Start-up businesses are growth focused. They are not professional bookkeepers, but they do every bit they can to keep their finances organized.
The issue is, when a start-up grows in terms of size & complexity, a simple Excel spreadsheet is no longer adequate to keep the books organized. And inept bookkeeping practices don’t just cause problems during tax or audit, but poor financial record keeping can also cause long-term headaches as your organization grows.
Sub-standard financial record keeping can also make you miss out on hidden growth opportunities. So how do you know when it is time to stop bootstrapping your start-up financial record keeping? If the tell-tale signs mentioned below sound familiar, then it is time to take financial management seriously.
You aren’t maintaining adequate financial records:
Good bookkeeping implicates maintaining all the financial transaction records of your start-up for a minimum of 3 years or longer in some scenarios. Both the financial auditors & IRS will ask you to validate each transaction on the general ledger. You could miss out tax deduction benefits in the event you fail to do so.
You aren’t doing a bank reconciliation quickly after month-end:
Because your bank statement gives 3rd party authentication of your activity, every business needs to reconcile the bank statement to the accounting records quickly after month-end. It’s recommended to do a reconciliation once the bank statement is available online.
This mayn’t sound like the best use of time for a start-up, but it is incredibly critical. If you fail to reconcile the books to your bank account on time, your financial statements might be wrong.
You are facing cash flow issues:
There is an issue with cash flow, if your bank account is low on funds, but your financial statements show you are earning money. There are many reasons for negative cash flow, and the major one is no doubt poorly performed bookkeeping.
Irrespective of the reason behind cash flow issues, all entrepreneurs have to stay on top of cash flow. Poorly handled cash flow can cause:
- Inaccuracies around burn rate & runway.
- Incapability to make payroll or cover liabilities
- Loss of investor interest on the off chance you fail the acid-test ratio.
Conclusion:Knowing when to start outsourcing financial record keeping services is part of an upbeat business management plan that sets your foundation for future growth. If you are looking for the right bookkeeping service for your business, do give Escrow Consulting Group a call. We are certified to make use of prominent accounting software like Quickbooks, Xero, Sage one, Zoho books, Saasu, Bill.com, Hubdoc, and more.