Starting a business is hard work and while business plans, product development and marketing are crucial, neglecting accounting needs can be fatal. Launching a startup requires a solid infrastructure which includes plans for marketing, operations and most importantly; accounting. If you aren’t a number cruncher, this can be a difficult task. Our startup accountants went hard at work and devised these strategic tips which will help you boost your startup.
A lot of startups fail because they do not pay adequate attention to their financial and cost models. It is important to know the status of your capital, where your money was spent and what changes need to be made. Basic accounting knowledge can help startup owners run their business more effectively. These strategic accounting tips can help you cover your accounting base and before moving to the next step.
1. Create separate bank accounts
You have launched your business, congratulations! The next step is to create a bank account to record your financial transactions. Having a separate business checking account will be less stressful in terms of keeping records distinct, organizing funds and planning for taxes. It will make recording business transactions easier for founders. To avoid combining your personal and business assets, create separate accounts for withdrawals and deposits. Before opening your bank account, do your research, look at different banks and compare their fee structures.
2. Establish Financial Goals
Establishing S.M.A.R.T financial goals around your business model is a crucial business activity. Building financial milestones can allow you to stay on track and make the necessary increments for constant growth. Achieving little goals along the way can give you the confidence to hit a larger milestone. Some common financial goals for startups can centre around Profitability, Cash Flow and Profit Margins. Financial goals can help you effectively monitor business growth checkpoints in your business journey.
3. Track and monitor expenses
Most startup founders make a common mistake of not having a ledger for their financial activities. They do not record every expense from the beginning and are too focused on customer acquisition. A good bookkeeping specialist and software can help you effectively record your financial transactions. Not tracking your expenses can be an extremely costly mistake from a tax and cash flow perspective and turn away future investors. Write everything down!
4. Hire experts
“Time is money and expert accountants will save you time, money and possibly your sanity”
Startups function in high-frequency environments and can often skip crucial business steps along the way. Accounting and financial experts can help to develop performance evaluations and do business health checks to keep the company on track. Having experts can make the entrepreneurial duty less stressful, and help founders focus on key business decisions. An Accountant can provide you with a financial map to take final decisions and prepare your company for accelerated growth. Delegation can also help your company cut bleeding cost margins that stunt growth.
5. Automate Manual Tasks
In the operational journey of a startup, there are always manual tasks that can be automated. It is true that certain functions must be handled manually, but to ensure consistency, time-saving and increased efficiency automate whatever you can. Services such as IFTTT are available online that can help businesses achieve their automation goals. For accounting purposes, a solid software infrastructure will save money and prevent costly manual errors. For managing staff, specialist SAAS tools can add immense value, our friends at hubstaff have created a guide to show you how this tool can integrate with your cloud accounting software to improve productivity and therefore business performance.
6. Research Tax Laws
Nothing sinks a startup’s budget faster than a big tax bill. Every process of your business from an operating structure to tax deductions should be kept in focus while preparing tax returns and cash flows. Having knowledge about tax implications for your business allows you to make choices about spending and allocating liquid capital. An important step can be to call a tax and legal consultant helpline to take advice on your business.
7. Create Budgeting and Forecasting Scenarios
Sustainable budgets require realistic estimations of revenue and expenses that might incur in the future. Some expenses like payroll and leasing fees remain static other like merchandising change over time. Startup costs are variable, but as the expenses grow founders should be prepared for future scenarios. Anything can happen during a business lifecycle, therefore it is best to create sustainable budgets and financial forecasts. Forecasting helps business owners keep reserves for future expenses. These expenses can be both personal and related to the business.
Source: Mahzeb Monica, Medium.com