I started my business in 2009 with little to no capital, and have since gone through a number of roller coaster rides along my entrepreneurial journey. Six years may not be a substantial amount of time for start-up veterans, but it is enough to understand the nature of entrepreneurship.
All in all, there have been a fair share of lows and highs in my entrepreneurial pursuit, so I can thoroughly understand some of the challenges that start-ups in Canberra face. As an entrepreneur who is trained in accounting, I would like to take this opportunity to share my golden rules of financial management for start-ups.
These are some common mistakes start-ups make:
- They fail to realise how important financial management is. Start-ups with poor financial management tend to suffer from poor cash flow and profit margins, ineffective debtor control, and an inability to meet their business’ commitments;
- They are unaware of alternative solutions such as hiring an accountant or implementing an accounting system. If crunching the numbers is not your strength, either hire or outsource to an accountant or bookkeeper who will deliver regular and reliable information and advice that you can use to manage your financial position;
- While many start-ups are in the field of IT, it is surprising how backward their accounting systems are. Stacks of receipts, manual ledger books, simple Excel sheets, messy financial transactions and reports, and overdue BAS and tax returns are common among start-ups with bad financial management;
- Start-ups tend to focus on their products, ideas, and clients, often neglecting the fundamentals of their business. I have never seen a successful business that does not have strong financial management.
After years of working with start-ups and other small businesses, I have accumulated a wealth of experience designing a sustainable and affordable accounting system. Here are some tips to avoid making those mistakes above:
- A good accounting system is a good return on investment. If you invest $50/month to use online accounting softwares such as Xero or Intuit QBO, it will save you at least $50/month in bookkeeping costs as well as your time. These savings will be crucial for further growth of your business;
- Don’t only start raising funds or getting loans when your business is running out of cash. Plan ahead and have good financial controls in place;
- Technology is the key driver of a good financial system. If your accountant suggests that you record everything in an Excel spreadsheet, this is no longer sufficient for doing business in the 21st century. The more automation you adopt for your accounting system, the more savings and accuracy you gain;
- Start-ups need to start working on the business, not in the business. If you can’t afford to have a giant financial management system with a qualified CFO like Google and Apple, then outsourcing would be the best option.
Should you be interested to outsource your accounting and financial system, give us a call at (02) 6169 5196. Tailored Accounts is the accounting department of Canberra and the preferred choice among small businesses.
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