6 Accounting Mistakes Every Startup Must Avoid
As a startup owner, you can expect to experience a lot of hurdles before you can claim to be successful in your endeavours. You’ll need to surpass challenges like fierce competition from giant and well-funded market players, hiring the right staff, financial management, and so on. Fortunately, modern business settings support startups with so many technologies and software to expedite tasks and allow them to join the industry seamlessly.
Before launching your startup, you need to prepare all the necessary tools and equipment for operations. Whatever products or services you’re offering, you need to ensure that your finance and accounting tasks are organized and error-free. Whether you outsource this task or have an internal finance team handle it, there are essential practices to achieve your goals.
Beware of the following accounting mistakes that are common among startups:
Not Using An Accounting Software
It’s a tendency for startup business owners to come up with an imperfect workflow, especially right after launching. You probably conduct all your financial records manually on paper ledgers and accounting books. However, this practice may endanger your business in many ways, and the best solution is to go for cloud accounting software instead. Read more for added information.
If you invest in the right accounting software, your finances will be easier to manage. This innovative accounting technology allows you to look professional and stay compliant. Because of the helpful features and functions many accounting programs have, you no longer need to do recording and computing manual work. Many are even cloud-based; thus, you don’t have to worry about losing data or misplacing essential files and documents.
Accounting software is pretty easy to use, even an internal financial worker or a hired third-party agency can get the hang of using it instantly. Your hired accountant will be able to manage your books, payroll, and taxes with this centralized software. This leaves no room for error which allows your business to continue operating successfully.
Managing Every Accounting Task By Yourself
Startup owners usually operate as a one-man-band or start hiring a minimal number of workers doing multiple tasks. Yet as this may be possible for many business chores, it can be pretty risky and ineffective for your accounting roles. It’s possible to find that when you attempt to manage your accounting yourself, the quality of services actually decreases.
Maintaining business accounts becomes increasingly essential when your enterprise grows, but it takes a lot of time. Consequently, it becomes difficult to be able to add accounts maintenance to your plate that’s already filled with so many other roles. Hence, it’s crucial to entrust your accounting tasks to a reliable staff or a third-party service provider.
As an effective leader, you shouldn’t carry all the burdens of your business. Learn to let go of accounting-related tasks for they can be performed even better by someone who’s an expert in the field of accounting. Growing your business requires your time and attention, so let go of those tasks that are no longer within your forte.
Overreliance On Spreadsheets
Accounting has become much more manageable with today’s online tools and automation. Nevertheless, apart from doing bookkeeping and accounting manually, many businesses make a mistake when they rely too much on spreadsheets. Sure, this software is free to use and is better than using ledgers and paper or printed files.
Alas, spreadsheets come with certain shortcomings and limitations. They can be complex and messy to use, especially for those unfamiliar with them. Your staff needs to learn how to use formulas and a tiny mistake can lead to a big disaster on your financial records.
Plus, over-reliance on spreadsheets means your team needs to spend more time figuring out how to come up with the formulas. This transcends to wasting more time and more room for errors. Not to mention, it won’t be ideal for remote workers who collaborate and communicate online. To solve this issue, it’s best to use modern accounting software.
Accounting and finance teams can unlock the full potential of modern accounting software. There’s no need for complex computations and formulas, as the program provides automated tools. Some app allows your business to integrate your bank accounts and transactions, having centralized financial data accessible to everyone in your accounting department.
Failure To Perform Data Back-up
Another accounting disaster to avoid is failing to back up your financial data. Imagine how disastrous it can be when your financial transactions and records get lost, stolen, or hacked. You would definitely need to go over everything again.
You should be prepared to restore your books at any time in case of these issues. Keeping an extra, current copy of your business finances with many backup options available is now possible. It’s essential to secure your paperless financial documents through separate hard drives, online memory drives, and the like.
Not Using Cloud Systems
Since many companies have shifted to remote or hybrid working styles, it’s a mistake for a business not to take advantage of cloud software or services.
Using cloud or web services, you can create a business financial report and processes that are always up-to-date and accessible to anyone. It makes it possible for you or your business partners or employees to obtain any financial data at any time – without physically visiting the company. Cloud software also comes with tight security and encryption, only allowing access to the authorized people from your accounting team.
It’s said that utilizing a cloud service for your financial records is the best option compared to other data storage options. You don’t have to worry about losing files, misplacing physical data drives, or corrupting your computer and hardware. With minimal subscription fees monthly, you’ll be able to have wide storage for all your records online. The key is to trust the right cloud service provider with reliable cyber security practices.
Not Tracking Payroll
Regardless of whether you have a single employee or twenty team members, tracking your payroll records is imperative. Your startup’s payroll system should be organized even during the first month of operations. This allows your workers to get paid on time, efficiently, and file taxes smoothly. While this can be done manually, it’s best to rely on and invest in payroll software.
Get rid of manual efforts to track overtime, working hours, sick leaves, and other details, as they can all be automated through the payroll tracking system. Wages can be calculated easily, deducting taxes and consistently coming up with error-free figures.
Sure, there are important considerations prior to a company’s launch, yet you need to avoid the different accounting blunders mentioned above when it comes to your finances. While there can be so many business requirements to tend to, never undermine the importance of your accounting and financial tasks. When you stay on top of your financial tasks, you can launch your business successfully and operate it seamlessly.