5 Accounting Challenges Startups Face and the Tools That Will Fix Them
Thankfully, adhering to accounting best practices is no longer as challenging as it once was. In fact, low-cost help is available.
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Accounting. Bookkeeping: The very words conjure up images of dusty ledgers and drudgery. Despite accounting's boring reputation, however, it can't be emphasized too much how essential it is that your business follow accounting's best practices right from the start.
Related: 5 Invoicing and Accounting Tools for New Entrepreneurs
In fact, financial mismanagement is an oft-cited reason for business failure: An influential study by CB Insights of 101 failed startups found that cash flow was the No. 2 reason why some of those small businesses failed, and was second only to businesses trying to sell a product that their market didn't need.
So, whether you're a bootstrapped startup or you've secured funding, pay very close attention to proactively managing your business's cash as it ebbs and flows. That kind of attention is vital for both long and short-term success.
Thankfully, adhering to accounting best practices is no longer as challenging and time-consuming as it once was. In the past decade as a founder, I've learned about a host of tools to help ensure my -- and your -- business maintains its all-important focus on the bottom line. Here are five standout ones small businesses can use to perfect their accounting practices and ensure their financials remain transparent.
Related: 3 Benefits of Cloud-Based Accounting Tools for Small-Business Owners
Many online businesses rely on a plethora of third-party apps to power and streamline their processes. No wonder: A nearly endless number of tools out there aim to make your business run smoothly. While many SaaS apps are well worth the monthly subscription costs, as your business grows, it becomes harder and harder to track how much you're spending on software.
Siftery offers a sophisticated expense-tracking service that makes it easy to calculate and optimize your monthly or annual spend. It also offers Quickbooks integration, making the tracking process seamless.
But Siftery does more than just track how much your business spends on software. According to CMO Gerry Giacoman Colyer, Siftery tracks more than 42,000 apps and how 840,000-plus companies use them to power their software recommendation engine. Siftery makes it easy to find SaaS apps that help power your business, and saves you money by negotiating discounts for Siftery users up-front. In more ways than one, Siftery will help you get the most out of your SaaS spend.
A big challenge any entrepreneur faces is tracking the expenditures and time of teams, especially those that work remotely. Humanity is an employee-scheduling and time-tracking solution that automates what traditionally has been a painful process.
Team members can log in from anywhere to see their schedules and even swap shifts with other employees. The intuitive, cloud-based interface provides a calendar view for both managers and employees, solving for the traditional headache that comes with complicated systems for tracking and expensing remote employees' hours.
From an accounting perspective, Humanity helps ensure that your employee's timesheets are accurate and that you're not spending more on wages than you should be. Like Siftery, Humanity offers Quickbooks integration to make workforce management even easier to blend with your overall bookkeeping practices.
There are two applications that I strongly recommend all businesses -- especially digital ones -- incorporate into their business operations. One is Google Analytics, to measure and record where your website's traffic comes from, and site performance. The other is Quickbooks.
While there are many software options, none beat Quickbooks for features and compatibility. Quickbooks has become the industry standard, and for good reason. For starters, It integrates seamlessly with your bank accounts, eliminating much of the labor involved in keeping your records balanced and up to date. Quickbooks is also hosted in the cloud, making maintaining your books from any device or location easy.
Its reporting and cash-flow management tools give you an instant snapshot of how your business is performing financially and can help you predict and plan for any shortfalls. Should the time ever come for you to sell your business or seek additional funding, solid and verifiable financials are a necessity. Diligent use of Quickbooks will ensure that you have those financials at your fingertips.
Thankfully, the days of saving a shoebox full of expense receipts until tax season rolled around are over. With Expensify, which like the other apps listed here offers extensive Quickbooks integration, you simply take a photo of a receipt on your smartphone, and categorize it. Expensify automatically uploads to Quickbooks.
If your team members are required to submit receipts for reimbursement, Expensify is then even more useful. It detects duplicate receipts, determines accurate foreign exchange rates and helps ensure the accuracy of each transaction.
Once an expense report is approved, the team member is automatically reimbursed within 24 hours via ACH. Expensify streamlines the expense-reporting process for both managers and employees. Even if you're self-employed, Expensify will save you considerable time and money. According to Forrester's 2017 Total Economic Impact Report, businesses that adopted Expensify saw a 598 percent ROI.
No matter how diligently you track and plan your business finances, only rarely will your startup not experience an occasional short-term cash flow crunch. That's where Fundbox comes in.
Fundbox syncs with your Quickbooks (or other accounting software) to evaluate the credit-worthiness of your business. Fundbox then offers funding options to supply U.S.-based businesses with cash. These options include invoice funding, meaning that Fundbox will advance you money for invoices you have outstanding with your customers -- plus a revolving line of credit of up to $100,000 that your business pays back over either a 12- or 24-week period.
Installment payments are deducted from your bank account weekly along with a fee. Two of the primary advantages of Fundbox are that the finance fees are typically much lower than an option like credit cards, and unlike a traditional small business loan from a bank, you won't face long wait times or mountains of paperwork to complete.
Simply give Fundbox access to your Quickbooks or bank account, and you'll have a decision in as little as three minutes. If you are approved, your funds will be available as soon as the next business day.
Related: 10 Essential Steps for Getting Started With QuickBooks Accounting Tools
No matter what type of business you run, never underestimate the importance of employing accounting best practices for your business from the very start. This may not seem like the top priority in the early stages of your startup, but as your business grows and demands more of your time, effective accounting and cash-flow management structures will become critical to your business' ability to scale.