When starting a small business, it’s essential to consider your accounting. Financial accounting is an HMRC requirement and a crucial way to track your financial performance and profitability

But what do you need to set up strong accounting practices from the start? If you have no experience managing your own finances, it may feel overwhelming and intimidating. Luckily, we can make it easier to swallow. 

This guide covers a new business accounting checklist to set you up for success, including:

  1. Opening a business account. 
  2. Creating a starting budget.
  3. Tracking expenses.
  4. Invoicing your customers.
  5. Establishing a payment system. 
  6. Organising your bookkeeping process. 
  7. Understanding tax requirements. 
  8. Using the right tools.

Your new business accounting checklist 

1) Opening a business account 

If you register as a limited company, you’re required to open a business account. Still, those registered as sole traders can use one to organise and separate their finances

Without an independent account for your business, you’ll have to shuffle through bank statements to pull out transactions relevant to your business. This process can be time-consuming and frustrating. 

But if you open a business account, you can organise all your expenses and earnings in one place. It’ll be easier to keep error-free records. 

Open a Countingup account in seconds.

2) Creating a starting budget 

Your new business’s starting budget lets you create realistic goals for how much you earn and spend

This budget will also take startup costs into account and help you determine what sales will allow you to reach profitability. 

To learn more, check out our article on how to create a starting budget.

3) Tracking expenses 

Another essential part of your new business accounting checklist is tracking your business expenses

To maintain accurate financial records for tax reporting and performance analysis, you’ll need proof of what you spend on your business. It’s also important to keep your receipts as proof of purchase.

For example, if you pay for a software subscription, record that transaction. You may also keep receipts for fuel expenses you rack up while travelling for your business. 

It’s crucial to create a clear and organised system for writing down what you spend, including: 

  • What you purchased.
  • Why you purchased it.
  • The date of purchase. 
  • The amount spent.  

4) Invoicing your customers

As you sell products or services, you’ll need to make invoices for your customers. These invoices act as bills asking for payment for completed sales or services. 

It’s important to have a system for creating and sending invoices to your clients. Plus, you must keep these invoices in your records using an invoice numbering system. 

See also: How to make an invoice

5) Establishing a payment system

Sending invoices notifies your customers about a payment, but you’ll still need to find a way to accept that payment

With the right payment system, you can accept payments easily and efficiently to turn your profit into cash. Accepting credit card payments will make you more accessible, especially if you offer services or sell products online. 

To do this, open a merchant account and find payment software. For online payments, you might use a platform like Paypal. If you run a shop, Sumup has great card reader options.  

See also: How to accept credit card payments.

6) Organising your bookkeeping process

Bookkeeping is when you record expenses and earnings to determine your overall profit or income. It also helps you determine the cash flow of your business, or how much money comes in compared to going out. 

For your bookkeeping, you’ll need to track and document your:  

When you create a bookkeeping process for your new business, find what works best for you. It’s crucial to keep your records updated and check in with them at least once a week. 

For example, you might use a digital spreadsheet alongside a physical ledger. Or you could use a tool that automates the bookkeeping process for you, like Countingup

See also: The importance of bookkeeping to small businesses

7) Understanding tax requirements 

As a business owner, it’s important to know what taxes you must pay and how the process works. You may need to pay:

  • Income tax or dividend tax
  • National Insurance 
  • Corporation taxlimited companies only 
  • VATVAT registered businesses only 

To determine what you owe for taxes, you’ll submit a Self Assessment tax return. 

Plus, familiarise yourself with the Making Tax Digital (MTD) government initiative to streamline the tax process. Right now, only VAT registered businesses are required to follow these processes. 

But, this will soon expand to all businesses. 

To simplify your accounting and tax process, you may want to get an accountant. Accountants can assist you with bookkeeping and taxes using their expertise. 

8) Using the right tools 

As you prepare for your new business accounting, some tools can simplify the process and save you time.

The right accounting software, like Countingup, will help you manage your new business accounting smoothly and efficiently. 

Countingup is the business account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

With Countingup, you can: 

  • Track your expenses with automatic expense categorisation and the receipt capture tool. 
  • Easily and quickly send and receive unlimited invoices from wherever you are. 
  • Analyse your performance with ongoing cash flow insights. 
  • Simplify your taxes with tax estimates and MTD compliance. 
  • Share your financial data with your accountant without worrying about duplicates or lags. 

Save yourself hours of accounting admin so you can focus on growing your business. 

Start your three-month free trial today. 

Apply now.

Set your accounting up for success  

By following this new business accounting checklist, you can set up your finances in an efficient, organised, and accurate way. Just be sure to: 

  • Separate your business finances. 
  • Keep your business spending transactions. 
  • Record all sales, earnings, and invoices. 
  • Stay updated on HMRC financial and tax regulations. 
  • Check-in with your finances regularly. 

As you get everything in order, you may want to grow your knowledge of financial accounting, especially if you’re new to it all. If so, check out our article on how to understand financial accounting.