New startup tip: how to make accounting a breeze
Let’s face it, effective management of finances is an integral part of running a successful business, whether new or established. It’s one area you simply cannot afford to overlook or manage sloppily if you’re looking to establish a sustainable brand or company. Even then, a lot of new business owners find accounting to be quite a headache especially if they know very little about the topic.
If this sounds like your current situation, learning about the basics of business accounting will come in handy in improving how you manage your finances. It also increases your chances of finding success with your startup.
With this in mind, here are five effective practices you can use to improve your accounting for an easy, reliable, and efficient process.
Automate where possible
In this 21st century where there’s an automated tool for nearly everything, paperwork is no longer a feasible option, especially when dealing with an area as sensitive as accounting. For effective and more accurate results, you need to move to technology-driven accounting practices.
For example, you can implement proven systems like QuickBooks and Xero to streamline your daily bookkeeping tasks while also storing crucial company data in the cloud for improved security.
Consider setting up a limited liability company
One of the notable wins that a limited company has for the owner is asset protection. The setup allows business owners (who can also be sole proprietors) to remain as separate entities from the operations of their businesses. Put simply, a limited company limits the possibility of mixing business with personal. In accounting, this means having your business finances sitting separately from your personal ones.
While it could sound overwhelming to most people, figuring out how to start an LLC doesn’t have to be difficult. Sure, it comes with its fair share of challenges (like any other business model) but the benefits are well worth every hustle involved. Besides, with useful resources like https://www.howtostartanllc.org/california-llc/ now readily available, setting up an LLC has never been easier.
Hire a professional
For startups on a budget, employing a full-time professional to give directions and advice can be a move out of reach. However, a lack of sufficient funds shouldn’t be a deterrent to good accounting practices. A smart approach is to explore other alternate solutions that are relatively inexpensive but equally effective. For example, you can choose to outsource some of your accounting work to freelance professionals only when you need to get things in order. This way, you don’t have to spend loads of money on salary and benefits that full-time employees would ask for.
Leveraging the skills and experience of professional accountants will help you identify areas of your business that need immediate attention so you can act on them first. A few great examples here include tax responsibilities, alignment of financial records, auditing, and financial reporting. Outsourcing such functions eliminates the obvious barriers to the growth of your business and increases your compliance with necessary authorities. Ultimately, this adds transparency, accountability, and professionalism which are integral to the success of any legit business.
Periodically review your accounting records
One of the biggest threats to the success of any startup is a lack of proper ways to monitor money flow. It all begins when entrepreneurs fail to track financial records on a regular basis. Over time, the heap of this neglect manifests in the form of poor financial accounting or worse, loss of money and ultimately a complete business breakdown.
To avoid falling into this trap, it’s important that you actively and periodically review your accounting records to be in the know of your company’s financial health at all times. Start by comparing the actual cash flow against the records on the books. The goal here is to have a good balance between reality and what’s on the records. If you cannot enforce this practice yourself, then hiring a professional is also an excellent option to consider.
Analyse the overall business workflow
At the core of any successful business are workflows with clear direction and depth. Without harmony between different departments in your new company, it can prove quite difficult for your startup to establish itself and achieve growth.
Workflow analysis involves familiarising with all the paths that processes take to shape critical areas of your business. This way, you get to understand the kind of work that goes into each stage of building the products and services that your company sells.
So, how does workflow analysis affect accounting?
By understanding the layout of business processes, you’re able to get clearer insights on both expenditures and revenues. Put otherwise, you can calculate the value you get from a particular investment as well the cost of making it a success. In addition, it becomes easier to identify areas in your business that are wasteful and thus need a lot of attention to stop draining your company of valuable resources. In the same measure, you are able to identify profitable processes that require even more investment to propel your startup to greater heights.
Do you think there’s more you can do to streamline accounting process in your startup? We’d love to hear your feedback.
