Small and medium enterprises, or SMEs, account for 99.8 per cent of all businesses in the UK – amounting to a not-insignificant 5.5 million businesses, collectively representing almost two thirds of the UK’s employment. An emboldening of entrepreneurs over the past two decades has enabled smaller businesses to thrive where, previously, capital was the deciding factor in business success.
While money is simultaneously a vital starting-point and the key end goal for every small business, it is no longer the case that businesses need significant seed capital to find their footing. However, between startup costs, tax obligations and the many professional doors that money can unlock, money still remains one of the most important considerations for a new business. As such, a business can only truly be as strong as its accounting. What follow are five essential accounting strategies every small enterprise should know.
Adopt Cloud-Based Accounting Solutions
The smaller the business, the more tempting it is to adopt a minimal accounting process; after all, what more do you need than a basic in-vs-out spreadsheet? Well, the answer is “a lot more” – not to mention the considerable technological conveniences you miss out on. Migrating to a cloud-based accounting platform can help you enhance data accessibility for employees in your business, and make it easier for cross-departmental reporting and collaboration.
Leverage Automation and Artificial Intelligence (AI)
AI is a big buzzword at present, but offers more value to the average business than chatbot duties and questionable creative output. Indeed, with the right software you can benefit from AI-assisted automation of basic accounting processes, to reduce manual errors, save time, and provide deeper insights into your finances.
Maintain Accurate and Separate Financial Records
Accuracy is a key word, and one you’ll encounter often when considering the importance of proper business accounting. Without accurate records, you set your business up for unexpected costs at best, and career-ending fraud allegations at worst.
If your business is a part-time operation, or if you come from a self-employed background, your business and personal finances may still be linked – which can impact the accuracy of your reporting. Separate your business and personal finances, and simplify both your bookkeeping and tax preparation in the process.
Stay Informed on Regulatory Changes
Though your specialism most likely does not lie in the financial realm, it is nonetheless crucially important that you stay updated on changes in tax laws and financial regulations on behalf of your small business, to ensure compliance and ultimately to avoid any potential financial penalties. For instance Companies House announced significant regulatory changes effective from April 2027, requiring all UK companies to file annual accounts using commercial software.
Engage Professional Accounting Services
This leads us, rather neatly, to a final important suggestion: engage a professional accountant for your finances. In outsourcing your financial reporting to specialised accountants for small businesses, you offload some burden of responsibility to said accountants; this third party can curate your financial planning and tax reporting with the industry knowledge you lack, and advise you on proper accounting strategy with your own business firmly in mind.
