What Does Good Bookkeeping for Startups Look Like?
So, you have spent tons of hours creating a product or service and managed to turn it into a lucrative business that’s making good money. Congrats! As a new business owner, you’re probably quite wrapped up in growth, marketing, sales, and building the business.
Bookkeeping and accounting might not be your top priority right now, but neglecting this crucial part of your business can lead to some serious long-term consequences. As a startup, it’s essential to learn how bookkeeping, accounting, and financial management fits into your business.
Keeping good books is not just about compliance with government regulations or producing financial statements when needed. Bookkeeping is about providing your business with consistent, accurate, and streamlined data that helps you manage cash flow. This will help you make better decisions on where to spend money and save money.
While most bookkeeping tasks can be handled by you or your in-house team, partnering with skilled bookkeeping and accounting experts can help you streamline the process and accelerate growth. You can focus on building your business and spend less time in spreadsheets while your bookkeeping experts take care of the back-office work.
If you are a founder of a flourishing startup, this guide will provide you with all the information about bookkeeping and accounting that you need to know. From what a bookkeeper does, to a weekly bookkeeping checklist for startups, to the signs of a good and bad bookkeeper, we’ve got you covered.
What Does a Bookkeeper Do?
Bookkeepers provide accurate, up-to-date financial information to help run your small business. This includes the creation of invoices, receipts, sales records, purchase orders, vendor payments, and bank reconciliations.
Beyond having a comprehensive understanding of accounting and financial management, a knowledgeable bookkeeper also has in-depth knowledge about the tax implications associated with particular transactions and activities, allowing them to create workable financial plans for your business.
In other words, they will help you keep track of where your money comes from and where it goes. Whereas bookkeeping and accounting might appear the same, accountants are responsible for analyzing, classifying, interpreting, reporting, and summarizing financial results and data.
When Does a Startup Need to Start Worrying About Doing Bookkeeping?
Cash is king in business, and good bookkeeping is the first order of business for cash management. As a startup, you should start worrying about bookkeeping as soon as your business starts making sales or incurring expenses.
Staying on top of your bookkeeping from the get-go will help you understand your money coming in and going out of your business and avoid cash flow problems down the line. Manual bookkeeping strategies like spreadsheets or whiteboards are not scalable, nor will they give you the real-time data you need to make smart business decisions.
They are also prone to errors and might not be as accurate as you’d like them to be. A good rule of thumb is to start implementing a proper bookkeeping system as soon as your business starts taking in revenue.
Weekly Bookkeeping Checklist for Startups
Weekly bookkeeping checklists are the essential tasks and activities you need to do each week to achieve the main goals of your bookkeeping system. The good news is that most of these can be outsourced, freeing up more time for you to focus on growing your business. With a weekly bookkeeping checklist, you ensure your finances are in order, get peace of mind, and avoid costly mistakes. These are the items you need to be checking off your list each week:
File or Digitize Receipts
As you receive receipts throughout the week, make sure to either file them away or digitize them. Whether they are inventory receipts, credit card receipts, or cash receipts, you need to have a place to store them, so they are readily available when you need to do your bookkeeping or for tax purposes.
At the same time, don’t let piling up receipts turn into a disorganized mess you need to clean out every time you do your bookkeeping. You can use a digital platform like Dext to digitize all your receipts. Most digital tools used for bookkeeping offer a free trial, so you can test them out and see which one is right for you.
Weekly inventory review is essential to help you know how much inventory you have left and when and what products to order. Failing to do a weekly inventory review will lead to overstocking, which ties up your cash and damages margins on unsold inventory.
Ensure you record any new inventory purchases and sales in your bookkeeping system, so you have an up-to-date picture of your inventory.
Review Timesheets & Payroll
Keeping track of your employees’ hours is a critical part of bookkeeping. The most accurate way to do this is by having your employees fill out their timesheets weekly. You should also use a system that automatically calculates your employees’ hours and then records that information into your bookkeeping system.
To keep your employees motivated, having timely payroll is a must. Reviewing your payroll will not only ensure you are paying your employees on time but will also provide you with up-to-date information about your team.
