There are some essential choices you have to make early on. Consider those choices carefully as changing later on in your business life it's time consuming and stressful.
Part 6
The boring bits
Limited company or sole trader
This is another somewhat important decision you will have to make, both have Pro's and Cons, mainly in terms of administration, taxation, and personal protection. You can read an article on key differences here.
In my opinion, the protection of your personal assets afforded by a limited company is paramount and overweighs factors such as lower taxation and less bureaucracy for sole traders. It’s easy to think that bad things will never happen to you, but it’s silly to believe it.
In my experience, being a limited company gives you more credibility with suppliers and banks as your annual statements will be available at Companies House and generally speaking, being a limited company means more transparency to third parties.
To set up a limited company I would go directly to Companies House or through your accountant if you get a good deal. For example, our accountant offered to register the company at a cost.
I wouldn’t recommend using third parties, which abound on the internet. Their services, although legitimate, are just redundant and you will end up paying more than you should for what is essentially a very simple task.
Choosing an accountant
Before I even start, I hear you say, “Do I really need one?”. And the simple answer is...yes you do!
An accountant is essential. My recommendation would be to choose one that is local to you (ask on your local Facebook group if needed) or someone that has been recommended by a friend. Vicinity is not all that important as I haven’t seen my accountant in years, but someone local will have a reputation to maintain.
I believe the standard fee to submit your accounts, statutory filings and your personal tax return is around £1200+VAT. This is provided that you can maintain accurate records of your income and expenses - which brings us to the next two paragraphs: bookkeeping and accounting software.
Using a bookkeeper
In the first few years of running my business I coped without a bookkeeper or any accounting software.
As I am quite good with Excel, I just kept track of my income and expenses on a spreadsheet - but as your business grows, this will become more and more time consuming. As an entrepreneur you should concentrate on the things that you are good at and passionate about, like producing amazing pizza and reaching more customers.
Like with most things, it’s easier to start on the right foot, than change midway. So, this is my advice to you: unless you have spent, literally every single penny on opening your restaurant (and this is not advisable anyway), get a bookkeeper and use technology from the beginning.
You can find a bookkeeper the same way that you found your accountant.
A bookkeeper will most likely charge you by the hour, and the number of hours you use them will grow with your business. You can start with a few hours a month, maybe to help you with the trickiest parts of managing your books and you can increase this when needed.
Accounting software
In order to keep accurate records, you will need some form of software. This will not only make your life easier, but also save your accountant some time, which in turn should result in lower fees for you. There are several accounting software's out there, you can find some comparison's here.
Personally, I use Xero as I get a good deal through my accountant. It’s also fairly intuitive to use and you can link different useful apps to your account.
What I found really useful are apps such as EzzyBills which allows you to scan expenses and forward invoices that you receive via email directly to your accounting software, or Soldo which is a prepaid card that allows you to keep track of your business expenses and take pictures of your receipts so that you don’t have a million, unfiled, uncategorized receipts lying about (we're all guilty of this!).
Bank Account
For my pizzeria I use the Co-operative bank, as you get free banking if you are a member of the Federation of Small Businesses (which I highly recommend).
The problem with the Co-op is that they are behind everyone else technology wise and also being an ethical bank, it quite literally takes months to open a bank account.
Nowadays for a small business, one can easily use an “app only” bank. For Pizzaiolo Tribe we use Starling.
Normally with these new banks you get very good customer service, free banking (depending on your turnover and number of transactions) and a few little extras to help you keep track of your expenses/income (for those you have to pay a fee). The whole opening process is done online, saving you considerable time and effort.
Check out the next blog post of this series: