Accounting for startup growth

When you’re just starting out, it’s easy and exciting to put all of your time and energy into building your business. But you also need to make a living, so how can you live the dream and ensure your business finances are well managed?

For startups, managing cashflow and keeping a close eye on finances is absolutely vital to success. It’s a core part of running a business. In fact, accounting for startups is so important that many small businesses with great products and plenty of customers fail each year just because they don’t get a handle on their finances. 

“You cannot be in control of your business if you don’t know what’s going on with your numbers – you’re essentially flying blind.”

Clemi Hardie,
Founder (and Head of Pencils) at Noodle Live

This is common sense but many first-time entrepreneurs shy away from anything to do with accounts, either because they are not well versed in the world of accounting (if this is you, you are not alone!), or because they wrongly believe that the numbers will look after themselves. Others hope that the accountant they have hired to do the end-of-year tax returns will also keep a watch over the health of their cashflow (they won’t, unless you pay them extra).

Learn about cashflow

So, there’s no other way to put it – getting to grips with your accounts and cashflow is your job. Cashflow is the lifeblood of all businesses and you simply must take control of it right from the start. 

You need to be your own finance team until you can afford to hire one. Otherwise, it’s hard to know what spending adjustments need to be made, whether you need to follow up on your receivables or payables and if, overall, month after month you will have enough cash to carry on.

Spreadsheets aren't a long-term solution

Many startups start their ‘accounting’ with a pen and paper, and a shoebox of receipts. Later, they progress to using Excel spreadsheets – and often leave it at that. But while spreadsheets can perform many tasks, it is of very limited use in the hands of those lacking the necessary expertise.

Let’s face it, setting up a spreadsheet that will meet all your startup accounting needs requires a lot of thought and planning. You need to know exactly how you are going to use the data before you start, because you might not be able to reconfigure it later. Spreadsheets are error-prone too (imagine the flow-on effect for your business if you enter £10,000 instead of £1,000), especially when more than one person uses the spreadsheet. It’s also virtually impossible to keep track of who’s making the changes.

“It took forever to set up things like expense reports and invoice tracking in Excel. It was a relief to switch to automated cloud software.”

Ed Ward,
Founder of Veglo 

Why your startup needs cloud software

Cloud accounting software can slash the amount of time and effort put into managing accounting for startups, so you can focus on growing your business rather than struggling to get financial insight. And the real beauty of it is that you don’t need to be a financial whiz to use it. 

Because everything is done online, you can run your business and have a real-time view of your finances from anywhere, anytime, as long as there’s internet access. And don’t worry, your data is completely secure even if your device is lost or stolen. Cloud systems are more collaborative than traditional desktop accounting systems. Your accountant will be able to step in seamlessly when you’re ready to bring them on board.

“I like that our accountant can log in to our system at any time to see what we've done, and add journals and adjustments.”

Clemi Hardie,
Founder (and Head of Pencils) at Noodle Live

Financial health of your business at your fingertips

There are robust reporting tools within accounting software and you can see all your bank balances, invoices, bills and expense claims on one screen, 24/7. As well as payment services like PayPal, Xero integrates with hundreds of other add-on business applications so that you can easily sync your data, and run your business as efficiently as possible. Obviously, all this financial information at your fingertips will only be meaningful if you regularly review and act on it.

For a startup, it’s very important to get into the habit of setting aside a regular time to review your numbers each and every week. It may be a struggle at first if you’re not used to it, but making financial management part of your routine pays off in the long run. Only then are you able to react to any potential problems with cashflow, such as non-paying customers.

Achieving your long-term goals

Cloud accounting software can give you the insight you need to make informed decisions about where you want your business to be in one, three, five years’ time and what you need to do to get there.

If you only keep manual records of your expenses and income or use a rudimentary spreadsheet to record transactions, you can never say with confidence that you are making enough to stay in business beyond the next few months.

“Xero makes it easy to see if we’re hitting our revenue targets and, if not, to plot what adjustments we need to make to achieve the growth we want.”

Emma Lomax,
Founder of Emma Lomax London 

The right software can help secure funding

To achieve growth, you may also have to apply for additional funding at some stage. You can use accounting software to prepare charts and forecasts of your costs and revenue to show potential lenders that you have a solid business plan in place, and that you'll be able to pay them back.

Now, as bank loans continue to be difficult to secure, alternative non-bank lenders are fast becoming the primary providers of loans to startups and small businesses. If you use cloud accounting software, it can make the loan application process easy and straightforward.

The software that saves you money

Last but not least, cloud accounting software can significantly reduce your remote accountant’s annual fee. And this is a big benefit, as startups and small businesses have to keep a close eye on their budgets.

Cashflow is particularly important when you’re starting out, so you need to be on top of it at all times. Otherwise, you’re unlikely to achieve your business goals and grow your startup to the next level. By giving you real-time control over your finances, smart cloud accounting software is just the right foundation from which to grow your new venture. 

Accounting for startup growth

Download the full guide 

Download pdf

Get your free Startup Kit

Step by step in an eBook and email course, you’ll learn how to build and grow your own business, from developing an idea on a napkin to managing cashflow.

Thanks. Download your Startup Kit eBook here. Check your inbox to start your free email course.