All businesses require some level of bookkeeping. A bookkeeper is an accounting professional tasked with keeping accurate financial statements and records. These professionals keep records of all financial transactions to maintain a precise data ledger, thereby helping the companies they serve to make better, more informed decisions.

Startups have unique financial needs and requirements, which underscores the importance of a quality bookkeeper. Though many startups attempt to do bookkeeping in-house, it’s imperative that bookkeeping is handled by someone experienced in the field. Clean books and accurate financial reports are important to any business’s financial health, let alone a startup. If a startup doesn’t have a qualified professional in-house, one option is to outsource such services to a startup accounting partner, like Graphite Financial, for example.

What Should You Expect Out of Your Bookkeeper?

A bookkeeper is an experienced financial expert who can help your startup keep track of all financial records, maintain clean books and run financial reports that can aid in key decision-making. And while good, accurate bookkeeping is important for any type and size of company, it’s especially important for startups that are looking to grow and succeed in their given market.

At the most basic level, startups can expect a bookkeeper to track and categorize all financial records. This includes all invoices, bills, receipts, bank statements, credit card statements, proof of payment, canceled checks, tax returns, W2 forms, 1099 forms and any other document that represents tax services, income, a deduction or credit.

Good bookkeeping for startups leads to more informed decision-making – something that’s crucial for any business as it looks to grow and scale. Bookkeeping can help influence financial statements and show an accurate picture, called a cash flow statement, of the money that’s both entering and exiting the company. Things like balance sheets, cash flow, income statements, profit margins and cash runways are all influenced by good bookkeeping practices, allowing startups to make faster and more informed decisions.

Why is Bookkeeping Important for Startups?

Keeping accurate books may seem like nothing more than just tracking all the money that’s entering and exiting the company. But it’s a lot more valuable than what you might see on the surface. Good startup accounting can help create accurate, timely financial reports, which can help your business make better decisions faster. These reports can also influence financial planning and financial analysis, affecting future business structure and potential business growth.

The goal of any startup is to grow and earn market share – and several factors can help influence this growth. You need a good business plan, a good product or service, investors and fundraising, and more. But good bookkeeping is something that you shouldn’t devalue. Good bookkeeping can help establish the financial infrastructure of your startup and then scale with you over time, playing a key role in decision-making among your startup’s leaders all along the way.

What Bookkeeping Tasks Should Startups Prioritize?

From tracking business expenses to managing invoices, bookkeeping plays a significant role in assessing the financial health of a startup at any given time in its early tenure. And you can’t downplay the importance of regular accurate financial reporting and reconciliation when it comes to assisting leaders in their decision-making. Profit and Loss, or P&L statements outline revenue, balance sheets display your startup’s current situation and cash flow statements identify how much cash is moving in and out of your startup over an established period. Some of the other key bookkeeping tasks a startup should prioritize are as follows:

Tracking Expenses and Income

Startups need accurate financial records to provide an overview of the business and assist with the monitoring of all inbound and outbound transactions. A good bookkeeper can take this task a step further for a startup and categorize expenses to help with budgeting and tax purposes. This is especially true for any overhead expenses, as they’ll mean different things when it comes to filing your tax return and your startup’s taxable income. Tracking expenses and income is something that should be done, at the most, every day, and, at a minimum, every week. All receipts should be filed or digitized to maintain accurate proof of record.

Managing Invoices and Accounts Receivable

“Cash is king” is an old cliché in the financial world – and knowing your startup’s cash flow at all times is crucial to its evolution over time. One of the key duties of any bookkeeper is to send out invoices and collect payment. This also involves prompt follow-up with any parties that haven’t paid on time. Managing and tracking invoices and accounts receivable is crucial to accurate bookkeeping.

How can your startup collect payments promptly and handle any overdue accounts? A bookkeeper can help send overdue notices, negotiate payment plans and flexible payment methods, and send payment reminders until all funds have been accounted for.

Reconciling Bank Statements

One way to ensure the accuracy of any financial records is to compare and contrast them to bank statements. Reconciling bank statements is when a startup compares its bank statements to its financial records to ensure accuracy. This helps confirm what payments have been processed and the money that’s been collected. Aside from helping confirm accurate financial reporting, reconciling bank statements can also help your startup determine any discrepancies or outstanding payments. It’s suggested that your startup reconciles its bank statements at least once a month or as soon as you receive your bank statement. A bookkeeper can help run these numbers to detect and resolve any irregularities.

Preparing Financial Reports

Finally, regular financial reporting is essential for any company of any size. But it’s perhaps even more important for a startup that’s in growth mode and looking to evolve. Regular financial reporting accurately details your startup’s overall financial health to help aid with decision-making, budgeting and future forecasting. Some of the essential financial reports a bookkeeper will help establish include income statements, balance sheets and cash flow statements. These – among other reports – assist leadership with business decisions and can also play a significant role in attracting investors and fundraising.

Outsourcing vs. In-House Bookkeeping: What Works Best for Startups?

