Earlier this year, we teed up some accounting tips to help set you up for success. Bookkeeping tips, then, might seem a little redundant. But there’s a key difference. Accounting requires some level of analysis of your company’s financial situation. Bookkeeping focuses solely on keeping track of your financial data.
In some ways, that makes it simpler. But it doesn’t make it any less important. Solid bookkeeping is the backbone of any company’s financial success.
To help there, our team came up with four tips you can use in 2024 to optimize your bookkeeping.
#1: Make sure you’re tracking everything
In your company’s early days, it might feel like it’s not a big deal if a few things slip through the cracks. If you take a client out to coffee but forget to save the receipt, no sweat — right?
When your company’s small, sure, keeping up with its expenses isn’t too daunting, even if you’re missing some recordkeeping details. You can probably sort things out from credit card and bank statements. But this is no way to live. Why? Because as you grow, everything scales up with you.
That includes the quantity and variety of expenses. If you don’t build in processes (and habits) for tracking expenses now, it’s only going to get more challenging to implement them down the road.
Good bookkeeping hinges on having clarity into every penny that’s coming into and leaving your business. Grouping expenses and receivables into categories enables better accounting, too.
In 2024, there’s no reason to do any of this manually. Setting up a bookkeeping software (something like QuickBooks Online or Xero) and connecting all relevant accounts to it automates your tracking. The right tool can even categorize inflows and outflows for you, too.
#2: Develop and stick to a schedule
While a good bookkeeping software makes life a lot easier here, you still need to stay involved in your financial details. Make it a point to look over your data on a regular basis.
For example, you might make a plan to:
- Dedicate 15 minutes every Friday to quickly scanning your account statements
- Sit down once a month to go through your balance sheet, getting a good handle on your assets, liabilities, and equity
- Schedule a quarterly meeting with your bookkeeper or doing a quarterly deep dive yourself
Carving out this time now — and sticking with it — means you keep a finger on the pulse of your company’s finances. If you start to burn through cash faster than expected, for example, these regular check-ins mean you’ll catch it early.
Similarly, regular review of your books allows you to make any required adjustments. Maybe you expected an invoice to be paid at a certain date and the customer still hasn’t handed over the money. If you had already assumed that money was in the bank, becoming aware of it allows you to take the necessary steps to pivot (e.g., doubling down on collection efforts, transferring money from another account to make up for a shortage before a bill hits).
#3: Be proactive about receivables
On a similar note, good bookkeeping allows you to stay on top of the money you should have coming in. Getting paid as fast and frequently as possible sets your company up for success. But startups often don’t have a dedicated A/R department.
That’s an issue because the longer your invoices are outstanding, the harder it gets to collect the money. In fact, generally, if an invoice hits the six-month mark, you’ll often need to go through the court or collections to get it.
Long story short, in the busyness of growing your business, you don’t want to let outstanding invoices slip through the cracks.
You might think you’d never let this happen, but startups operating on a subscription model are particularly susceptible to this issue. If a customer has signed up to auto-renew their annual subscription, you might assume you don’t need to worry. But everything from the card they have on file expiring to them quietly canceling auto-renew could pose a problem.
To get proactive about your receivables, implement three things:
- Send invoices immediately after services are rendered or products are sold.
- Give customers multiple payment options (e.g., cash, electronic fund transfers, credit cards) to make it easy for them to settle up with you.
- Regularly follow up with invoices approaching the due date, and follow up as frequently as possible (e.g., daily) with customers who have outstanding balances.
#4: Know when it’s time to hire someone
Many startup founders operate as their companies’ financial function in the early days. That makes sense when you need to be as lean as possible. But as you grow, make it an early priority to bring on bookkeeping help. Founders who don’t run into one of two problems. They either sink too much time into this crucial task, or they push it to the back-burner where issues like outstanding invoices and missed expense tracking start to accumulate.
With the tax deadline behind us, you might be feeling relaxed after a crunch. Don’t rest on your laurels, though. If this last tax season was stressful for you, now’s the opportunity to make some changes. Ask yourself: is it time to hire a bookkeeper? Doing so can free up your time to focus on core business activities while also getting a specialist in your corner.
If you do think your company would benefit from a pro here, you have another decision to make. Do you want to outsource your bookkeeping, or are you ready for an in-house hire? Outsourcing is generally more affordable, so a lot of startups start there.
If you outsource, keep tabs on how things are going. Over time, you might decide that your business is ready to scale up its finance function again by hiring an internal bookkeeper, even one who’s part-time.
You have options here. Whether you’re handling bookkeeping yourself, you’re working with an outside bookkeeper, or you’re building this function in-house, these tips can help. Putting in the work to make sure every penny gets tracked and carving out time to look over your financial data on a regular basis sets you up for success. Making it a point to collect the money you’re owed extends your runway. Yes, all of this requires work, but we can help.
To talk with our team of accountants and bookkeepers who specialize in supporting tech startups, reach out today.