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Why accountancy is so important when starting a new business

20th January 2022 Print

Accounting is an essential part of a business’s routine operations, no matter how big or small the organisation might be. Accountancy is a reliable way of tracking, viewing, analysing, and evaluating how your business is performing, and provides priceless insight that can assist all decision-making processes. 

The same goes for businesses that are about to, or are only just starting to, get off the ground. So with this in mind, let us take a look at some of the reasons why accountancy is so crucial when starting a new business. 

Record all financial transactions

Accountancy allows businesses to record accurate and complete records of every financial transaction. This is particularly helpful for small businesses and start-ups that might be working with less capital, allowing them to effectively keep track of cash flow at all times. 

Forecast expenditure 

For start-ups, it is important to develop a solid business plan and economic forecast in order to secure capital from lenders and investors. Being able to show your expected start-up costs, monthly expenses, and how this all feeds into your business plan will show stakeholders that you have your finances all planned out, and thus are a reliable investment prospect.  

Produce an accurate budget 

When starting up, businesses often have less capital, and so the money that you do spend is all the more important. Produce an accurate budget of what money you have to spend, and where it will be spent, whether it is on employees, advertising, purchasing stock, and so on. An accurate budget ensures that you have the money available for the things you need, and helps you to waste less capital on non-essential things. 

Assess profits 

The success of a business, especially in its formative years, is determined by its profitability. It doesn’t matter how many sales you are making, or how much money you are bringing in, if the costs outweigh the revenue. An accountant can weigh up the income and expenditure of the business, and use their expertise to suggest areas for improvement in order to maximise profits. 

Legal requirements

Every company has a legal requirement to keep adequate accounting records, as stipulated in the Companies Act 2006. These records should contain all day-to-day transactions, assets and liabilities, the company's financial position, and stocktakings. Accounting records must be accurate and available to share with shareholders, regulatory bodies, and the tax authority. 

In addition to ensuring you are adhering to the law yourself, accounting can help to spot and catch people who are attempting to defraud you or steal from the company. By keeping accounting records, these can be used as evidence. 

Save you and your colleagues’ time

When starting a new business, do you really want to have to learn a new skill and take on the accounting yourself? As banks and investors are more likely to work with someone who they trust knows what they are talking about, it is always a good idea to bring in a reliable accountant. 

Accounting companies such as ST Accountancy Services can take care of all the accountancy side of the business, allowing you to focus on what you do best. In doing so, you can save both you and your colleagues’ time while simultaneously protecting your company’s financial assets.