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23 March 17

Learn the accounting basics for your start-up business

Donald Inglis

Welcome to our latest blog from Inglis Chartered Accountants – thank you for reading this far.

This month I am going to walk you through the basics of accounting for your start-up business. Whether your vision is to pay yourself a living wage or to provide employment to hundreds, the foundations of good accounting remain the same.

In my previous blog, ‘Cloud based accounting – do I really need this?’ I talked about the pros and cons of an online book keeping system. Whilst it may feel like many accountants like to over complicate things, our mission is to make life (including your accounts) as easy as possible. That starts with the basics.

There are only four main elements that you need to concern yourself with:

  • Sales, and upcoming sales (order book / pipeline / sales funnel)
  • Receivables (Debtors)
  • Purchases and upcoming expenses
  • Payables (Creditor)

A new business may have no sales, and at this time your working capital (own funds, bank overdraft or any other lending) is under the most pressure.  No sales = no income = no money = no business. That combined with having to pay up front for premises, equipment etc. can exhaust vital cash reserves very quickly.

So as you are offered a new contract, or receive a sales order, it is vital that you keep a record of who has paid you and when, and who is due to pay you and when.  It is exactly the same with spending. When is a purchase required and when do you physically part with the cash for it? I learnt the hard way that the old adage – a sale is not a sale until the money is in the bank – is very true.

Profit is an accounting function. There are many variables that can and should be included to give a true reflection. Many companies have not made profits because they are continually re-investing, and what they are re-investing with is cash.

Remember, cash is king, cash is real, and cash at the bank account is an exact figure.

I hope this helps. Keep it simple, look after the cash, and keep a close eye on the cash flow over the next few months.

For more advice and support with your business accounting get in touch with myself and the team at Inglis Chartered Accountants on 01904 787973.

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