Importance Of Bookkeeping For Funded Startups. Bookkeeping by definition is all about keeping a record of a company’s financial transactions and history. Bookkeeping as a practice helps companies make better financial and management decisions and allows companies to set benchmarks to know their financial health. The bookkeeping company remains on track about who is to be paid, from whom money is to be received, and invoicing details. Bookkeeping for funded start-ups also comes in the realm of covering all these financial aspects enabling the founders to remain cognizant of the growth and sustenance of the company in the long term.
Start-ups are typically run by not more than 10 employees including the founders. Hence, the founders are compelled to wear many hats at the same time. Since in the initial stages, every founder is hard-pressed for time, it is prudent for an entrepreneur to outsource the bookkeeping services of the company to an outside accounting firm. This takes off much pressure from the shoulder of the founder and allows them to focus on the strategy and growth of the company.
This blog is an attempt to inform readers on what to look out for when selecting bookkeeping for funded start-ups. The write-up seeks to enlist the kind of financial services that are most required by funded start-ups.
Bookkeeping for Funded Start-ups
We shall enlist each of the financial services offered by a standard bookkeeping service for a funded start-up firm. Here it is:
Recording Financial Statements: A bookkeeper is meant to keep a record of all transactions emanating from revenue generation and expenses incurred into the company’s accounting system. With the help of standard off-the-shelf solutions like QuickBooks, a bookkeeping firm should be able to streamline the entire accounting system and keep the company’s finances right on track. Most start-ups tend to operate in a fast-paced environment and such companies need to involve an experienced bookkeeper who entirely understands the nuances and subtleties associated with automated accounting systems.
Tracking Revenue Generation: Most VCs remain interested in the company’s financial statements and are not really moved by the “growth projections.” Incidentally, most start-ups keep a keen eye on their revenue growth because future funding is dependent on it. In such a situation, the bookkeeping firm must become the essential ally of the founder, that can create easy-to-use dashboards that give a bird’s eye view of the entire set of financial dynamics associated with the company. With such validated financial data in hand, the founders will be more confident in approaching VCs for continued funding.
Reconciling Accounts: Companies that raise capital are bound to show accurate books to VCs without discrepancies and ambiguity. In fact, it is one of the standard clauses present in the funding contract agreement. This makes account reconciliation a vital financial practice for start-ups, meaning they have to ensure that money leaving the account should match the money spent by the company. With such strict obligations, start-ups must go with a bookkeeping firm that comes with the pedigree of having dealt with start-ups in the past.
Preparing Financial Statements: In most start-ups – the investors, board members, and founders are keen on seeing three financial statements namely – the income statement, the balance sheet, and the cash flow statement. The income statement enables investors to know the financial viability of the company, the balance sheet showcases how much the business is currently worth and the cash flow statement provides how much cash is going in and out of business in a specified period. All these three can quite accurately predict how the business is going to perform in the future. Any start-up that is keen on knowing its financial health with clarity must have in place a bookkeeping services firm that understands these obligations and provides these reports in a timely manner. This will ensure open, free-flowing, and transparent communication between the founders and VCs about the financial well-being of the company.
Conclusion:
While it may be easier to handle a company’s finances with the advent of accounting software like QuickBooks. That said, one must not forget bookkeeping for funded start-ups by the entrepreneur themselves does involve a steep learning curve and has the potential to cause a lot of missed opportunities in business. This should make you select and outsource your bookkeeping services to a firm with knowledge, expertise, and experience in managing the financial records of start-ups. This firm will ensure you remain up-to-date with all your necessary financial paperwork without any heartache. Overall, it is about making the necessary choices and delegating wherever necessary.