Blog

So you’ve started a small business… What do you do now?

Adam Pritchard

By Adam Pritchard
12 July 2021

Most of us dream of owning our own company at some point in life. Setting up as a sole trader, starting a small business from your kitchen or creating a limited company.

But setting up your own business can be daunting and where do you even begin when you’ve started a small business?

You’ve gone through the stages of thinking up a business idea, your product or service, making a business plan, done market research, come up with a great business name, thought about your target audience and potential customers, figured out the type of business you want to be and now you’re ready to get going. But how do you actually move forward after starting a business?

You won’t be surprised to read that you’re not on your own when it comes to starting a business and not sure what the next steps are.

We’re here to help you on your way to becoming a great business owner with all your ducks in a row from day one (or maybe a few more days in).

There’s lots to do when you’ve started a small business. Running the business, sales, services, delivering, growing and administering can make it difficult to know where and how to allocate resources and in what quantities. Hopefully, we can give you the benefit of our experience and help you get started the right way.

In this blog post, we’re going to break down what your next steps are when you’ve started a small business.

There are three main stages. So let’s get straight to it.

 

Stage One: Incorporation

If you want to be a business owner you need to register a business first. When you incorporate your company or register your business, you’ll have either done it yourself through the Government Gateway or used an agent. However, whichever way you’ve done it you should have and will, without doubt, need the following:

Starting a Business

A Government Gateway ID and password:

You will use the Government Gateway to:

  • Register for taxes including Corporation Tax, VAT, PAYE, CIS and more
  • Activate online tax services
  • File tax returns
  • Monitor your tax liabilities
  • Pay your tax liabilities

 

The Government Gateway is the central hub for managing your compliance and relationship with HMRC and the single source of truth regarding: your HMRC debt.

As accountants, we like to be registered as your agent but we also like to have a login to your business’ Government Gateway. This is so we can see the details of what has been submitted and is currently being held by HMRC. We can then reconcile it back to the data we hold for our clients.

It’s also incredibly useful to have this information readily available in the event that you move between accountancy providers and will mitigate any potential disruption in service.

 

Companies House Authentication Code

When you incorporate your business, Companies House will automatically send you an authentication code. This code will allow you to file forms online, submit accounts, confirmation statements and make changes to the public record.

It’s a six-digit code and having a record of it will save you time when you need it the most. It will also make your accountant’s life that little bit easier. You will receive a lot of post and there will be many moving parts at this stage of the journey, but keep your eyes peeled and hang on to this code for dear life.

 

Business Bank Account

It almost goes without saying that you’ll need to register a separate bank account through which you process business transactions.

In our experience, the traditional high street banks are slow to respond and the administration involved in setting up a business bank account can be burdensome.

We tend to recommend Starling Bank and have personally had a great experience with them. But, it’s your decision to make so any online challenger bank is worth checking out. Other recommendations include:

 

The important thing to remember here is that you will want to connect your business bank account to your accountancy package. This will help automate the bank reconciliation so it’s worth checking with your chosen provider how they integrate with your accountancy software (we would recommend Xero).

 

Stage 2: Your first quarter

When you begin trading you must keep a reliable and accurate record of the money spent and received in the business in order to be able to properly assess the business’ performance. It’s also to ensure that nothing gets missed that could be to your detriment.

Business Owner

So the next thing you’ll need to do is choose an accountancy package.

We recommend that you use a cloud-based accountancy package and as Gold Xero Certified partners we would highly recommend you use Xero. Not just because we consider it to be a superior product but because it also offers other really useful software such as Hubdoc. This bit of additional software will immediately facilitate a much smoother and more reliable data processing function in the business at no additional cost.

Connect your business bank and begin pulling in your banking data from the earliest available and relevant date.

At this stage, you don’t necessarily need to incur the cost of an accountant but you will need the infrastructure to capture your financial data.

 

Stage 3: Quarter Two & Beyond

If you haven’t already in stage two, then this is the point where we would advise you to get an accountant.

Start A Business

However, this is not a box-ticking exercise to manage compliance. This relationship will be important and your accountant should be more than just a technical gatekeeper.

