As the entrepreneur behind a startup company in Canada, you’ve got a lot on your plate. This can mean your accounting and finances get put on the back burner. Let’s explore some tips on bookkeeping for startups: we’ll look at how to set up your books and tackle the simple bookkeeping tasks that will help you overcome common small business accounting pain points.
What Is Startup Bookkeeping?
Bookkeeping is all about maintenance. By introducing bookkeeping into your business, you can keep track of and maintain accurate records of sales and expenses. However, you need to establish a bookkeeping system that makes it easy to record your transactions, whether that’s doing it manually via an old-school ledger, using startup accounting software, or hiring a part-time bookkeeper.
What Does Bookkeeping For Startups Entail?
The fundamentals of startup bookkeeping involve a lot of data entry, tracking down receipts, and keeping records that ensure your company is compliant with tax laws. Some of the typical duties related to bookkeeping for startups would include:
- Data entry of records related to financial transactions
- Tracking expenses to understand how cash flows in and out of the company
- Managing invoices and receipts to ensure you’re being paid and that you’re honouring your obligations
- Processing payroll if you have staff
- Ensuring legal compliance for things like tax filing for startups and any reporting you are obliged to provide
- Preparing bank documents for obtaining loans
- Creating reports that typically include income statements, cash flow statements, and balance sheets
How To Set Up Simple Bookkeeping For A Small Startup Business
You have two choices to manage simple bookkeeping for your startup:
1. Manual Bookkeeping
If you’re in the early stages, bookkeeping isn’t quite as painful to manage manually. Just keep in mind you’ll eventually have to transition to software as you grow. Manual transaction recording requires the following:
- Decide how you want to record everything, which would typically be using something like an Excel spreadsheet
- Set up a filing system that allows you to identify, organize, and save your records for money owed, spent, and coming in
- Be diligent in recording all your transactions at least weekly, being careful to double-check your entries to maintain accurate records
- Set up a time to post entries to your general ledger
- Make sure your accounts balance and find your mistakes right away when they don’t
- Create financial statements each month, including your profit and loss statement, cash flow statement and balance sheets
- Close your books each period
- Review your reports so you can keep an eye on cash flow
2. Accounting Software
Accounting software records transactions and automates accounting processes, making life a lot easier. There is still data entry involved but you save yourself a lot of time and effort, other than the upfront time required to set up the software.
The main difference here is that you’ll need to choose your accounting software and set up your account information such as your bank accounts and loans, input customer/vendor information, etc.
From there you’re managing the same basics of startup accounting as those done manually, but with fewer hassles.
The Things You Need To Know: Accounting vs. Bookkeeping
Accounting has two sides: the bookkeeping side that is more about accurate record-keeping, and the accounting side that is more about getting a handle on your financial health. While bookkeeping does involve some analysis of your reports, it focuses on tracking and maintaining your day-to-day transactions, so you know where your money is, down to the last cent. Bookkeeping also helps keep you organized when tax time comes around, including GST, income, and payroll.
Accounting provides the financial oversight you need to run your business so you can evaluate performance based on the data you record in your bookkeeping. You need to understand complex financial data to master accounting, which can pose a problem if you’re not a numbers whiz, or don’t know how to identify things such as liabilities and cash flow problems. From a tax standpoint, the accounting side allows you to leverage tax breaks and write-offs to reduce your tax burden.
Bookkeeping Shortcuts For Startups
There are three main areas you should focus on to make life easier with startup bookkeeping:
1. Create a manageable bookkeeping schedule
Set aside accounting time as part of your operational practices so you avoid long gaps that lead to disorganization and finding out too late when you have a problem. Your duties should include keeping track of daily transactions, reconciling accounts and transactions, addressing discrepancies, accurate data entry, and keeping on top of bill payments.
2. Understand cash flow
Track your income and expenditures based on:
- Sales
- Taxes
- Cash
- Invoices (incoming)
- Bills
- Bank transactions in and out
- Debt
- The types of fees and interest you’re paying
Whether done manually or using an accounting dashboard, you need to keep on top of these cash flow items to remain efficient and in touch with your finances.
3. Review your reports
Accounting software makes this easier as it will automate financial reporting, so you always know where you stand. Proactively reviewing your financial health is crucial to making smart business decisions to remain sustainable and scalable.
Know When It’s Time To Outsource Accounting
We guarantee the time will come when you can’t manage accounting on your own! Here are the signs:
- It’s taking a lot of time to tend to your books, which is taking away from managing the core functions of the business
- Things are starting to fall through the cracks both accounting-wise and business-wise
- You’ve reached more than 150 transactions a month, which is making it hard to track
- Growing transactions are posing inventory or supply-chasing issues that can negatively impact customer experience
- You’re falling behind on paying your invoices, even though you have the money to cover them
- You’re missing critical tax deadlines, whether it’s GST, payroll, or income
- You’re not tracking your Cost of Goods Sold (COGS), so you can’t grasp your profit margins accurately
- You’ve lost sight of your cash flow, so you can’t make smart decisions
- Your last tax season was disastrous with late penalties, the highest balance owed yet, and scrambling like crazy trying to get your records in order
These signs all point to the need to outsource your bookkeeping or seek guidance in accounting for startups from an accountant or fractional CFO. It doesn’t hurt to discuss your needs with a team of professionals to help get your finances on track so you can achieve your growth goals.
Call Intrepidium today at 778-800-7976 or click here to schedule a consultation to discuss accounting for your startup business.
