There’s an old saying in business that cash is king, and that’s a good place to start when you consider accounting for startups.

If you’re starting a business, nothing will shut it down more quickly than running out of cash. But for many startups, establishing a good financial plan can often be much further down their priority list than things like how to manufacture their products or provide a service to customers.

Here are a few accounting tips for startups to keep more money in your business during the vital early days.

In many ways, accounting for startups is the same as for any business. You need reliable financial information to help you make good management decisions.

One of the first investments you should make is to buy decent accounting software. I’d recommend a package like Xero as an affordable example of accounting software for startups. It will make managing your finances a whole lot easier, especially when things get busy.

Investing in accounting software for startups and keeping it up to date will make keeping on top of your accounting much easier and free up valuable time to run the business.

As accountants for startups, we often work with new business to help set up their accounting software for startups and train them on how to use it so that they get the maximum benefit from their investment.

YYou need to have enough working capital so you can trade comfortably while bringing enough cash into the business from sales. It could be at least 30 days before you get paid for your first invoice. Will your working capital come from our own pocket, or will you be going out to the market to raise the money from a bank or investor?

Remember that an investment must be paid back over time, which will attract interest charges. The cost for all of this needs to be considered within the accounting for your start-up.

Most businesses are set up because someone has spotted an opportunity or a gap in the market. While they might be great at sales and building a brand, it’s important they don’t take their eye off the cash needs of the business – because that’s where it can go wrong, if the business runs out of cash.

Perhaps the most important piece of accounting advice for startups is to create a cash-flow forecast. Look as far ahead as you reasonably can so you understand where money is flowing into and out of your business. For a start-up, we would typically recommend making this a 30-week rolling forecast.

Apart from anything else, this discipline will help you to avoid the classic start-up mistake of ‘overtrading’. The meaning of overtrading is spending more money in the growth phase of your business on things like stock and premises than you are bringing in through paid invoices.

By having a clear picture of your business’ finances, you have all the information you need to foresee cash flow difficulties, putting you in a good position to plan ahead for this.

The bedrock of good accounting for startups is to establish a reliable set of management accounts. Whether you do it monthly or quarterly in line with your VAT returns, it’s an absolute must for keeping on top of all aspects of your business and being ready for things like VAT inspections or your end-of-year tax return.

Credit control is another important consideration in accounting for startups. When it comes to getting your invoices paid on time, be confident about the value of the work you have provided and don’t be hesitant about chasing payment. Money for the work you’ve done belongs in your bank account, not your customer’s.

Credit control will be easier if you make use of accounting software for startups. Good accounting software will allow you to clearly set out your payment terms, send statements covering outstanding invoices and monitor your costs in line with payments coming in.

For anyone involved with accounting for startups, it’s important to understand the margin of products or services. For example, understand what the costs are for getting your product from the raw materials stage to a delivered product that someone will pay for. Once you know this, you can decide how much to charge for the product so you can cover those costs and make a decent profit. At the same time, you can regularly check whether your margin is starting to shift and what adjustments you need to make to your prices or costs.

You might wonder ‘do I need an accountant for my startup business?’. An accountant can advise on everything from structuring the business, if you are in business with partners, to creating a cash flow forecast at the outset, so this is all established from day one.

If your business employs anyone, an accountant can support with payroll services, and they can give you their advice on matters such as tax planning.

Seeking advice from an accountant for startups at the outset of the business is often the most cost-efficient approach and can help set the business up for success.

As experienced accountants for startups, we’re here to help

At Prime Accountants Group, we understand that most people don’t set up a business because they are passionate about accounting for startups. They want to focus on their product or service and do the things they are good at.

As experienced accountants for startups, we work with many new businesses to create and monitor a cost-effective financial plan on their behalf from day one, while offering them advice and guidance as they navigate the tricky first months and even years of trading.

At Prime Accountants Group, we understand that most people don’t set up a business because they are passionate about accounting for startups. They want to focus on their product or service and do the things they are good at.

As experienced accountants for startups, we work with many new businesses to create and monitor a cost-effective financial plan on their behalf from day one, while offering them advice and guidance as they navigate the tricky first months and even years of trading.