Starting a business does not have to be expensive, nevertheless there will be a number of costs that you will have to factor in to your initial budget. No two businesses are the same and the costs that you will incur will largely depend on the type of industry that you are in and the scale of your business. Your costs may include:
- Company formation and filing costs
- Market research
- IT equipment and software, including accounting software
- Internet domain name registration
- Raw materials
- Business premises, rates and utility bills
- Internet and phone rental
- Staff salaries
- Business cards and stationery
- Vehicle leasing
- Equipment and machinery
- Finance and banking costs
- Accountancy fees
- Legal fees.
It is a good idea to draw up a budget for your business's set-up costs and allocate a sum of money to each cost. That way, you are less likely to overspend on a laptop with all the latest features and then find that you can't afford to pay the phone bill.
You may already have a good understanding of what some of your costs will be, but others could come as a big surprise to you. Advertising, for example, can be very expensive if you want to buy space in a glossy magazine. Forewarned is forearmed so thoroughly research all your start-up costs - and make sure you have sufficient budget for them - before you start trading.
In the early days, when you probably won't have much money coming in, it is particularly important that you keep a tight grip on your costs and resist the urge to splash out unnecessarily.
Record keeping is very important in business and it is essential that you keep an accurate log of your income and expenses to prepare your business accounts at the end of the financial year. You should record all the expenses you incur to start the business, even if these were before you registered your business with HMRC or Companies House. You can usually claim back expenses made in the six-month period prior to the date the business started. Expenses are usually allowable as long as they were made wholly and exclusively for business purposes.
If you have a simple business, or you are a freelancer, you can use Excel spreadsheets or the online accounting software FreeAgent for your accounts. More complicated businesses will probably need to use software packages from providers such as Sage, Iris, QuickBooks, CCH or KashFlow (for further providers, search online). Your accountant should be able to help you to choose a software provider.