For gaming startups in the UK, there is the potential for high levels of success, but you need to make sure that you have strong financials from day one. Gaming startups in the UK often make the same accounting mistakes, which could prove to be costly in more ways than one. Read on to discover these common mistakes and how they can be avoided.
- Weak Cash-Flow Forecasting
Gaming startups tend to focus on development and launching the game, but fail to accurately forecast and monitor cash flow. It is easy to see why the focus is on the game itself, but weak cash-flow forecasting can lead to payment delays, inability to pay royalties, or forced dilution of equity. This is why it is smart to use experts in the field for cash-flow forecasting best practices.
- Overlooking Industry-Specific Tax Incentives
Gaming start-ups may also miss out on reliefs such as the UK’s Video Games Tax Relief (VGTR) or associated R&D credits, either through lack of awareness or poor documentation. This means that you could be missing out on valuable reliefs that could make it much easier to maintain strong financial health in the crucial early stages.
- Mis-Categorisation of Development Vs. Marketing Costs
Mixing up cost categories (for example, treating development costs as marketing, or capitalising versus expensing incorrectly) can distort profit, tax position, and affect external investment appraisal. For example, a UK retail firm recently revealed a £7m accounting error tied to cost misrecognition. This is why you should establish clear policies for categorising expenses and review these regularly.
- Poor Record-Keeping & Lack of Audit Readiness
Fast-moving digital business models can lead to neglected bookkeeping, missing reconciliations, and uncontrolled supplier expense categorisation – all of which raise risk for external audit or investors. To prevent this, you need a clear system in place from day one to maintain organised financial records. Cloud-based accounting tools can be a great way to keep on top of bookkeeping.
- Lack of Long-Term Financial Planning & Scalability Modelling
Many gaming start-ups are focused on “getting the game live” and neglect the next phase in their business operation. This can involve scaling the business, user acquisition, cost modelling, and profitability break-even modelling. This can leave them exposed when growth slows or fundraising is needed, holding the business back from higher levels of success. This is why you should always have one eye on the future and use scalable financial models from the start to anticipate capital needs.
These are the five accounting mistakes that you will want to avoid when launching your gaming startup. Financial management might not be as fun or exciting as developing and launching the game, but it is crucial to your success. You do not want to encounter financial issues before your game has had a chance to succeed, so make sure you are aware of the above mistakes and how they can be avoided.