Most new start-up agencies are set up by consultants who haven’t had a director’s responsibilities before. You need the skills to make placements, but there’s more to it. Understanding contracts, compliance, time management, cashflow and accountancy processes is all needed.
TBOS polled their office and came up with six key things new Directors should know:
A new agency is usually a small agency, with plenty of quiet time in the first few months. You still need to stay motivated, though! Putting in the hours, making calls, and sending out CVs still needs to be done. There’s also the risk of spending too long celebrating each placement rather than getting to work on the next.
We’ve seen some Directors use serviced offices so they have the right atmosphere for work every day.
If you’re not used to anything outside making placements, managing your cashflow is a whole new challenge. Understand what money you have, know what you’ll have to pay and when. The only way you can know your bottom line is to track payments coming in, HMRC liabilities, and what suppliers need to be paid. Once you know that, you know if you can pay yourself.
Contracts & Compliance
The responsibility for each placement now falls on you. You must follow legislation, complete compliance, and ensure contracts are signed – or consequences can be disastrous. Make sure your contracts are current and know what compliance your industry requires so you can check it.
VAT and other HMRC Taxes
Failure to pay the correct taxes can mean the death of your agency. PAYE, VAT, Corporation Tax (and, potentially, CIS), all need to be accounted for and your cashflow needs to take these into account.
VAT’s different tax schemes (Flat-Rate, Cash Accounting and VAT Accounting) can often confuse new directors, leading to trouble.
Delayed Return on Investment
You may not be able to draw a salary in the first three to six months. Make sure you can survive on minimal salary and have some savings in place before you start – and be prepared to curb your spending habits!
Doing Personal Tax Return on Dividends Taken
As a consultant, the money you received already had the correct taxes taken. As a director, especially in a new company, you may be drawing money as a dividend.
Dividends are paid on profits generated by the company after corporation tax. Tax on dividends are often lower, and they’re paid on your personal tax return. Just make sure you handle your personal returns correctly! A personal accountant’s help may be needed.