Very few people like to waste their time writing down records, looking for bills or matching numbers. However, this is necessary if you want a company to strive. The past accounting process for a creative agency determine its success or failure of the present and helps establish sales and marketing strategies for the future.
Also, keeping the accounts of an agency is a legal obligation. Can you imagine what would happen if you were summoned for an audit and your accounting books were a disaster?
Successful entrepreneurs recognized that the key to success has been to keep a thorough and detailed accounting system from the beginning. With the help of this data, you can know what is failing or improving in the business model and what steps must take to reduce costs or increase profits.
Accounting provides a small business owner with valuable information about the state and health of their business. Knowledge of accounting is more important for a small entrepreneur than for the owners of a large company.
The economic status of a company is more than knowing how much money is available in the bank. Many entrepreneurs make the mistake of assuming that the “total asset” numbers identify the health of their business, however, this is wrong.
Perhaps the most crucial aspect for the accounting of a small business is the liabilities section of the balance sheet. What you owe, in the short and long term. Many entrepreneurs fail because they have focused more on the final result than on the reduction of liabilities.
With accurate accounting, we can see items that involve expenditures which are not necessary for the company. And backwards. We can see that dedicating more resources to a business would be beneficial to growth.
The Accounting department helps small businesses overcome audits without worries. Having adequate knowledge of business operations and transactions will help pass inspections,l or in other words make you more prepared.
Proper accounting helps ensure compliance with all tax obligations. Failure or late payment of taxes come with severe penalties.
It also helps to take VAT it into account. You cannot count on the money charged from VAT because you have to pay it back quarterly. The VAT is not an income. It is the tax in which the employer acts as an intermediary between the Treasury and the final consumer.
Obtaining loans for business expansion
Banks are more confident in dealing with business owners who have adequate documentation about their company’s finances. It is easier to negotiate loans to grow if the accounts are clear.
It also helps in the creation and fulfilment of budgets. A budget is essential to start an entrepreneurial project since there are details of the necessary expenses to start our business.
Expenses include payment to employees, purchases, and marketing. A budget helps small businesses avoid unnecessary costs.
Determining the earnings
A business that does not generate profits, regardless of income, is heading towards failure, as there is no benefit to them in the long run.
Accounting is an essential means to determine the profitability of small businesses. Accounting also helps to meet business objectives and goals, by monitoring budgets income and tax costs.
Accounting tips for a creative agency
Successful entrepreneurs have recognized that the key to success has been to keep thoroughly detailed accounting from the beginning.
Although it can be difficult, here are some tips to make it a smoother ride:
1. Decide if you keep accounting and finances for your advertising company by yourself
Depending on the size of your agency and the number of weekly or monthly operations, if you organize yourself well and have the necessary tools, you can keep your finances in check thanks to new technologies. Remember that this will take time away from your working day. Still, with an appropriate billing application, you can keep your company’s accounting without having to use the services of an accountant.
2. Use programs appropriate to your sector
Although accounting is all about numbers in general, it is better to use a computer program used by other companies in your sector. Creative agency business models aren’t the same as that of companies in the hospitality industry. That is why you must choose to fit the services and products you offer.
3. Take special care of the details of your international clients
If you also work with the international market, you should check the legality of your exports and imports very well so as not to incur high fines. In this case, perhaps hiring an accountant with experience in this area would save you time and headaches.
4. Use the data to plan your client outreach.’
Knowing what your expenses and income are will help you establish better relations with clients. For example, you can focus only on the most profitable clients using ROI figures. This data will also help you know what expenses can be reduced in a real way to generate more benefits or use that money in more profitable areas.
5. Proper accounting can help you get an investment
If you are going to request a loan or an investment for your agency, the bank or investor will probably like to take a look at your accounting to see if you have enough monthly income to guarantee your payments. Remember that if you need money for your business, you can take a look at your local aid for new companies or think about mortgaging some company-related assets.
6. keep on top of invoices
If, for work reasons your employees have to travel, you need to demand all bills related to transportation, food or accommodation. These invoices must also appear in your accounting books. To quickly and efficiently track your invoices, it is worth using a billing program. These can save you a lot of time, give storage space for your invoices and useful reports and statistics.
