9th August 2019

Compliance for tech start ups

The UK’s start-up scene, despite the wider economic gloom of 2019, shows no sign of slowing down. In fact, it’s fair to say the UK is currently experiencing a start-up boom.

The stats tell the full story: 660,000 new companies are registered in the UK every year. That’s nearly one business for each person in Sheffield. And it’s the UK’s tech start-up scene, in particular, that forms the centrepiece of this vibrant sector.

UK tech start-ups are raking in record numbers of investment. Over the first five months of 2019, investment in tech start-ups climbed to £3.8bn, eclipsing the previous half-year record. Safe to say, it looks likely that the full year record will be surpassed, too.

And while the lion’s share of investment went to London businesses, other regions of the country are catching up. Cities like Cambridge and Bristol, in particular, have developed diverse start-up eco-systems.

In other words, it's an exciting time to found and build a tech start-up in the UK, not only in London. Throughout the country, a robust infrastructure to support start-ups has developed. A recent example is Deloitte's Reading Tech Foundry, founded in 2019.

The Foundry is a space where Deloitte’s employees and their business clients can work together on accelerating innovation. Part of that commitment means setting up businesses to succeed in the long term, and a key facet of that is compliance.

In high growth businesses, accounting needs can be a fluid situation. Whether it's accessing R&D funding or getting the right company structure in place, specialist guidance makes a huge difference.

At the Reading Tech Foundry, Deloitte Propel’s compliance team works with innovative businesses to get their financial foundation right. Of course, compliance matters for every business. This is by no means a unique need of startups, but young businesses are particularly vulnerable if they fall on the wrong side of regulations.

But let’s not focus on the negatives: compliance is an often overlooked part of the business growth process. Getting your structures right and your compliance and accounting spot-on aren’t just boring necessities; they are the platform from which your start-up can lift off. And, are particularly pertinent to young tech companies.

It doesn’t need to be drudgery. With the start-ups at the tech foundry, for example, Propel’s compliance team automates much of the accounts preparation process through cloud technology. Not only does this spare you the headache, but manual errors are also reduced.

Every start-up is different, but across the board Propel’s compliance commonly includes:

  • Selecting an appropriate accounting software package that can adapt to a growing business.
  • Determining whether the company should do in house bookkeeping, payroll and compliance (statutory accounts and tax return) or outsource it.
  • What we call ‘forward looking criteria’, like whether revenue will exceed the VAT threshold, Whether revenue, assets or staff numbers exceed the small company threshold and they will require a statutory audit, or whether the size of the company means they will need to make monthly corporation tax payments.
  • Managing cash flow so the company knows when significant payments will be coming in and out of bank accounts.
  • Helping plan around key deadlines like statutory accounts submission to Companies House, Corporation tax return submission to HMRC, Corporation tax payment to HMRC.
  • Whether the company’s R&D expenditure is eligible for R&D claims, the deadlines for these submissions and who to engage to assist with this work.

As the start-up grows, and their needs change, flexible add-ons can be tacked on to ensure the compliance package is tailored to their needs. What works for a business as a pre-revenue start-up won’t work for a scale-up, after all.

As the famous VC Ben Horowitz notes, not everything requires a solution. Sometimes all a start-up needs is clarity: to be able to have a full view of the business and its challenges. Compliance, when done right, offers clarity. It doesn’t need to be a burden, and it shouldn’t eat up attention that should be spent delivering value to the business.

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