In an ideal world with endless funding, every entrepreneur would have access to an accountant. More often than not, most early stage start-ups are bootstrapping and cutting costs wherever necessary. This often means not hiring an accountant. In reality, most entrepreneurs find themselves performing the majority, if not all, of the accounting tasks associated with running their start-up. However, you don’t always need to hire an accountant to manage the financial aspects of your business effectively. There has been ample software developed to help businesses, both large and small, with their accounting. In fact, accountants make use software platforms themselves in order to do their jobs more effectively.
Why Entrepreneurs Need Good Accounting Skills:
- Budgeting: Keeping track of how much you’re spending and when and where you are spending is essential for making decisions about where to put your money. You may find that some entrepreneurs endeavour to have a high ROI (return on investment) while others are not benefiting the business enough to justify the cost. Good budgeting can help you take advantage of opportunities and correct problems before they pose a threat to your business.
- Tracking Progress: By taking a look at your profits and spending, you can get a good idea of how you are progressing. Looking at your financial history can enable you to make predictions about where your business is headed and then set realistic goals (for example, becoming cash flow positive in 3 months etc.).
- Transparency: Demonstrating good budgeting abilities from the get go can also help you when seeking funding or looking for investors in the future. It also ensures that all stakeholders know where and how money has been spent — this builds trust between partners.
- Reliability: Paying bills on time and sending out invoices promptly will help you build better business relationships and show that you are serious in what you are doing.
- Scalability: If your business starts to take off, you want to be able to take full advantage of that growth and not be bogged down with menial business tasks. By having the right accounting software in place, you will be able to take on more clients/users. You cannot create more time, so it is wise to eliminate time-consuming manual processes long before they become all-consuming.
- Better Outcomes: Recent studies have shown that start-ups that demonstrate early financial monitoring grow faster in revenue and headcount. Read more about the study here.
By implementing accounting software early on, you can save yourself major headaches and make it easier for any accountant that you do hire down the line. In fact, you may need to hire an accountant as a contractor during the early stages of your start-up or find yourself outsourcing some of your accounting tasks. No matter what your accounting systems look like in a year or 5 years it will likely involve some form of commercial or custom-built software. The earlier you start using smart accounting software the easier it will be to focus on the core of your business.