It can be difficult to choose your first accountant, do you look at the cheapest option, do you go with a large firm or a small practice, do you choose a traditional or modern accountant, do you stay local or is a digital practice for you… there are so many choices and options when it comes to choosing the best accountant for your business. The most important thing is that you feel comfortable with that person or practice.

Talking about business finances, how to grow your business, money and costs can be a sensitive subject so make sure you find someone you are happy talking to about these topics.

As you grow your business you’ll need someone who knows the numbers but you will also need someone who can give you advice, support and ideas on the tech that could help you grow and scale, identify opportunities for funding, raise red flags ahead of time, clearly and regularly communicate with you.

Foster a close working relationship with someone that is willing and available to troubleshoot, give you advice and guide you on this journey of being a new business owner.

Because ‘how to find the right accountant for your business’, is a frequently asked question, we’ll be writing a step by step guide with our advice and question ideas that will help you make the right decision for your company.

 

So that’s it…

For the first few stages when you’ve started a small business.

If you want a checklist to tick off some of the actions you need to complete, you can see the five points we’ve covered below.

  • Government Gateway user ID & Password
  • Companies House Authentication Code
  • Business Bank account
  • Accountancy software package
  • Accountant

 

Bonus Starting A Business Questions:

How much money should I pay myself?

This is a question we tend to get asked quite often by those who have started a small business of their own.

This is also a complicated question and will depend entirely on your personal circumstances, goals and ambitions.

If it is just you employed by the business as the sole director, the business will not qualify for the £4,000 Employers NIC employment allowance. Therefore, in order to incur no tax liabilities, you should pay yourself up to the secondary threshold, which in the tax year 2021/22 is £8,840.

The balance of any money you draw above your salary will be classified as dividends, provided that there are sufficient distributable reserves to cover these drawings.

If you draw more money from the business than your salary and available reserves allow for, you will end up with an overdrawn directors loan account. Often you won’t know this has happened or realise the significance of it, but for most owner-managed businesses it’s important not to end the year with an overdrawn directors loan account.

If you don’t mind paying some NIC but do not want to pay income tax, then you can pay yourself an amount equal to the personal allowance, which for the financial year 2021/22 is £12,570.

We would advise you to seek formal advice from a tax professional to be 100% on the above explanation.

What can I claim as a deductible expense?

As a business owner, you can reclaim expenses that are incurred wholly and exclusively for the purposes of trade.

If you intend to grow your business and exit, you do not want to push through erroneous living expenses that affect the reported performance of the business. When a client asks us this question they are usually expressing a desire to pay as little tax as possible.

The real solution to paying low amounts of tax is to have transparency and control over the business performance. This facilitates forward planning, tax saving and wealth creation.

However, here are a few of the hot tips on deductible expenses:

  • Petrol: Do not put through petrol receipts. Track your mileage using the Xero expenses app and claim the standard allowance at £0.45p for the first 10,000 miles
  • Staff entertainment: You can reclaim the VAT and it’s tax-deductible
  • Client entertainment: You cannot reclaim the VAT and whilst it can be included as a cost of doing business and deducted to arrive at your accounting profit, it will be added back for the purposes of tax

 

When should I register for VAT?

The VAT threshold is £85,000 and there are three instances in which you should register for VAT.

  • You have exceeded the threshold in the last 12 months
  • You will exceed the threshold in the next 30 days
  • None of the above but you want to register for VAT on a voluntary basis

 

Now you’re a New Business Owner

That’s a wrap, if you’re looking to start or you’ve already started your own small business, you may want to consider these three stages we’ve laid out for you.

Starting Your Own Business

We have been in your position, Linford Grey also started as just a business idea. As a new business owner you go through a lot of ups and downs and uncertainty, so getting the business structure set up correctly from the start saves a lot of time and hassle further down the line.

If you need any help or advice or you don’t know where to start just get in touch with our team.

We work with a fair number of startup businesses and we can most certainly help you on your way (or stick around for the journey).

If you fancy a chat feel free to book a time that suits you in our calendar below.