Failing to plan is planning to fail. This is especially the case for start-ups. Many start-ups fail because they fail to plan and plan well. These start-ups fail to keep up with the rising costs and run out of cash and hence fail to execute their plans.
The article talks about 4 specific and important accounting expenses and how start-ups should avoid them.
Do you have accounting expertise on your team?
If you are in the process of launching your business, you may be wondering who will handle your books and the financial details of your business.
This is a common issue for most new businesses. You may be tempted to take care of them yourself, but this is not only unnecessary, but it is also risky. If you are running your business, you need to be focusing on marketing, sales, and strategy.
These are the things that are going to help your business grow. When you are starting out, you should be focusing on getting your products or services out to the market.
You should be working on building your business, not spending most of your time crunching numbers if you do not have any accounting expertise on your founding team.
What are the top 4 accounting expenses that start-ups should avoid?
Not doing day to day accounting is one thing and doing bad accounting is another. It is much more dangerous than doing no accounting.
Bad accounting is done by those when someone who is not from an accounting background takes care of your start-up's accounting.
Many start-ups pay unwanted fines and penalties due to bad accounting. As the calculations mismatch at the time of paying taxes.
As a result, one of the most essential things you can invest in as a company is good accounting. It's far too simple to construct something that will never operate without financial infusions or to waste a lot of money on the wrong things if you don't have it.
Accounting Software and Tools
Accounting Software and tools can account for a huge proportion of the average start-up’s expenses. However, far too many start-ups either purchase tools that they do not require or purchase tools that are overloaded with features they do not need.
The truth is that the "greatest tool on the market" is often created with large businesses in mind. Which a start-up does not require.
So, purchase something which is cheap, or outsource to some accounting firm that already has these software’s which they give you access to.
It may be a little less glamorous, but it will save you a lot of money while being just as effective.
Hiring a Full-Time Accountant
When trying to establish a revenue stream, many companies make the mistake of recruiting unneeded or underutilized employees. Such as hiring a full-time accountant.
Because the real cost of employing a full-time employee is often 1.5x to 2x their salary (and because paying your employees is one of your biggest costs), hiring them too soon just burns cash quicker than needed.
In India if you are to hire a fresher accountant the minimum salary you will be paying him/her is at least INR 20,000 Per month. But if you outsource the same to an accounting firm, they will do the same work within INR 5,000 – 10,000 per month.
Plus, you will get an extra benefit of experience, these are the professional accountants who will be taking care of your company accounting. That makes your accounting is in safe hands.
Clubbing Together Personal and Business Expenses
It's just as important to keep your personal and professional lives separate as it is to keep your personal and professional expenditures separate. It's difficult to manage your start-up’s cash flow if you can't see it separately.
Open a separate bank account for your business if you haven’t done it already. And get it managed by a professional.
Does your business have a chart of accounts?
In the initial years, a start-up is not very concerned about accounting expenses. In the initial years, a start-up may not have a chart of accounts, may not have a proper accounting system, and may not have a CFO/Virtual CFO
But once the business starts making profits, a chart of accounts is a must. So, a chart of accounts is a very important thing for a start-up. Moreover, a chart of accounts helps the management to track the financial status of the company.
A chart of accounts can be set up in a way that helps in planning for the future.
Are you sure that you are being billed for all your services?
It is very important to be aware of your costs and to watch every penny that is spent. Many business owners assume that they are being billed for all services but in many cases, they're not.
There are a few things that business owners should watch out for, and they're often missed. These expenses might seem insignificant but can add up and cause a lot of trouble when it comes time to pay taxes.
Conclusion: If you are undertaking any of these tasks, remember it is okay to be giving away your money or time to another business.
Hopefully, this blog has helped you in some way. If you have any other questions or concerns about starting a business or managing your personal or business accounting, please contact us anytime at email@example.com. Thank you for reading.