Accounting: Harder Than it Looks, Especially for Startups

Accounting is almost as old as business itself, and mostly unchanged through the centuries. It’s still basically just a process of recording expenses and revenues then figuring up what you actually have in the bank. Simple, right?

Not necessarily. Even the most basic bookkeeping requires more than simple arithmetic. Someone also needs to track the numbers according to strategic objectives, file the supporting documents properly, and generate month-end reports consistently. It’s time-consuming work that must be done carefully – and it’s just one aspect of effective accounting.

Most young companies – especially startups with a run-lean and sprint-fast mentality – struggle with accounting more than they realize. They may not stumble into financial catastrophes, but that doesn’t mean their accounting runs perfectly…or even adequately.

Is Your Accounting an Obstacle?

This is the fundamental challenge of accounting: it’s both complicated and critical. That means doing it correctly requires more resources (time, staff, money, expertise etc) than startups are willing or able to invest. Yet if they don’t put robust accounting processes in place, they put both the bottom line and the business strategy at risk.

Larger companies can pay for limitless accounting and finance teams. Startups don’t have that luxury, though. At best, they have a small accounting staff, and at worst, the founder balances the books while juggling everything else. Many rely on introductory accounting software and use Jerry-rigged processes, following the path of least resistance to create something that’s at least adequate – which is exactly the problem.

Adequate isn’t enough. It will always result in small mistakes, minor delays, confusing results and other outcomes of less-than-perfect accounting. These may be manageable in the early days of the company. But as it begins to pursue investors and growth, accounting problems become an anchor on the effort.

The simple fact is that getting good enough at accounting to start a business is pretty easy. Getting good enough to navigate that business towards growth or an acquisition offer is much harder. Fortunately, there’s an easy way to make up the difference.

Outsourcing: A Natural Fit for Startups

Good accounting takes time, technology, experience, and expertise. Efficient processes are  needed to manage the complexities of accounting. And they must be effective as well to avoid things like accounting errors and tax mistakes that can cause a startup to stumble. 

Instead of trying to bring all these elements together in-house, many startups take a shortcut by outsourcing some or all of their accounting needs: everything from basic bookkeeping to taxes to strategic finance. Outsourcing takes these workloads off the startup’s plate, freeing up founders and other in-house resources to focus elsewhere. More than saving time, though, outsourcing accounting delivers the high standards and sophisticated capabilities that forward-looking startups need to gain footing. It replaces the adequate with the exceptional.

Ready for your own replacement? Contact Edward Thomas Associates to explore the next steps.

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