Over the past few years I have worked with companies of varying sizes and at different stages in the lifecycle of business. All of these companies need some form of guidance or advice, more often than not start-ups tend to have no systems or processes in place when it comes to accounting. They tend to look at the bank account and make decisions based on how much cash they have – a huge no-no for any business planning on growing into the long term.
With tight budgets or small funding startups are always on the fence about hiring help. Can we afford someone to do the accounting? Proper record keeping an accounting can ensure that the business grows and grows properly for the long term. Simple mistakes early on can result in the business being on the hook for anything from lawsuits to garnishments from the government. Oftentimes I’ve seen new CEO’s and Founders underestimate the importance of good record keeping in a legal regard.
If you are not tracking key metrics from day one, how will you know where to focus your energy? The fact of the matter is you may not even know which direction to focus your attention on and may end up putting yourself out of business….
I’m not recommending hiring a full time CFO at the end of reading this post. Your business just needs some simple systems and monthly guidance to ensure that you are on the right track for success. The most cost-effective solution to solve your accounting headaches are simply outsourced accounting.
When is the right time to hire an Accountant?
When should we spend the time and energy to hire an accountant? Many early stage companies are posed with these questions. The answer is it really depends on your business. There are many reasons to hire an accountant early, as mentioned above, to avoid costly mistakes or set up the proper systems from day one.
Here are a few benchmarks to help you decide if now is the right time to outsource your accounting:
- You recently raised money. At the time you take ownership of someone else’s funds, you have a fiduciary responsibility to properly manage those funds. Corporate identities and LLC’s help protect you from the ramifications of a failed business, however, they don’t protect the owner/operator who misappropriated funds. If you have raised a larger round, like a Series A or taken on significant debt – let’s say its better late than never to outsource your accounting.
- Your financials are a mess. Is it a scramble to get your books to your accountant at the end of the year? How are you able to help grow your business without proper financial reports on a regular basis? Proper record keeping and understanding your expenses ensures that you can make the best decisions for your business.
- Your business volume (and/or expenses) has increased. As the business begins to scale, more employees are hired, different revenue channels are opened. This makes it crucial to understand what is happening in your financials. More importantly, it becomes vital to track it. Quit basing your decisions on the cash in the bank and ensure you can cover payroll into the foreseeable future.
What Does a Start-Up Accountant Do?
Any accountant you hire should be able to provide a wide range of services to support you through the beginning stages of growth. Here’s a short list of services that accountants provide in the different phases:
Accounting Policies and procedures
Sales Tax filing and reporting
Up and running:
GAAP financial statements
Accounts payable (A/P)
Accounts receivable (A/R)
W2 and 1099s
Fixed assets tracking
Growing your business:
Cash flow analysis
Audit support and preparation
What Key Benefits Can I Expect From a Start-Up Accountant?
As you can see from the exhausting list above, your accountant does much more than just sit around with an iPad playing with your numbers. An outsourced accountant will give you much-needed support in many areas of your business while also providing the following benefits:
Letting you focus on your business. Perhaps the most important reason to hire an accountant is so that you and your early employees can focus on building your brand, improving the early stage product, making sales and running a lean company. In the early stages, it is vital to not get bogged down with administrative work or key pieces of the business that do not create the most value.
High-quality financial information. When you’re trying to get that new office lease, raise funding or obtain a line of credit, your financial house needs to be in order. That means having high quality financials on hand. These kinds of financial statements are also essential for filing timely and correct sales tax reports. It does not stop there – financials that are in order mean tax reporting and investor updates are a breeze. Equally important, the financial information provided by your outsourced accountant will give you great insight into the financial decisions of your business allowing for overall higher quality decisions.
A valuable partner. Outsourcing your accounting function also gives you the advantage of having another trusted partner. Individuals like myself have extensive expertise working with early stage start-ups from a variety of backgrounds. Using our insight and knowledge from other industry leaders, ensures that you stay ahead of the game. This expertise and experience can be invaluable for your company when it comes to raising funds, financial planning, negotiating term sheets, structuring deals, financial reporting, etc.
Essentially, if you think your startup may be in need of accounting support, it probably is! Remember, it’s better to get the accounting support you need now rather than have to clean up your messy finances for a hefty cost. The quicker you put financial systems and processes in place the sooner you will have the framework and financial support your startup needs.
Who is Zac Weiner?
A freelance financial and accounting consultant for hire in New York City with almost 10 years experience in the real estate, tech, restaurant and startup sectors. I started my career in the startup sector, moving to real estate, and the hospitality industry before finally working as a freelance financial consultant.
I offer a wide range of financial consultancy services — from full financial strategy and daily accounting management to financial vision and outsourced CFO services. Though I’m based in NYC and often work with clients in their offices, I handle financials for organizations across the country.