3 Mins
TL;DR
Accounting pitfalls can derail your startup’s success. Henderson Loggie’s Games & Digital team recommends:
- Budgeting: Set realistic budgets covering development, marketing, and unforeseen challenges.
- Cash Flow Management: Monitor diligently, use invoicing systems, negotiate terms, and explore financing options.
- Tax: Partner with specialists to navigate gaming-related tax incentives and deductions effectively.
- Financial Records: Simplify with cloud accounting (e.g., Xero), update records, categorise expenses, and reconcile promptly.
- Future Planning: Invest in strategic financial planning for scalability and long-term growth.
Amidst the excitement of developing the next big game, it’s easy to overlook the less thrilling, but equally crucial, aspect of running a gaming startup: accounting.
At Henderson Loggie, our Video Game Developers sector team understands the unique challenges faced by gaming startups in the UK, and we’re here to guide you through the maze of accounting intricacies in this article.
Launching a gaming startup is a rollercoaster ride filled with twists, turns, and unexpected challenges. While your focus may be on game design and development, it’s essential not to underestimate the impact accounting can have on the success of your venture. Here are some of the most common accounting mistakes that we’ve seen throughout our 30+ years of experience in the industry.
1. Unrealistic budgets
Challenge:
Creating captivating games often involves unpredictable expenses, from unexpected development hurdles to the need for additional graphic design assets. Many startups find themselves grappling with budget overruns, leading to financial strain.
Solution:
Establish a realistic budget that accounts for potential contingencies. Factor in not just development costs, but also marketing, staffing, and unexpected challenges. Regularly review and adjust your budget as the project progresses to stay ahead of any financial curveballs.
2. Mismanagement of cash flow
Challenge:
Cash flow is the lifeblood of any startup, and gaming companies are no exception. Uneven income streams, delayed payments, or overspending can lead to cash flow crises, hindering day-to-day operations.
Solution:
Monitor your cash flow diligently. Implement invoicing systems that encourage timely payments, negotiate flexible payment terms with suppliers, and explore financing options if needed. Henderson Loggie’s expertise in gaming startup accounting can help you maintain a healthy cash flow.
3. Missing out on tax opportunities
Challenge:
Navigating the complex landscape of gaming-related tax incentives and deductions can be daunting. Missing out on opportunities like Video Games Tax Relief (VGTR) or Research and Development (R&D) tax credits can leave money on the table.
Solution:
Partner with a knowledgeable accounting team that specialises in the gaming industry, like Henderson Loggie’s Games & Digital team. Stay informed about available tax incentives, maintain accurate records, and seek professional guidance to ensure you capitalise on every tax advantage. Read more about the tax incentives and deductions that are available for gaming startups.
The HL Guide for Video Games Startups
Learn from industry experts and get helpful tips to make your gaming business a success. Launch your games startup with our in-depth guide.
4. Neglecting financial records
Challenge:
In the fast-paced world of game development, meticulous record-keeping can take a back seat. However, neglecting financial records can lead to confusion, hinder decision-making, and cause compliance issues.
Solution:
Simplify your accounting processes using cloud accounting software such as Xero. Regularly update financial records, categorise expenses accurately, and reconcile accounts promptly. A streamlined approach not only aids day-to-day operations but also ensures readiness for financial assessments.
5. Lack of future planning
Challenge:
Gaming startups often focus on the immediate challenges, neglecting long-term financial planning. Without a clear financial roadmap, scalability and sustained growth become challenging.
Solution:
Invest time in strategic financial planning. Set realistic growth milestones, explore funding options, and consider the long-term financial implications of business decisions. Henderson Loggie’s Games & Digital team can provide valuable insights to help you chart a sustainable financial course.
Conclusion
In the exciting world of gaming startups, accounting might not be the main character, but it plays a crucial supporting role in the quest for success. At Henderson Loggie, our Games & Digital team is more than just number crunchers – we’re your trusted companions on this adventure, helping you navigate the challenges and avoid the pitfalls that can hinder your gaming startup’s journey.
Remember, the key is to stay proactive and informed. By addressing these common accounting challenges head-on and partnering with professionals who understand the gaming industry, you’re not just avoiding obstacles – we’re setting the stage for a successful and financially sound gaming venture.
Ready to level up your accounting game? Get in touch with us today, to arrange a free 30-minute video call to see how we can help with your startup.