on your business. So, leave the financial side to an accountant.
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