The UK tech industry is one of the most booming sectors globally, reaching a combined market value of 1 trillion in 2022. However, navigating a software or tech company can be complicated as it carries unique challenges for even the most weathered business leader.
This article will explore the five most important accounting practices for software and IT businesses to make the journey a bit easier.
1. Choose The Right Technology
If you work in the tech sector, you understand the importance of developing technology best suited to your needs. This is also true in the accounting world!
Software and automation are crucial components of a successful accounting strategy. Most companies working in the field of tech process a large volume of transactions, creating a complex case for accounting. Integrating your processing system with a cloud accounting software such as Xero will quickly add value to your operations and provide critical data analytics features to scale your business.
2. Keep an Eye on Your Tax Credits
Some organisations operating in the tech sector may be eligible to apply for specialised tax credits or get government funding during their life cycle.
As continuous development is significant in technology, R&D tax schemes are a popular way to create additional savings in your books. There are several types of R&D initiatives in the UK depending on your business size or type which can require different accounting practices, from simple profit and loss accounting to “above-the-line” credits.
3. Focus on Funding
Most tech companies heavily rely on funding to start or expand their operations. Tech is highly attractive for investors, with UK tech companies raising £29.4bn in 2021, showcasing the need for tech entrepreneurs to have their up-to-date financial reports readily available for potential parties.
Raising capital is necessary to fuel your growth and reach profitability faster if you are an IT or technology business. For this reason, you should explore various options for funding your venture. Consider your tech business’s future needs and decide early on your approach to investors, including managing your equity.
4. Stay on Top of Your Intangible Assets
Operating a technology business comes with unique challenges, one of which is intangible assets. Intangible assets require specific accounting methods and must be handled by an experienced accountant. Internally developed intangible assets are regulated in the UK and need to be accounted for as an expense in the profit and loss account.
However, managing intangible assets in your financial systems requires expertise and careful planning.
5. Manage Your Sales Team Effectively
A successful technology or IT business depends on its sales team to close profitable deals. Thus, designing the right bonus schemes to incentivise your sales reps is critical. But here comes the challenge.
Commission tracking can become a tiresome process when it comes to returns, discounts, and other transactions regarding your products. This includes payroll processes, calculating individual bonus packages, and tax applications. Therefore, business leaders must develop an effective financial system to ensure no manual errors occur during these calculations.
Get Expert Help
As your organisation grows, maintaining accurate financial records can get complicated and time-consuming leaving you with little to no time to reflect on other parts of your company.
An external financial partner can lend a helping hand in tackling complex financial audits, preparing financial reports ahead of funding rounds, and analysing your tech company’s financial health to achieve your goals.
At Sanay, we are dedicated to providing the best service to growth-oriented technology and IT companies.
Reach out to us for more information on the accounting services we can offer for your technology business.