Accounting is essential for the success of any business organization. So, you can find some awesome accounting strategies for start-ups, around the Web in this article. Start-ups need to pay special attention to accounting as it shows the financial position of the company, helps in fulfilling statutory obligations on time, and in taking strategic business decisions. Accounting is crucial for start-ups, especially when they need to get funds from banks and investors who rely on financial reports to make their investment decisions.
Accounting can be an intimidating task for entrepreneurs without an accounting background. Moreover, an entrepreneur is always busy expanding his business and may have little or no time to focus on the accounting function. However, that being said, accounting cannot be neglected and kept aside as a task to be done during the weekends. So, it is imperative for start-ups to give the accounting function its due importance, as it plays an important role in categorizing expenses and tracking cash flows to ensure that the company has a strong cash position.
Simple accounting strategies can help start-ups maintain a good accounting hygiene to begin with and as the business grows, they can bring new improvements and better accounting procedures about in the accounting process.
Some accounting strategies that start-ups can implement are:
1. Regular Bookkeeping:
Proper bookkeeping enables companies to prepare accurate financial reports and measure business performance from time to time, so start-ups should ensure that bookkeeping is done daily. Bookkeeping helps the company to record and maintain its transactions in an organized manner. Organized bookkeeping involves the preparation of:
- Journal Entries
- Ledger Entries
- Cash Register
- Bank Reconciliation
- Trial Balance
- Preparing financial statements like profit & loss account, balance sheet, cash flow statements, etc.
2. Invest in an accounting software:
A good accounting software has inbuilt automation technology that takes care of all the mundane accounting jobs. It saves the time and efforts of the employees who need to spend hours doing manual paper work and register entries. An accounting software gives the start-up an added advantage of going digital and paperless. It ensures that anyone can access data from anywhere at any time. Some benefits of investing in a good accounting software are:
- Generates error free financial reports
- Quick and effortless synchronization of financial data
- Digital payments
- Provides data accuracy
- Minimizes inventory errors
- Better security of data
3. Tracking expenses and emphasizing on savings:
Start-ups need a lot of money for operating their business, especially in the early years. However, start-ups need to track their expenses regularly. A good expense tracking system helps the start-ups to identify the expenses that add very little value to the business and can be trimmed down or avoided altogether. They can cut down on the costs to improve the company savings and these funds during emergencies. Start-ups should focus on saving so that they do not end up spending over the top and exhaust their credit and overdraft limits.
4. Inventory management:
Start-ups usually underestimate the need for inventory management. They either have too little stock and cannot meet customer expectations or they end up over stocking which increases their storage cost and lower sales. Managing inventory correctly puts very little stress on the liquidity position of the company. An effective inventory management enables the company to stock the right amount of stock by analyzing the market expectation and the customer demands while taking into consideration the production schedules.
5. Reviewing the accounts receivables:
In order to maintain a smooth flow of funds, it is important to review the accounts receivables regularly. Having a good review mechanism ensures that the cash cycle is running smoothly and there are few occurrences of bad debts. The contract terms with the customers should be revised in case of those accounts who default on a regular basis.
6. Paying suppliers and fulling statutory obligation on time:
Just like receiving payments from customers on time ensures better cash flow. In the similar manner, payments to suppliers and vendors help to increase a company’s reputation and reduce the amount of interest because of late payments. Late payment of statutory obligations may lead to fines and penalties. Thus, fulfilling all payment obligations and taxes on time increases the company’s credibility in the market.
7. Managing payroll:
Managing payroll can be tricky, especially when you do not have a dedicated staff or department to track employees’ leaves, overtime and employee related payments. A start-up usually has a lot on its plate and it makes sense to either have a payroll system or outsource the payroll operations. Both these options save a lot of time and are cost -effective. Employees play a very important role in the company’s success and thus keeping them satisfied reduces their attrition and ensures that employee turnover does not affect the start-ups’ performance.
8. Forecasting financial goals:
Every start-up has a dream of becoming big. And they can easily achieve this with financial forecasting which should be done quarterly based on the current financial situation of the company. Forecasting helps to set both short-term and long-term financial goals, which helps the start-up to stay afloat even during turmoil. A good accounting software can help you track expenses and revenue accurately and provide you with the complete financial standing of the company. This can help the start-up to take informed decisions and make realistic forecasts.
A good accounting solution helps to give a good kick-start to the start-up and also increases its profitability. Many start-ups cannot juggle both operations and accounting and finance and thus lead to financial troubles and business closure. Outsourcing the accounting function to financial and accounting service providers like Diligen not only ensures that accounting is done professionally, but also lets the owners concentrate on their core activities.
Diligen’s team of experts and professionals are well equipped to organize the entire accounting system for a start-up. The experts can also help start-ups in implementing their own accounting system and provide them with hands-on training.
Diligen provides customized accounting solutions to its clients by providing the highest data security and integrity. The owners can choose the type of accounting solution that suits both their business needs and their pockets and stay focused on their business while Diligen takes care of their accounting and finance needs.