Monthly Bookkeeping Checklist for Startups
Reviewing your monthly bookkeeping checklist will help you ensure your financial records are accurate, track revenue against costs, detect trends, and have more confidence in your financial decisions. Monthly bookkeeping isn’t a one-time thing. It’s an ongoing process that should be built into your company’s processes and procedures. Here are some of the tasks you need to be doing each month:
Reconcile Your Bank Accounts
Reconciling your bank accounts helps you adjust your financial records with your actual bank balance. This allows you to ensure that all your expenses match your bank statements and any discrepancies are brought to light.
Prepare and Send Invoices (if applicable)
If you send invoices to your customers, you should be preparing them every month. This process is usually pretty straightforward. You will need your customer’s invoice address, payment terms, and complete contact information.
You will also need to attach your customer’s purchase order or contract (if applicable). Then all you need to do is send the invoice out and wait for your money. You can use online invoicing platforms to make the process even easier.
Pay Vendors and Other Bills
Vendors are an essential part of your business. You need to pay them every month on time; otherwise, they may stop doing business with you, which can hurt your business. You can set up your recurring monthly bills in your bookkeeping system so they automatically get paid when it’s time to pay them.
Review Outstanding Invoices
Monitoring your outstanding invoices is a great way to manage your cash flow. With your vendors, this will help you avoid late fees, dunning costs, or penalties. With your customers, you can ensure that invoices are sent to customers in a timely fashion and get paid in a reasonable amount of time.
Review Your Financial Standing
Reviewing your financial standing once a month is important to track your sales, cash on hand, expenses, and debt. This will keep you informed about the financial progress of your business and help you make informed decisions to ensure it continues to grow.
Signs of a Bad Bookkeeper
Having a competent bookkeeper for your startup is a great way to save time and ensure you have accurate records. However, if your bookkeeper isn’t working out, it can be a nightmare for your business. If your financial records are not up-to-date, accurate, or you’ve lost track of all your expenses, your startup could be in trouble. Here are some signs of a bad bookkeeper:
- They’re always late in responding to you.
- They’re behind on keeping the books updated.
- They’re full of excuses or pass the blame to someone else.
- They don’t know how to use basic bookkeeping software and have little understanding of bookkeeping terminology.
- They never ask questions or dig deeper into the books.
- They don’t take responsibility and try to play it off as your fault or that you should have known something wasn’t right.
- You don’t feel like they are competent enough to do the job.
You don’t want to be stuck in the situation of a bad bookkeeper. That’s why it is crucial that you find a good one that fits your budget, gives you peace of mind, and helps you manage your cash flow.
Signs of a Good Bookkeeper
A reliable bookkeeper will give you accurate and timely information. They make the process of bookkeeping and accounting easy and less stressful. Here are some general signs that you have a good bookkeeper:
- They have experience in bookkeeping and the financial services industry.
- They take the time to get to know you, your business, and the people involved.
- They understand how important it is for you to have accurate financial records.
- They ask questions whenever necessary and only make changes when necessary.
- They make the process of bookkeeping easy and smooth for you, not just for themselves.
- They are up-to-date on the latest accounting technology and bookkeeping trends.
- They have a good track record of keeping businesses with similar needs and goals as yours happy.
How Should a Founder, COO, or Other Business Leader Assess and Use the Books?
The books are mainly used to track financial progress, projections, and make future business decisions. Founders, COOs, and business leaders should understand basic bookkeeping and accounting to help manage the numbers. This will ensure that they can ask the right questions, know how to get the numbers they need, and understand what they mean.
Basic understanding of bookkeeping terms is also essential so that you’re able to find the right bookkeeper for your needs. Understanding the essential functions of a bookkeeper will also help you assess and use the books more effectively. A good bookkeeper will give you a better idea of your financial health and what you need to do to improve it.
Need Help with Your Bookkeeping?
Partnering with a competent, experienced, and reliable bookkeeper for your startup or business can be the difference between success and failure. A good bookkeeper will take the stress and frustration out of bookkeeping for you and help you focus on other important areas of your business.
If you are looking to outsource accounting services, hiline is here for you. We are a premium tech-enabled accounting firm that provides bookkeeping services for startups, small businesses, and entrepreneurs.
Our cloud-based accounting makes us more efficient and flexible to suit your needs. Contact us today for a free consultation and learn how we can help your startup achieve its full potential.
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