1. High Growth Technology Group Managing your money TeachFirst Innovation Booster 23 November 2013 Ju-Vern See, KPMG Patrick Imbach, KPMG

2. 1 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. The road ahead Incorporation … Also register with HMRC for corporation tax File tax return with HMRC. Small profits rate 20% You incur expenses… Keep all receipts and invoices Accounting system Outsource or DIY You get traction… Budget and forecast your business Register for VAT? Business experiences rapid growth File accounts with Companies House Main rate 23%

3. 2 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Accounting overview ■General accounting principles and policies ■Example of financial statements ■Outsourcing vs doing it yourself ■What accounting software to use Financial planning ■Why prepare a cash flow forecast ■How to build a financial model What are we going to go through today

4. 3 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Accounting overview ■General accounting principles and policies ■Example of financial statements ■Outsourcing vs doing it yourself ■What accounting software to use Financial planning ■Why prepare a cash flow forecast ■How to build a financial model What are we going to go through today

5. 4 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Record income and expense over the period of the transaction (cash may change hands at a different time) You hired a freelance developer in September who you estimate worked 10 hours in the month for £100 hourly wage. At the end of the month, you haven’t received an invoice from her but you still have to make an entry in your accounts as it relates to September. Accrual principle Expenses to be matched to when income is generated (e.g. depreciation). Bought an iMac for £1200 which you expect to last 2 years. Using depreciation, you get to spread the costs of the £1200 across 2 years which means only £50 would be charged to your monthly profit and loss accounts. You now have £1200 less cash, but only £50 of loss. There is a set of accounting principles about how to accounts for certain revenue and expense transactions and how to value and present assets and liabilities Matching principle Accounting policies Accounting principles

6. 5 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Financial Statements Income Statement/ Profit and Loss Account ■Measures profitability across a period of time ■Income – Expenses = Profit or loss ■Profit is not your cash balance Balance Sheet ■Measures your financial health at a point in time ■Assets – what you own, Liabilities – what you owe ■Equity – what’s left over ■Assets = Liabilities + Equity Cash Flow ■Track your cash movement ■Reconciles your profit to your cash balance

7. 6 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Example – Income Statement/Profit & Loss Account

8. 7 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Example – Balance sheet

9. 8 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Outsourcing vs. Do it yourself Do it yourself Outsourcing Pros ■Allows you to understand your financials better ■Cheaper ■Many resources to help you out Cons ■Time consuming ■May be caught unaware with deadlines ■You need to learn the different accounting and tax laws Pros ■Allows you to focus on your product/ service ■Provide you with other insights and an independent view ■A network of specialist advisors in other professions e.g. Lawyers Cons ■More expensive ■May not have the relevant experience What needs to be doneFrequency Bookkeeping Posting transactions Billing chasing outstanding debtors Daily/Weekly Prepare management information Profit and loss Balance sheet Cash flow forecast Monthly/Quarterly Submitting quarterly VAT returnsQuarterly Preparation of statutory financial statementsAnnually Corporation tax calculationsAnnually Claiming tax reliefs (R&D, Patent Box)One off

10. 9 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. How to choose an accounting software Accounting software out there … ■Easy to use cloud based – Xero, FreeAgent, Kashflow, Quickbooks Online ■Support functions – Crunch ■Desktop – Sage, Quickbooks What to consider … ■Different functionality – invoicing, timesheets, multi currency ■Costs of software ■Number of transactions ■Do you need external advice

11. 10 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Accounting overview ■General accounting principles and policies ■Example of financial statements ■Outsourcing vs doing it yourself ■What accounting software to use Financial planning ■Why prepare a cash flow forecast ■How to build a financial model What are we going to go through today

12. 11 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Example – Cash flow forecast Year 1Year 2Year 3 Sales Sales Channel 150,000100,000200,000 Sales Channel 250,000100,000200,000 Sales Channel 350,000100,000200,000 Total sales150,000300,000600,000 Total cost of sales-50,000-100,000-150,000 Salaries-150,000 -200,000 Office supplies-1,000 Rent-20,000 Communication-1,000 Total operating expenses-172,000 -222,000 Tax10,0000-15,000 CapEx Computer equipment-10,000-5,0000 Furniture-5,00000 Total CapEx-15,000-5,0000 Cash Opening balance60,000-17,0006,000 Net cash movements -77,00023,000213,000 Closing balance-17,0006,000219,000

13. 12 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Feasibility analysis ■Develop business model including revenue model (e.g. is the business financially viable?) ■Think through the assumptions (e.g. growth rate) ■Identify resource/ capital need ■Identify risks Document to raise funds ■Demonstrate potential to investors & lenders Management tool ■Management report: Milestones & Accountability ■Measure and benchmark key metrics Why prepare a financial forecast

14. 13 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. How to build a financial model Plan List all assumptions Working capital, revenue growth, user numbers Consider your corporate structure – debt or equity? Build Separate – keep input and output in different tabs Consistency – adds professionalism and validity Integrity – keep in line with accounting standards Simplicity – avoid complicated functions and macros Test Get someone else to go through your model Analyse every cell

15. 14 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. An introduction to the High Growth Technology Group What we do We are bringing the expertise and experience of KPMG to support the next wave of world class technology companies grow and succeed … Back office finance functions of book-keeping and tax compliance Ensuring your operations are fit for international expansion Integrating you into our internal and external networks Making sure you can attract and retain the right staff Ensuring you obtain the tax incentives available to you as an innovative business Helping ensure your compliance to tax regulations Making sure you are ready for funding Ensuring your business has processes fit for growth … via the High Growth Technology Group

16. 15 © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. A range of skills and experience An introduction to the High Growth Technology Group Who we are The team is dedicated to early stage and high growth technology companies in the UK A dedicated team focused on this sector Based in Shoreditch, East London A single point of contact into KPMG Reporting directly to the board of KPMG UK Patrick Imbach Patrick is our financial expert, helping companies with everything from accounts to business plans and funding e : patrick.imbach@kpmg.co.ukpatrick.imbach@kpmg.co.uk t : 020 7311 2440 In: PatrickImbach T: @patrickimbach Ju-Vern See Our resident techie with a passion for start- ups and all things coding. e:Ju-Vern.See@kpmg.co.ukJu-Vern.See@kpmg.co.uk t :07522 331142 In:JuVern T: @juvern Contact us O : 64 Great Eastern Street, EC2A 3QR W : www.kpmgtechgrowth.co.uk T : @kpmgtechgrowth

17. © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Produced by Create Graphics Contact us O : 64 Great Eastern Street, EC2A 3QR W : www.kpmgtechgrowth.co.uk T : @kpmgtechgrowth