This article was written by Andrew Evans - owner of Sky Life Accountancy - The Video Games Practice.
Embarking on the arduous journey of starting up a studio is as thrilling as it is daunting in this lightning-paced day and age.
It doesn’t take much to get caught up in the flurry of the gargantuan demands of designing and developing your first game, but like with any new business, it takes even less to overlook one of the most critical aspects of your business - your accounting and finance function.
No matter how small or big your studio is, every business needs an accounting system from Day One and in simplistic terms, this might just be some basic bookkeeping using a Google Sheet.
Ensuring your studio's financial health is not just about keeping the lights on; it's about laying a foundation for enduring success. With a new year comes the opportunity to get your financial house in order, and here’s how you can do just that.
Setting Up the Basics
The first rule of thumb for any start-up gaming studio is to separate business and personal finances. It's a common misstep - you have to get a business bank account and if you have a limited company it is a legal requirement if you are receiving income or trading.
It can be particularly problematic when receiving funds from investments or grants into your personal bank account for instance, and not just from an ‘untangling-your-business-expenses-from-your-personal-one's’ point of view, but a legal and tax one!
I normally recommend engaging with a neobank to start off with such as Starling (because you can open up an account relatively quickly) and then when you’ve grown a little, if you feel the need to go more traditional, you can apply for a high street bank account (as they usually take a little longer to open).
Barclays is a great supporter of the video games industry and if you have foreign transactions, perhaps consider setting up with Wise. A distinct business bank account also lends credibility to your studio for future financing and presenting a professional front to investors and partners.
Choosing the Right Accounting Software
Your next step is to select your accounting weapon of choice! There is a plethora of accounting software out there designed to help simplify your record keeping so selecting the right one can lead to some procrastination. From my experience, the best accounting software is Xero, followed by Quickbooks, which have different packages to suit different needs.
Your ideal pick should balance affordability with functionality with a strong focus on the UX and for that reason, Xero does trump everything else in my opinion because it is so easy to use. The best part is that it connects to your bank account to pull in your transactions and updates every day without you having to touch a button.
If you’re not quite ready for accounting software just yet then you should at least meet the cloud in the middle by developing a Google Sheet system for managing your business transactions. Google has some quickfire tangible benefits in terms of collaboration and accessibility for sharing with your accountant at ease, for instance, but it should only ever be a stopgap before you eventually upgrade.
If you are VAT-registered though, you will need to get proper accounting software so you can update your financial records in real-time. The right software not only keeps your finances in check but also frees up more time for you to focus on what you love - making games.
Bookkeeping Best Practices
It is imperative that you implement bookkeeping into your busy schedule but of course, like most business owners starting out, time is not an abundant resource. It doesn’t have to be much so setting aside an hour or two each month to review your transactions will do wonders - and the beauty of having a cloud accounting system is that you can do it from anywhere.
Keeping an eye on cash flow, expenses, and income helps identify potential issues before they escalate. And while it’s tempting to manage everything yourself, consulting with a professional accountant can be invaluable, especially at the start because they can provide insights, help navigate tax laws, and make your accounting systems more efficient.
As you forge ahead in the world of indie game design, remember that a strong financial foundation is integral to your studio's creativity and growth and the start of a new year is the perfect time to get your financial house in order.
Here’s a quick summary of everything you need to do:
Ensure you have a business bank account that is completely separate from your personal affairs
Get accounting software, or create a basic accounting system using products like Google Sheets
Blockout time in your calendar at least once per month to reconcile your accounting transactions
Outsource your bookkeeping to an accountancy practice (when you can no longer do-it-yourself)