One of the most important things you can do for your startup is to implement an effective accounting process right from the start. Being diligent and accurate with your accounting will make sure that you don’t run out of money. It will also help you identify opportunities and weaknesses.
Having accurate financials can help with so much more, as well.
If you are looking for partnerships or funding, you will need to have clean books that show your potential. You can choose to do it yourself, or you can choose to hire a professional to do it for you.
Whatever you choose, you will need to balance the investment you would make to hire with the investment in time that it would take. Here are some important tips for managing your accounting as a startup.
1. Separate your business and personal accounts.
The first thing you need to do is open at least one account purely for your business. You should not be mixing business and personal accounts. From an organizational standpoint, it can be a mess.
You will have a mix of receipts and expenditures from your personal and professional lives. Keeping them separate will make it clear what your cash flow is, and will make it easier to file your taxes at the end of the year.
Plus, any connection between those two segments of your life could create liability questions if your business is ever named in a lawsuit.
2. Choose a solid digital accounting platform.
There’s no reason to pour over an ever-expanding and messy spreadsheet in Excel or a similar program.
One of the best investments you can make is in digital accounting software that works for your business. Yes, you will need to spend some money, but in the long run, it will be more than worth it.
Different programs have different features, but digital software solutions will help you automate many processes that might have taken up a lot of your time otherwise. This includes the ability to enter invoices and receipts by taking a photo of them, and quick categorizing options.
You will always be up to date with accurate information, and you will save time for the core functions of running your business.
3. Hire an expert.
Of course, one of the best ways to manage your accounting is to get someone else to do it for you.
It’s never been easier for a startup to find virtual bookkeeping services at an affordable cost. Hiring someone to manage your bookkeeping will ensure that your books are up to date and accurate at all times.
If you are handling that work yourself you could find that busy days mean that your bookkeeping gets put off to the side. Bookkeeping procedures tend to be standard across businesses, so anyone can do it for you from anywhere in the world.
You will save your time and be able to spend more time on other tasks. If you need information, you can ask your service provider and have it within minutes, or get regular reports.
4. Manage your cash flow.
A professional bookkeeper can keep track of your revenue and expenses. However, it’s up to you to use that information appropriately.
The vast majority of startups fail because they go through their money too fast. When you first start out and are not breaking even yet, you need to keep close track of how fast you are going through your money, and how long you have until it’s gone.
As your business grows and you start bringing in more revenue, you should be tracking your expenses very closely. This means having a budget and being able to keep your expenditures on pace with those projections. If your bookkeeping is not up to date or not accurate, you could find yourself sunk because of cash flow issues.
5. Have a reliable payroll system.
As a startup, the last thing you need is high staff turnover. If you aren’t paying your employees reliably, then you will lose them.
However, payroll can be complicated, so it might be a good choice to hire a payroll service or use an automated software solution of some kind.
Your employees are your most valuable assets, so make sure that you keep them happy. Most payroll software will also integrate with your accounting software so that all of your data entry is handled automatically.
Never take your accounting for granted.
You might want to do the accounting yourself, and that’s fine. However, if it gets behind, your business could end up in serious trouble.
Having effective accounting processes will protect you and your business. It will keep you organized and prepared for anything that comes your way.
Proper accounting is one of the most important aspects of any business, so follow these five tips to make sure that you are managing your startup’s finances properly.