Why Start-Ups Need Bookkeeping
Every large corporation once began as a startup with an original idea, a viable business model, and pure grit and determination. The crux of every startup is finding a way to acquire customers and generate revenue in exciting, new ways. In order to succeed though, beneath all that excitement and enthusiasm you must maintain accurate, detailed financial records, aka--bookkeeping.
Money is ultimately what will keep a startup going, so managing your money wisely will determine the viability of your company in the long run. Before your startup can get off the ground, though, you must have both accounting and bookkeeping systems in place.
First Steps for Startups
First, choose a business entity (sole proprietorship, S or C corporation, partnership, or LLC). Before you can set up bookkeeping and accounting records, you have to designate the structure of your business because that will determine how you are taxed, the size of your business, how you pay yourself, liabilities, and other important factors. Next, open a bank account, separate from your personal account, specifically for your startup. Then, purchase accounting software or outsource to establish an accounting and bookkeeping system.
Accounting is essential to every business, big or small. It functions as a monitor of the company’s financial standing, and provides accurate indicators about what is working and what needs to be improved like managing the budget, generating financial reports, and keeping in compliance with the IRS. Bookkeeping is different from accounting. It tracks day-to-day transactions and cash flow, then records it in ledgers. This includes recording invoices, payments, debts, paying suppliers and vendors, and more.
Why Startups Need Bookkeeping
Accurate bookkeeping will help your startup:
● Keep your startup out of any legal or financial issues
● Increase efficiency
● Attract investors
● Secure lines of credit
● Give an accurate indication of your startup’s financial standing
● Identify problems, risks, or errors
● Compare your startup to competitors
● Free up more of your time
There are a lot of moving parts in a startup which can make managing and keeping track of it all a daunting task. Making bookkeeping a priority right off the bat will save you so much time and so many headaches in the future.
If startups do not use accurate bookkeeping, they incur many risks, including:
● Not knowing where they stand financially
● Coming up short for payroll
● Insufficient funds come tax season
● Missing important forms or tax documents
● Losing money
● Legal issues with the IRS and audits
● Losing investors
● Racking up debt
● Poor credit
On a weekly basis your bookkeeper (in-house or outsourced) should file and/or digitize all receipts and invoices. This will make it much easier to keep track of transactions or purchases, should you need to revisit a specific invoice. Bookkeepers should also categorize transactions in preparation for tax season, so you know what your business can write-off. On a monthly basis, your startup should use bookkeeping to reconcile your bank accounts to keep a close eye on income and expenses, pay vendors and bills, send invoices as soon as possible, review and write-off outstanding invoices, and most importantly, review your financial standing.
If you're looking for someone to handle bookkeeping for your startup, consider virtual bookkeeping. Virtual bookkeeping saves you plenty of time, both up front and in the long run. There is no need to hire or train someone, and you don’t have to keep on top of them to make sure they’re doing it correctly. Virtual bookkeepers also use more efficient software than you could acquire in-house. This speeds up the process, and lets you use your time on more pressing matters.
GritForce Bookkeeping is here to help companies do what they do best! They provide a virtual bookkeeping service, personalized for small businesses and non-profit organizations. GritForce works with you to get your books in order so you can focus on your main priorities. Their goal is to assist you to understand your financial position, enabling you to make smarter, informed decisions.