Should you hire an in-house bookkeeper or work with an external firm? It’s a question that many startups ask themselves upon their establishment – and the answer largely depends on your specific company. For most startups, it makes more sense to hire a bookkeeping firm that can scale with you until you are much larger. Here’s a look at some considerations when making this decision:

• Cost: Startups are already typically strapped for cash as they establish and look to get their product or service off the ground. Hence, a full-time, in-house bookkeeper may not be feasible in the current budget. Startups can typically save significant money by outsourcing this service versus paying a salary and benefits to an in-house professional.
• Expertise: When you hire a single person, you rely on them alone, which creates concentration risk, both from experience and support stances. When you outsource, your startup will be working with a team of experienced professionals who can provide the services that your startup needs to save money, make strategic business decisions and secure your company’s financial position.
• Scalability: Outsourcing bookkeeping doesn’t just serve as a stop-gap until your startup can afford to hire a full-time, in-house bookkeeper. A good bookkeeping firm works to serve as an extension of your startup and grow and scale with it over time. Even if your startup evolves to a point where it can bring some accounting services in-house, there’s still a role for an external partner.

Strategies for Effective Budgeting and Financial Planning

A bookkeeper’s duties can help a startup budget and plan effectively. Some tips and strategies for doing this include:

• Knowing your income, bank account balance, and what your budgetary limits are.
• Understanding generally accepted accounting principles.
• Setting realistic goals.
• Categorizing expenses and prioritizing the more essential ones until cash flow can support more.
• Adjusting and adapting to changing conditions or other factors like new accounting systems.
• Staying up to date with current technology like accounting software and bookkeeping software.
• Identifying and tracking variable costs, which are costs that tend to change from month to month.
• Identifying financial goals and monitoring progress toward achieving said goals.

Implementing Efficient Bookkeeping Systems for Startups

A good bookkeeping service will integrate and implement several tools and systems to help a startup flourish. There’s no shortage of tools to help bookkeepers do their jobs and maintain an accurate financial picture of their company. The best tools are the ones that are also the most user-friendly and simple to understand. A bookkeeper can help advise which ones might make the most sense for your startup and what you’re looking to achieve. Some bookkeeping solutions are also able to integrate with other programs and platforms that are helping propel your startup.

How Bookkeeping Can Enhance Due Diligence for Startups

Accurate financial records are important for a variety of reasons. They’re important for maintaining a timely financial snapshot of your startup. They’re important for tax purposes. They’re also important for attracting potential investors and for organizing fundraising campaigns. The due diligence that good bookkeeping can help achieve can also help improve your startup’s reputation in the specific market that it’s operating in.

Consumers want to do business with startups that they view as favorable. And investors want to spend their money on startups they believe in. While there’s a lot more to achieving this than good bookkeeping, it can certainly help.

Secure Your Success: Bookkeeping with Graphite Financial

Bookkeeping isn’t something that any startup should downplay when it comes to its overall importance. Good bookkeeping is invaluable – and for reasons well beyond just keeping an accurate record of money that’s coming into and out of the company. Good bookkeeping is the key to understanding the economics of your business, growth goal setting, and fundraising.

For more information on the importance of good bookkeeping and to explore how Graphite Financial’s startup bookkeeping services can help set your startup up for success, contact us today. We offer personalized help and custom solutions for every startup that we work with to ensure that we’re providing the value that you need. Contact us today for more information and to schedule a consultation.

FAQs

How much do bookkeeping services for startups cost?

Cost largely depends on the level of service that your startup requires and how often you require bookkeeping services. For instance, a young startup is likely to require less intensive bookkeeping services than a startup that is in growth mode. At Graphite Financial, we offer a variety of pricing tiers and can customize solutions for your startup to ensure its bookkeeping needs are best met.

What types of services do startup bookkeeping firms provide?

From tracking expenses and income to managing invoices and accounts receivable to reconciling bank statements and creating financial reports, a good bookkeeping service does more than just ensure the books are kept up to date.

What factors should a startup consider when selecting a bookkeeping partner?

When choosing a bookkeeping partner for your startup, steer clear of low-cost options that often sacrifice quality and firms that solely focus on basic bookkeeping, which may not offer the comprehensive support your startup needs. High client-to-team member ratios and shared service centers are other important factors to consider as these can lead to delayed responses and lower service quality. Instead, prioritize firms with a low number of clients per team member to ensure personalized attention and responsiveness.

Opt for a partner firm that can scale alongside your startup’s growth and offers a full suite of financial services, including financial modeling and tax assistance. It’s best to seek out firms with a proven track record in your space to benefit from their industry expertise and understanding of your specific challenges and opportunities. By choosing a bookkeeping partner with these qualities, you can set your startup on the path to financial success and sustainable growth.

What are the benefits of outsourcing bookkeeping services versus bringing them in-house?

The biggest benefit for a startup firm when it comes to working with an external partner versus hiring a bookkeeper in-house is the cost. Startups operate with limited cash flow and it can be cost prohibitive to bring a bookkeeper in house and pay their salary and benefits. When you work with an external partner, you can customize your solutions and only pay a bookkeeper when they’re working for your startup. Additionally, partnering with an external bookkeeper can ensure they scale with your startup as it grows and evolves.