How to Keep Accounting Simple and Efficient in a Startup

Running a startup includes far more responsibilities than being a mere company employee. If this is the first time you’ve been a business owner, you might get tangled up in the number and scope of different duties. This can lead to inefficiency in various aspects in your business, but you’ll see the most serious effects of a poorly managed startup in accounting. If the financial figures don’t match, you’ll have problems with your employees, business associates, and the tax authorities. As a result, all this can put your entire startup to risk.

That’s why we’ve prepared some basic accounting tips that will help you keep your books in order.

Don’t run out of cash

As a business owner who has to spend long hours at work and deal with demanding challenges, you won’t be able to cope with too complex accounting procedures. However, you need to take an active role in the following one – ensuring a backup plan regarding your business assets.

Business advisers often claim that every business owner should have a special fund in which they’ll always have enough money to survive 3-6 months without an additional cash inflow. This money refers to all the expenses that need to be covered if you want your business to keep rolling even in the dry season. Although you should always do your best to maintain a seamless cash flow, you can never tell what’s waiting behind the corner.

As for the actions that will help you save assets for the backup fund, it’s advisable not to accept new projects and hire new staff if you haven’t put this fund to practice. Grow your business step by step and always take care how to save it in case of a crisis.

Encourage early payments

Many business owners complain about irresponsible business associates who don’t make their payments on time. Truth be told, there will always be businesspeople who won’t do their share of work as you would expect from honorable people. Since you can’t change them, you can modify your soft attitude in business and become much more assertive when it comes to payments.

That way, you should reduce the payment periods for the goods and services you sell as much as possible. Forget about NET 60 or NET 90 payment terms. You’re a startup owner and every single payment they owe you is a potential nail in your coffin.

What you can do to turn the tide is to encourage and reward early payments. For instance, if a customer pays you within seven days from the invoice date, you can give them a 20% discount coupon for their next purchase. Similarly, if they make the payment one or two days after the invoice date, this discount can go up to 30%. Of course, these are only some tactics that can speed up the payment process.

Likewise, you should provide your customers with the best payment experience, meaning that they should be able to pay you in as many ways as possible – via credit cards, online payment solutions, offline bank accounts etc. The more options you offer, the larger number of fast payments you can expect. Simply put, this is the digital age and you need to utilize all its advantages to accelerate the payment process.

Work with a neutral accountant

Like we’ve already said, you can’t expect too much from yourself when it comes to the accounting management of your business. Every startup owner invests too many emotions in their business, which is why they’re often incapable of making rational decisions. This is no wonder because you launched a startup because you wanted to make your business ideas come.

This is why keeping your startup accounting under control should be done in collaboration with a neutral accountant. When we say neutral, we mean that this person isn’t on your payroll as an employee. When you present your financial reports and your ideas for the future to such a professional, they’ll know what parts of your plan should be retained and which ones are to be discarded.

What’s also useful when working with such an accountant is the fact that they probably work with more businesses. Because of that, they have a bigger picture of the market than you. As a result, they can predict more precisely what’s going to happen and what you can do to improve your business.

If you pay them as outsourcers, rather than full-time employees, they can keep their neutral position and not succumb to your opinion just because you’re their employee.

Create a strategy for alternative financing

Having a special fund for difficult times is a must for every reasonable startup owner. However, it’s not the only alternative that you should seek to establish. You need to bear in mind that a period of recession can devour that fund in a couple of months. It would be a shame to close down a business that’s been working well for years only because of a few months.

As an alternative to such an ending, you should establish contact with different financiers when your business is at its peak. Banks, private lenders, government administrations for the SMB-niche, individual investors – you should communicate with them and show them your books when you’re on a winning streak. During that period, make sure to start using some of their services, just to keep your name in their databases. You can treat that cooperation like a raincheck just in case you need it.

In case of an economic crisis or any other plague of the market, that raincheck could help you keep your head above the water and survive the financial tsunami.

Modernize your accounting software

Modern accounting software tools are gaining more and more options as we speak. That way, you can automate a large portion of the accounting procedures a startup can have.

For instance, you can connect the aforementioned payment options with software tools and have payment reports generated at once.

Apart from that, you can track and analyze your business expenses on the go. The option to access your accounting data from any device your gadget in the world is an extremely practical advantage of accounting tools. It will help you to discuss the current affairs with your accountant (the neutral one) no matter where you and that person are at that particular moment.

Further, accounting software solutions give you the comfort of pre-setting invoices, so that these tools automatically send them when the time comes.

All these options will make it possible for you to get familiar with some accounting features in a simple and time-saving way. That will improve your work efficiency as well as the overall productivity of your business.

Conclusion

When you’re launching a startup, you should expect a rocky road, rather than a bed of roses. Still, you’ll learn most things on the go, as you work and come across new challenges. Accounting is a bit trickier because it takes more time to become prolific in that niche. So, make sure to keep a good eye on your incomes and expenses, but don’t go too deep into accounting. Having a professional accountant by your side and a reliable accounting tool installed on your computer will help you get the most of accounting for your business.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
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