Starting a marketing agency can be an exciting venture, but to achieve all that you want to, it’s crucial to establish solid financial foundations. From efficient bookkeeping to tax compliance, managing your finances effectively is key to sustainability and growth. Let’s take a look at what you should consider for your startup.

Efficient bookkeeping

The backbone of any successful marketing agency is a robust bookkeeping system. Keeping track of your income and expenses not only helps you understand your financial health but allows you to plan and make better strategic decisions.

When creating a bookkeeping system, you should begin by considering the tools available to you. Cloud accounting software is especially effective, as their document-reading and automation capabilities simplify the bookkeeping process, saving you time and reducing the chances of errors.

However, your software won’t do everything for you without any input from you. You should still establish a routine, setting aside time weekly or monthly to update your records. Conduct regular check-ins as well so you can catch discrepancies early and maintain a clear picture of your finances.

Cashflow management

Cashflow is the lifeblood of any business. Without a steady inflow of cash, even profitable businesses can face challenges. Those with a healthy cashflow can take advantage of opportunities, make sustainable plans and prepare for economic downturns.

Managing your cashflow is a big topic, but some strategies you can think about now include the following.

• Creating cashflow projections: These are estimates of your cashflow based on your income and expenses for the upcoming months. Projections can help you identify potential shortfalls and plan accordingly.

• Invoice promptly and follow up: Send your invoices as early as possible and follow up on overdue payments. Consider offering discounts for early payments to encourage timely transactions.

• Maintain a cash reserve: Aim to keep a cash reserve to cover at least three months of operating expenses. This safety net can be invaluable during lean periods.

Tax compliance

Tax compliance is an often-overlooked area that can have significant financial implications.

As a minimum, you should know the following two things.

• Your tax obligations: Make sure you understand the specific tax requirements for your location and business structure. This includes income tax, self-employment tax and any applicable sales tax or VAT.
• Which records you need to keep: You have to maintain meticulous records of all transactions, including receipts and invoices.

You may also want to hire an accountant who specialises in marketing agencies. They’ll help you navigate tax regulations, file your returns and optimise your tax strategy so you pay only what you owe.

VAT

One tax that marketing firms need to be especially careful of is VAT. This complex consumption tax is a legal requirement for businesses with a turnover above the VAT threshold (currently £90,000).

If your business is VAT-registered, you need to apply the correct VAT rate to your invoices and keep appropriate records. You also need to file quarterly VAT returns that detail the tax you’ve collected and the VAT you’ve paid.

Budgeting for growth

Budgeting is another essential when laying your financial foundations. By meticulously planning your spending, informed either by historical data or industry benchmarks, you can create a budget that reflects your agency’s goals.

In your budget, make sure to include all your spending, including marketing, salaries, software and other operational costs. You should also allocate a portion of your budget for unexpected costs, which can help you avoid cashflow disruptions.

Remember though, that your budget isn’t set in stone. Regularly review your budget against actual performance and make adjustments as necessary to stay on track.

Looking for an accountant for marketing agencies? Get in touch with us at Smith Butler. We’d be happy to see how we can help you.