Why You Need to Master Accounting to Thrive as a Startup
You’re an entrepreneur, so you must know all about accounting, right? It seems a simple task to ensure the timely payment of accounts. Well, yes and no. Tracking accounts payable and receivable is a critical aspect of accounting, but it is only one aspect. There are many more accounting tools startups can use.
What You Don’t Know About Accounting
Tracking and recording every single transaction may not be glamorous, but it is essential. Keep a general ledger of all accounts and reconcile it frequently. If there are employees empowered to spend money on behalf of the company, every expense should be meticulously documented. If you are considering an acquisition of your company, this type of record keeping is absolutely critical. Many larger companies will not proceed with an acquisition until every dollar your company made or spent is accounted for.
If your accounting practices are good enough, you can predict the future: future revenues, future costs, and future demands. Accounting does this by using analytical tools to create projections, allowing plans to be made for the future and to some degree, with some creativity, shape the future. When a startup is just beginning, having a clear vision of the future of the company is essential to uniting a team and focusing efforts.
A startup may also need to commit to certain things: long-term investments in assets, promises to pay for things over time like rent or salary, or borrowing money to purchase needed assets for growth or capital investments such as purchasing inventory or giving customer credit. Keeping track of these commitments is another aspect of accounting.
An obvious, but easy to miss, aspect of accounting is using it to measure business progress. Are you meeting the goals you set? If not, where are things falling short? Keeping track of individual effort allows top workers to be rewarded and others to be encouraged.
How to Learn
How did you learn what you know now? Not just about accounting, but about everything? For a lot of it, you probably had a teacher, and a teacher is the best way to learn more about accounting. Hire an accounting expert to provide you with everything mentioned in this article and more, and see your startup grow for your efforts. Having the insights of an accountant from the very beginning of a startup might not seem like a priority, but it can make a critical difference in the growth or possibility of acquisition of your company.
Diversified Management Services, Inc. helps small business owners understand and set up their accounting process and following a business plan. Contact us for help with small business planning, accounting services, tax help, or payroll services.