The road to successful entrepreneurship can be a long and rocky one. Therefore when your business is in the start-up phase it is important to ensure financial efficiency is a prime consideration in any decision you make.
The five steps outlined below will make sure your business is built on firm foundations.
1. Choice of Legal Entity
This decision will have repercussions on your tax return, on the records you need to keep and on the amount of personal financial risk you are exposed to. For any person considering working as a contractor you will need to weigh up the benefits of a limited company versus an umbrella company.
For other start-ups there will be the choice between the sole trader route, various types of partnership or a limited company. If you choose the latter you will need to register with Companies House (ed. note: US businesses should probably register elsewhere 😉 ) and file an annual return. However, it will give you more protection with regards to your personal assets.
2. Insurance Protection
When you are a new business it is easy to forget about making sure you protect yourself against unexpected events. Legal claims brought against you, damage or loss to property and insufficient cover for your employees can literally wipe out your business if you don’t have ample insurance cover in place. Public liability, employers’ liability, property insurance and professional indemnity are the minimum cover you should seek. As your company grows you may also want to consider key person insurance and additional life assurance and private medical insurance for you and any staff.
Once these five key areas have been addressed you can move forward in confidence. You will know you have established your start-up in the most financially efficient way to take you forward into future business success.
3. Protect Your Data
You will amass a large amount of data within your business in a relatively short time. This can be both electronic data and hard copies. It can also relate both to your own business and to those of clients, including sensitive personal and financial information.
The security of your electronic data ties in with the point above about keeping your systems running smoothly. As well as troubleshooting problems as they arise you also need to think long term and to put the following processes in place: install and regularly update virus protection software to guard against malware and the malicious loss of sensitive data; protect systems and applications with complex passwords and change them frequently; and finally back-up all data on a daily basis and keep these backups secure and off-site in line with best disaster recovery practice.
4. Taxation and Accounting Choices
Excellent record keeping within your business will ensure you are ready to make annual returns and remain as tax efficient as possible. If accountancy is not one of your areas of expertise at least familiarize yourself with the basics. Even if you outsource bookkeeping and payroll ultimately it is your responsibility, and not your accountants, to make sure records and annual returns are accurate.
However, expert advice can help to ensure you claim all the business expenses you are entitled to. This can make a substantial difference to whether you are in profit, and by how much, at the end of your first year in business.
5. Keep Your Systems Running
In today’s technology driven workplace, most businesses cannot function without their computers, laptops and mobile phones. Ensuring your network, or even your own personal computer, has relatively little downtime is essential to the financial viability of your business. If you run into small computer issues you can often solve them yourself by searching for computer tips to help you get back up and running. If the issue is more serious it can be more time and money efficient to seek professional help as soon as possible.