7. If you need help, ask for it
If after a while you feel that this task exceeds you since you do not have enough time or do not have the necessary computer skills to keep the accounting, do not hesitate to ask someone for help. Perhaps you can start by offering someone competent in your company this responsibility. But if you don’t want to burden your employees with additional tasks, it is probably best to trust a professional accountant.
8. Be patient
The Accounting department is only about numbers, but so many figures can end the tolerance of any person; especially if the numbers don’t add up. Remember that the more you get frustrated if something goes wrong, the longer it will take you to solve it. So try to be patient and use the necessary breaks to perform this task with the best possible attitude.
9. Learn to separate your finances from those of your business
Which is a common problem in small businesses, and many times there is no clear division between the income earned a business and your payroll.
And may end up affecting the financial balance of your business. So it is best to open an exclusive bank account for the company’s operations. That way, you will be able to track the inflows and outflows of money better, and more efficiently manage the funds generated by your business.
10. Avoid unnecessary costs
A vital aspect of a company’s basic accounting is to have a routine to record all movements, expenses and income, in detail. But at the same time, you should know how to manage your costs very well and differentiate those that are unnecessary from those that are essential for the profitability of the business.
External contracting means more costs, consider what activities or tasks you need to outsource to increase productivity or save money. Do the same with the suppliers. Remember that you must monitor the costs and take the necessary measures to improve the profitability of your business.
11. Balance your cash flow
The cash flow is a crucial concept of basic accounting that you must take into account, as it will be critical to the viability of your company. Cash flow reflects real cash outflows and receipts, indicating the liquidity of the business. And to keep an exhaustive control of your company’s finances, it is essential to monitor inflows and outflows of resources.
1. Do not do anything.
Many entrepreneurs tend to be topologists, in the spirit of having all the details under control; they absorb many more tasks than they can handle efficiently. The case of taxes is no exception, as there are even those who decide to keep their business accounts on their own without asking for advice. In the case of a business, it will always be better to have the support of an accountant to maximize tax advantages, since they know what the minimum procedures to start working are.
2. Avoid informality
One of the first temptations that many entrepreneurs face in our country is informality, which is a false door that you should avoid opening at all costs. If you start on these terms, returning to legality will become difficult. Informality will take you away from what it is to be an entrepreneur, just as it will close all doors to the development and real potential of your business. Worse, it could become a law issue.
3. Do not mix business with personal finance, even in taxation
First-time entrepreneurs do this very often. They end up with a financial disorder at the end of the year because they hardly realise exactly how lucrative or viable their business was, which complicates all of their accounting. That can lead you to deduct less and therefore pay more taxes. The main factor for which many people do not deduct correctly is due to lack of control and order in expenses. The easiest way to avoid this is by having separate checking and credit card accounts for you and your business.
4. Adopt new technologies for your company
Whatever your venture, you should approach new technologies to be able to carry out your processes in less time. With an Electronic Billing system, you can Create an Electronic Invoice in less than a minute. It also works to keep track of the tax receipts that you have generated.
5. Do not miss important deadlines
A creative agency should pay their due taxes on time. The period for taxes for the financial year are always available, and as a public responsibility, an agency should be proactive about this course of action. If an agency fails to pay all obligated taxes within the deadline, then HMRC will impose penalties, and there will be interest charged until you pay the tax. That will incur unnecessary costs on your company’s overheads and will lead to budget constraints.
6. Pay your taxes or risk having a bad reputation
Moreover, a creative agency’s primary source of revenue is the service budget provided by its clients for marketing, designing, production, etc. Many lucrative clients are particular about who they like to be associated. Some of the biggest companies want to stay out of trouble and courtroom rituals, which is why they would always prefer agencies which are clean in records. That means any creative agency must file their taxes on time or risk losing partnership of critical clients.
The domains of tax and accounting are essential for a creative agency in the UK. Many market players succumb to failure and are driven out of the market after they failed to streamline their tax strategies and conducted improper business accounting. Also, if your books are clean and well kept, you will avoid a great deal of unnecessary trouble with HMRC and lead a good reputation in the whole business hub.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.