Research shows that only about half of all startups survive beyond their fifth year in business. There are many reasons why startups don’t last. One of the most common, though, is issues related to accounting and money management. It includes things like a lack of cash flow and pricing/cost-related issues. If you want to keep your business up and running beyond the five-year mark, you’ll need to make sure you’re handling your money in the most appropriate way.
Accounting For Startups
Read to learn about some of the most common problems that arise when handling accounting for startups. You’ll also learn how to avoid having to deal with them yourself.
1. Poor Record-Keeping:
Often, when businesses experience financial difficulties, those difficulties can be traced back to poor record-keeping. If you don’t do a good job of tracking expenses, saving receipts, and paying attention to where is your money going, you’re going to have a hard time making sure your business stays profitable long-term. To avoid this, make sure you have an iron-clad record-keeping system in place from day one. Invest in a bookkeeper or bookkeeping software to help you manage your accounts and track your expenses.
2. No Internal Controls:
It’s not uncommon for employees to wear different hats when you’re running a startup. There’s nothing inherently wrong with this. It can make it harder to keep track of who’s in charge of what, though. This can be a big issue when it comes to accounting and money management. If you don’t know who’s in charge of accounting, you’ll have a harder time keeping track of what’s working and what’s not.
Make sure you designate someone to handle all your business’s finance-related issues, so nothing falls through the cracks.
3. Lack of Tax Knowledge:
Taxes can trip up even the most seasoned businessmen and women, so they’re an issue for startups. Make sure the employee in charge of handling accounting has a thorough understanding of tax laws and knows how to ensure your business isn’t paying too much or too little. You may also need to consider hiring an outside accounting firm to help if no one on your team has this knowledge.
4. Payroll Difficulties:
If you have employees, you’ll need to make sure you’re staying on top of payroll. Accurate record-keeping will make the payroll process much easier. You’ll also need to make sure you’re handling basic aspects of payroll, though. For example, don’t forget to make pay stubs and deliver them to your employees on time. If you aren’t able to do this on your own, make sure you outsource payroll to someone else. It’ll save time and stress later on.
☞ Avoid These Accounting for Startups Problems:
As you can see, there are many problems you might have to face when it comes to dealing with accounting for startups. The good news is that it is not too hard to avoid these problems. With a bit of planning and good money management, you can ensure that your business thrives and is profitable long-term.
Do you wish to learn more about business money management? If so, check out the Business section today. You’ll find all kinds of helpful pieces of advice to keep your business afloat.