Whether you’ve found yourself trying to dig your startup of a messy accounting hole, or want to get proactive and prevent money mistakes before they happen, knowing what not to do is often just as important as knowing what the right steps are to take.
Entrepreneurs don’t start their new business ventures only to spend hours working out budgets and managing their company from the inside. They have dreams to chase and need a well-oiled accounting process to make sure they can focus on growth rather than constant internal management.
Especially for business owners just starting out, putting off your accounting tasks doesn’t make them go away. The less you’re able to nail down accurate books this month, the harder it will be to fix them next month.
1. Not integrating accounting as a core component of your business process
One of the most common problems entrepreneurs make has less to do with the specifics of accounting, but how they treat it within their business.
Just like sales or marketing, accounting is a core part of the broader business process––not a task that simply hangs on from the outside. Thinking of it as something that only needs to be thought about “every once in a while,” already sets you up for disaster down the road.
Accounting tasks come into play just about every day. Making sure expenses are logged and tracked on a daily basis not only saves you from devoting a huge block of time at the end of the month you’d spend compiling all of that information, it also helps to ensure every expense is noted and accounted for when it comes time to get your books in order.
2. Ignoring Cash Flow
It happens all the time.
An impassioned entrepreneur launches a business and is spurred on to expand after some initial success only to realize the business isn’t in the green––it’s deep in the red.
Bottom-line profits look great, but cobwebs are forming in the checking account. It’s not a scenario you want to be in when the bills start coming in.
While some businesses can skirt around the problem with credit offers to customers, startups rarely find themselves able to do this.
That’s why it’s extra important to be sure you’re getting paid as early as possible. For those who use a variety of subscription-based tools, remember to take advantage of any discounts for long-term service that can improve your cash flow in the future.
When it comes time to pay invoices, delay them as long as possible if no early payment discount exists. This way, you can use the difference between collection and payment to throw towards growth investments.
3. Understanding accounting basics and reaching out to professionals
There’s no question you’ll have enough accounting work to keep you busy––the question is, do you understand it? Numbers and careful calculations aren’t everyone’s strong point and when you’re working under pressure, your chances of getting it wrong only increase.
For those that need extra assistance, it’s important to know which questions you’ll need to ask.
What kind of documents you’ll need to keep, what the purpose of them will be now and in the future, and what kind of liabilities might face are all questions that should be asked by those who aren’t well acquainted with bookkeeping.
If all of that is simply too much for you to handle along with the other parts of your business, outsourced accounting professionals are available to help pick up the slack.
For most startups, hiring outside help can be well worth it when compared to the potential losses possible when mistakes are made in-house.
If you’re a startup or small business owner interested in hiring an outsourced accountant, contact us. Our start-up accounting and CFO services experts can provide you with personal guidance.
Photo credit: Jono Haysom