Accountants for Startups

Are you a startup founder?

In an ideal world, a startup would speak to an accountant before doing anything else. Before getting insurance, creating a limited company, registering with HMRC, or even opening a bank account – the first thing to do should be to speak to an accountant.

There are different types of accountants. A one-person practice might be good for startups initially, but they often lack the resources and expertise to support a startup as it grows into a flourishing business.

Ideally, a startup should work with a boutique firm of accountants that is not too big, but not too small. A team size of anywhere between 3 to 20 members can be ideal.

At CTA, for example, there are around 12 team members. The firm operates in small teams, keeping it personal while having enough resources to provide more extensive support.

The right type of accountant will provide advice on critical early decisions, such as the best business structure. Once the business structure is decided, the accountant can help with HMRC registration, Companies House requirements (if it’s a limited company), opening a bank account, and organising business insurances.

Once compliance is handled, startups can begin to think more strategically about growing the business.

Does every startup need an accountant?

It is not essential to have an accountant at the beginning, but it should be considered a positive investment. Many startups that don’t have an accountant initially end up needing to reverse incorrect actions, which becomes difficult and costly down the line. Not consulting an accountant at the beginning can lead to issues that become too late to fix 12 months later. An accountant can save a startup significant pain and hassle. For example, knowing the right time to register for VAT can save thousands of pounds. Accountants can also provide specific advice for startups around VAT registration and other crucial compliance areas.

There can be exceptions where an accountant might not be as necessary, such as with a very small part-time business operating as a sole trader with a turnover of just a few thousand pounds per year. In such situations, an accountant might not be as crucial.

However, for anyone trying to grow their business, it makes sense to speak to an accountant early on.

How to set up an accounting system for a startup:

There are key software providers that startups can use in the UK- Xero, QuickBooks, Sage, and FreeAgent are some of the main options.

Any of these systems can be suitable for startups. QuickBooks and FreeAgent are often cost-effective choices, while Xero might be better for a longer-term solution as the startup grows.

In the past, people may have managed without accounting software and instead used spreadsheets, especially if they were not a limited company and not VAT registered.

However, with Making Tax Digital (MTD) regulations, using spreadsheets is becoming less viable, as HMRC will soon require quarterly updates of financial records. Therefore, an online bookkeeping system is essential.

Setting up with software like Xero or QuickBooks is fairly easy and can be done by the startup or with help from an accountant. It’s important that the system is set up to suit the particular business to ensure smooth and effective financial management.

• Choosing the right business structure and setting up the correct software as soon as possible are crucial steps
• There are numerous examples of how not having proper accounting can go wrong, such as failing to register for VAT at the correct time, which can cost thousands of pounds. All of this could have been avoided by consulting an accountant early on.

The sooner a startup speaks to an accountant, the sooner they can establish a roadmap and strategy for their business.

Having an accountant is like having a sat-nav or roadmap that gives the startup clarity and peace of mind about where they are heading. It provides a clear vision of milestones and helps the business navigate towards success.

Accountants who have worked with businesses from the beginning understand the challenges of growing a startup and provide the right advice to help the business succeed. Besides ensuring compliance, an accountant can also help startups grow. They can provide business owners with different perspectives, insights, and useful tips for business growth that might give them a head start.

CTA is a team of expert accountants who are ready to help you on your startup journey. Schedule a no-obligation discovery call with us to see how we can help you.