Bookkeeping for Startups: Are You Leaving Money On the Table?

Written by Amanda Bower    |    Published: June 15, 2022

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At the heart of every startup organization is a product or service your audience needs. They might not know that they need it today, but the innovations that you have developed will ultimately change the way companies do business and create a better experience for the end consumer.

While you’ve been working on creating the best possible product for the market, other parts of your burgeoning business may be neglected. One of the most common areas to get overlooked is the bookkeeping process. Although the bank account remains positive and the bills are getting paid, bookkeeping ensures cash flow is properly managed and offers opportunities to justify your vision to investors.

Without a solid plan established early on, getting bookkeeping for startups back on track is not only time-consuming, but makes it more difficult to bring in potential partners to fuel future growth – leaving potential money and talent on the table. Here’s what every founder needs to understand about getting started with a healthy bookkeeping foundation.

How Is Bookkeeping Different From Accounting?

Although many founders and business managers use the terms interchangeably, bookkeeping and accounting are two parts of the same discipline. The sole difference in bookkeeping vs. accounting is how much detail you need from your numbers.

Accounting involves looking at the larger financial picture of your business and taking the steps to actualize them. Accounting decisions entrepreneurs and leadership teams often make during the startup phase include setting up the corporate structure, financing the business, and onboarding the first members of your team.

On the other side, bookkeeping for startups involves following the money at the transactional level. The basics of bookkeeping include understanding cash flow patterns, ensuring accounts are reconciled each month, and processing both accounts payable and accounts receivable on-time.

While they are different skills, both bookkeeping and accounting are vital towards the success of your company. Teaming with a strong outsourced accounting partner can also help you manage the day-to-day tasks of bookkeeping, while helping you plan for your future growth. Regardless of whether you use cash accounting or accrual accounting, hiline can help you build a financial foundation which gives your startup room to grow.

What a Healthy Bookkeeping Program Looks Like

In today’s digital world, it seems like anything in a small business can be automated. Unfortunately, bookkeeping is not one of those tasks. Although you can set up accounting software to automatically track income and expenses, it’s not the same as managing healthy bookkeeping for startups.

In a healthy bookkeeping program, your team will be able to clearly see where transactions are going in your accounting software, manage books through single-entry or double-entry accounting, and manage both income and expenses, including payroll. With any bookkeeping services for small businesses, being able to communicate directly with the team and understand cash flow, profit centers, and liabilities is critical. Without transparency, it’s impossible to create a financial environment for your company to grow.

Hiline provides accounting services for any startup, ranging from a seed-stage company to those getting ready to bring on their first round of investors. Our team can help yours prepare your books for growth, helping you find fiscal success.

5 Ways Good Bookkeeping Saves Money

Not only can healthy bookkeeping habits keep your company on solid fiscal ground, but can also save cash in taxes, manpower, and drive profits over time. Here are five easy ways bookkeeping for startups can help save money.

Stay tax-ready

Once your company grows to a certain size, it will be time to pay quarterly taxes. According to the IRS, anyone expecting to owe more than $1,000 in taxes at the end of the year must pay estimated tax payments throughout the year.

By making good bookkeeping decisions throughout the year, your company can estimate the quarterly taxes due and avoid having a major bill to pay at the end of the year. This can save your company a major headache when tax season comes.

Be ready to scale

While signing contracts and getting new customers is a great feeling, the reality is that your business needs to be prepared to service these new accounts. Without a strong bookkeeping plan, your team could be unprepared to fulfill your orders.

Strong bookkeeping for startups allows you to understand scaling needs, giving you better insight into your operations and allows you to plan ahead for the next major event. Without vision into your finances, one major order could create problems down the line.

Save time

As the old adage goes, “time is money.” When your team is using their time to catch up on the books, it takes away from your overall productivity, which costs you more over time in resources and manpower.

Keeping up on your bookkeeping regularly makes it a smoother process, without exceeding your budget for human resources. Partnering with a virtual bookkeeper can make it even easier, as your finance team will have dedicated resources to help manage your finances each month.

Make better forecasts

As you prepare for financing rounds or to onboard investors, the first thing new partners will want to see is your future forecasts. Without good bookkeeping, you won’t be able to make accurate forecasts that represent your trajectory.

Smart bookkeeping for startups is key, especially for those who are anticipating growth rounds in the immediate future. Understanding cyclical cash flow and cost measurement allows you to make the best possible forecasts available, giving you the advantage at the bargaining table.

Build your profit margin

Without knowing your material and handling costs, you can’t properly calculate your profit margins on products or services. This can lead to costs spiraling out of control, ultimately leeching more money out of your business without your knowledge.

Keeping a regular bookkeeping schedule can help your business scale by understanding your profit margins, and the challenges that ultimately erode them. Good bookkeeping services for small businesses can help your leadership team identify current costs, giving you the information needed to find more efficiency in your supply chain and ultimately build better profit margins.

We help founders, CEOs, and other business leaders get back money

Every business owner knows leaving cash on the table is a bad practice. Not taking advantage of every opportunity – be it through partners or from smart bookkeeping for startups – can cost you a significant amount of money in the long run. This is why bookkeeping is so critical for early-stage companies. Setting smart money habits now and tracking cash flow today can help you create a stronger platform for growth in the future.

Don’t let your business fall behind with bad bookkeeping practices. No matter where your startup or small business is at, the team at hiline can help you create a plan to manage your bookkeeping and accounting with expert support every step of the way. Contact us today to get help reclaiming the money you may be accidentally leaving on the table.

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