It is so important as a business owner that you have an understanding of your accounts because this is your business and you need to make yourself aware of all aspects of it. So let me offer you some simple insight to your accounts….
1. Open a Business Bank Account
Once you have made the decision to open your new business as a limited company or as a sole trade the next step is to set up a Business Bank Account. It is a legal requirement to open a separate business account if you are a limited company but not as a sole trader; however it is imperative that you have a separate business account because it will keep your accounts simple.
2. Hire an Accountant
It is important to hire an accountant that is efficient, knowledgeable and one that you can trust them to give you the correct guidance for your business. Ensure that they come recommended, investigate both their costs and ask to speak to some of their clients to seek references.
3. Book Keeping
It is important to have an understanding of basic book keeping, so that you can understand how your business is operating. You will need to decide how you will track all monies coming in and going out of your business.
- If you will buy your own accountancy software and hire a part time book keeper to come in to do your books for you or instead to teach you how to do your own books.
- If you will outsource your book keeping to your accountant or to a book keeping company.
I prefer to have my accounts accessible on my own computer for easy access. Therefore you will need to invest in the appropriate software and hire a book keeper to enter the information for you or to teach you how to do it yourself. The main advice I would give is that you have someone set up efficient but simple systems at the outset so that you as a business owner can follow the guidance given and can keep your accounts tidy and up to date easily.
4. Track your Expenses
From the minute you decide to go into business keep every receipt for anything business related: furnishing & fittings, purchases, toiletries/cleaning materials, car expenses e.g. parking/tolls, travel expenses e.g. accommodation/meals, stationary/printers/software/laptops etc. The most important thing here is to file & track everything. Anything you buy for your business can be allocated as an expense against your business and I have seen many businesses that don’t keep their receipts and claim their expenses back on their expenditure.
5. Car Expenses
Does your new business necessitate the use of a car? If so will you buy a company car/van and allow it to belong to the company or will you use your own car and claim mileage for any trips you need to make for your business?
6. Should You Be VAT Registered?
There are a variety of VAT rates: currently it is 13.5% on services, 23% on sales.
Once a company is VAT registered, you may claim back any VAT that you spend when making purchases. However, it also means that you must pay the VAT as above. This is something worth considering especially should you need a car/van for your business and if the company is making the purchase. This should be discussed with your accountant before you open your business.
Will you have staff in your business and therefore need to have a payroll system? Again you need to decide whether to buy the payroll software and have your book keeper in once a month to process wages or whether to outsource this job.
8. Accepting Payments
Will you accept payments on line and use the likes of Paypal? Will you offer a credit card facility or will your business just accept cash? These are important things to consider and set up before you open your doors.
9. Sales Projections
it is important before you decide to go into business that you work out thoroughly the gross margins that you can make from each treatment/sale.
For every sale of product/service you need to consider that from the amount charged to the customer how much of that retail amount belongs to the vat man and how much did the product or service cost you? Deducting these two will give you the gross profit on the sale
When you deduct the business overheads from the gross profit you are left with the net profit
This is the amount of money the business is capable of making. So you need to consider if you have one therapist how many clients can they see in a day, how much on average can they take per hour then multiply this by the amount of staff you have to see what is the greatest turnover that can be achieved. Add to this sales potential of products and do bear in mind that it will take a while for a business to reach its full potential so you need to assess if you can survive if it is hitting e.g. 30% of the turnover so test if it is a viable business idea.
To ensure that your business has potential before you invest all of your time, energy and money into it you will need to do a detailed sales projection to see what money your business is capable of making first.
10. Tax Returns
You will be responsible as a business owner to pay the following:
- Employees tax and USC
- Employers tax
- VAT if your company is vat registered
I highly recommend that you open a second business bank account that you can transfer this money into because it ensures that money is put aside for when it due.