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Start-up finance: key things to think about when launching

Getting your business finance set up properly from the start can save you time, money and stress in the long run.

Business person planning their start-up finances using a tablet.
Finance expert shares the key things to consider when launching a start-up.

Whether you’re a seasoned entrepreneur or launching your very first start-up, setting up a business is a busy time.

There are lots of things you’ll need to do, including thinking about your start-up finance.

Investing time into your business finances right from the start is essential, according to Scott Garden, head of outsourced finance at Hutcheon Mearns. The finance firm offers a range of complementary services for businesses, from specialist finance support to recruitment, outsourced finance and corporate finance advice.

Here, Scott shares seven key things to think about when it comes to your start-up finances.

7 essential steps when considering your start-up finances

1. What is the right business structure?

Scott explained: “There are a number of different structures available to businesses that they should consider as part of setting up, whether that’s becoming a sole trader, a limited company, partnership or LLP. Hutcheon Mearns can help guide you through this process, outlining the pros and cons of each relevant option to help you select the most suitable one for your business.”

Scott Garden, head of outsourced finance at Hutcheon Mearns
Scott Garden, head of outsourced finance at Hutcheon Mearns.

It’s much easier if you get this decision right from the start. Scott continued: “There could be a tax impact to the business structure, depending on the type of business it is and the type of trade you’re undertaking.

“And equally, liability is another important factor when it comes to structure which, depending on the risk profile of the business, is quite important.”

2. Does your business plan consider funding options?

Understand how you’re going to fund your business, whether that’s through self-funded start-up capital, bank loans or seeking angel or private equity investment. This should ideally be part of your business plan.

Scott said: “You should have a business plan in place whether you’re going for funding or not. You should understand what you want your business to do, how you want it to operate and what you anticipate in terms of trading activity over your first three to five years. Regardless of whether you initially need it for internal or external purposes, a business plan is key.”

If you are looking for financial backing of some sort, then the Hutcheon Mearns advisory team is well placed to source funding for start-ups.

They can also help with the likes of business models, so that looking beyond start-up finances, you can anticipate if any funding will be needed now or at later points to help reach your ultimate business goals.

3. Are you correctly registered for tax?

Scott asked: “Will you be eligible for VAT? Is your business going to be partially exempt for VAT, depending on what your taxable supplies are? And how is that then going to impact your cash? If you’re not eligible for VAT, if you’re effectively selling non-taxable supplies, you can’t then reclaim VAT on purchases, so that will have a knock-on effect on cash flow.”

He also mentions the compliance side of things when it comes to VAT, corporation tax and any other applicable UK regulations.

It’s so much easier – from a time and stress perspective, not least to mention any filing penalties or tax investigations further down the line– to get this right from the start.

Another top tip Scott mentions here is setting up your HMRC portal with agent access, which means your accountant (like Hutcheon Mearns) can deal with HMRC on your behalf.

4. How will you take money out of your business?

Scott explained: “Understand the methodology for taking money out of your business when it starts to generate profits and positive cash flows – identify a tax-efficient way to withdraw profits from your business. That could be through a combination of dividends and taking the maximum allowable salary before you hit a tax threshold, things like that.”

5. What finance system will you choose?

Scott said: “Our outsourced finance team has extensive experience in the use of finance software within both practice and industry, and we’re happy to guide you to the best option for your business.

“For smaller to medium sized businesses, we are experts in using Xero finance software. We would be able to set up a new (or existing) business on that and structure it in the right way to ensure the ownership receive the best financial reporting outputs it can for timely decision-making purposes.”

6. Will you go for an in-house finance team or outsourced support?

Having the right financial information to hand is so important for businesses, but you have options when it comes to pulling this information together – either employing an in-house finance person or outsourcing your accounting work to a trusted external provider.

Scott explained: “The Hutcheon Mearns outsourced finance team can provide a cost-effective solution which gives you access to a full finance function, from assistant accountant level all the way to finance director, which you’re not going to get internally by employing one person at a bookkeeper level.”

And then when you feel the time is right, Hutcheon Mearns’ dedicated finance resourcing team could help you find the right full-time, in-house team members.

7. Are you ready for key filings?

Ensure your compliance is all up-to-date, particularly in relation to Companies House.

Scott advised: “Make sure you have a plan in place to file your statutory accounts and corporation tax returns, know your filing deadlines and understand what other filings you may have to make with the relevant authorities if there are changes in your business. This could include simple things like a change in your company’s registered address or more strategic things such as changes in its shareholding.

“Basically, get to know all of the statutory filings you’ll need to make as your business progresses to ensure you’re compliant.”

The Hutcheon Mearns outsourced finance team are well versed in filing statutory accounts, corporation tax returns and various other statutory documents for clients directly to Companies House and HMRC. Effectively, all clients have to do is review and approve the documents prior to submission.

Get expert support with your start-up finances

Full team stood outside the Hutcheon Mearns new Aberdeen office.
The Hutcheon Mearns team in Aberdeen offer a range of services to help businesses.

You won’t regret taking the time to get your start-up finances right. As well as keeping you right on regulations and compliance, it will also ensure you receive timely and accurate financial information from the inception of your business

And this information is vital for helping you to run and grow your business.

With its range of complementary services, Hutcheon Mearns is ideally placed to grow with you.

That includes Scott’s outsourced finance department, which continues to work with both new and established businesses. Currently a team of six, the in-demand department is hoping to expand and Scott is always keen to hear from any interested finance professionals or trainees who’d like to join.

Find out more about outsourced finance and other services available from Hutcheon Mearns.