Why online accounting works for startups12 Jun 2016
Online accountants for start up businesses
Every business in the UK, whether it’s a sole trader, a new limited company or an established multinational corporation, has a number of statutory reporting obligations that it’s obliged to meet. In order to ensure those filings are accurate (and timely) the business should also consider investing some resources (either financial or human) in keeping on top of its payroll, VAT returns and bookkeeping records.Small businesses can decide to handle this work in-house, of course (by hiring an in-house accountant or bookkeeper, or by dedicating a portion of the business owner’s own time to this effort) or they can get a local accountancy firm to carry this administrative burden.
However, for startups with few (or no) employees and relatively low turnover, a third option might be the best bet: online accountants.
Many startups, particularly newly launched, bootstrapped businesses where working capital may be in short supply in the early days, must weigh up every product or service to ensure it’s absolutely vital, since any expense that eats up a significant amount of the company’s cash risks shortening the startup’s ‘runway’ (the amount of time the business has until it runs out of money).
While statutory obligations mean no business can treat accounting as an ‘optional extra’, cash-strapped startups may be inclined to satisfy those accounting obligations as cost-effectively as possible – and in fact it’s a very wise decision for early-stage startups to watch the pennies (and the pounds) by reducing excessive costs.
As we’ve already mentioned, this cost-cutting exercise might involve the business owner taking care of the company’s accounting themselves…but this can have a knock-on effect on the business’s productivity when a business leader gets bogged down in accounting minutiae.
An increasingly popular alternative to this DIY approach to small business accounting is to turn to an online accountant, who can take care of the accounting essentials at a very affordable (and fixed) monthly price.
By cutting out the accounting, payroll or tax services that are irrelevant to most new startups, online accounting packages can dramatically reduce the cost of a business’s accounting.
Beyond cost savings, though, there is another reason many startups are attracted to online accounting – time savings.
Many small businesses are not only cash-poor…in many cases they are also time-poor. With less team members available to personally deal with the business’s accounting obligations, face-to-face meetings with a small business accountant can be a rather big ask for many startups.
Online accounting overcomes this obstacle, since most online accounting services don’t require one-to-one interaction (or at least not in real time). When an online accountant has questions or needs more information those queries can usually be handled by email at the business owner’s convenience, freeing up the time that would otherwise be spent in meetings.
While not all startups are technology companies, many startup founders are ‘digital natives’, since marketing, sales, advertising, recruitment and customer service have largely migrated to the web.
So, it should come as no surprise that many startup founders are very comfortable with products and services that are delivered entirely online, with potentially zero face-to-face (or even phone) interaction.
In fact, many digital natives snub their noses at paper forms and similar ‘analogue’ business processes, so an online accounting solution is likely to fit perfectly with their personal preferences.
What startups can expect from an online accountant
Many startups don’t have any employees in the early days, with the business owner (or owners) handling everything themselves. As such, complicated payroll is often unnecessary. Similarly, the annual turnover of many new startups is often below the threshold for VAT registration, meaning those businesses would not be obliged to file quarterly VAT returns either.
The accounting and tax obligations that are likely to be common to most new startups are statutory accounts, tax returns and Corporation Tax, payroll for the company’s director and the same individual’s annual self-assessment. It should come as no surprise, therefore, that our own online accounting package is specifically tailored to meet those needs, incorporating:
- Preparation of the business’s annual statutory accounts
- Annual Corporation Tax calculations, including accounting for the allowances, deductions and exemptions that can fairly and legitimately reduce the company’s tax liability
- Access to Xero’s award-winning accountancy software
- Calculating and processing the director's payroll
- Completing and filing the director's self-assessment tax return
We’re a great choice for entrepreneurs
Is your startup keen to free up some human capital, without making a large dent in its startup capital, by handing over the burden of its small business accounting to an experienced online accountant? That’s where we come in.
At Accounts and Legal we have a team of London accountants dedicated to providing fixed-price tax and accounting services that are specifically tailored to needs of Britain’s startups and SMEs.
Get in touch with our team of small business accountants to discuss your requirements, or get an online quote now using our instant accounting quote tool.