This is our third post in the blog series titled “Accounting Basics for Indian Startups”. Let’s crisply summarize a few tips and tricks that all entrepreneurs should keep in mind when looking to create sound financial and accounting systems within their organisation.
- Always, we repeat, always, record your transactions real time. We can’t begin to tell you the countless number of benefits maintaining this practice has. The most obvious benefit being that it minimizes the scope for error to a very large extent.
- Follow up the above mentioned practice by also doing all your documentation and invoices real time for the same reason.
- Assess when you need to get an accounting/finance resource onboard and get one the second you think the time is right (no procrastinating, please).
- Have a clear cut picture of what kind of a job you want your resource to do. For example, some entrepreneurs do their invoicing themselves and some prefer getting it done by an external resource. Remember, this isn’t a decision you should make purely based on the cost, as time plays a much more important role here. You shouldn’t waste time invoicing if your time can be better utilized on another aspect of your business.
- Once you have collected a few months worth of data, look towards implementing an accounting software, as it would make your life much easier. Once you have this in place, think about the kind of reports you need from the data you will be entering into the accounting system. Gain insights into your business and audience with the help of these reports. There are two ways of going about this:
- One, approach a professional firm that will holistically manage all your finances and ideally, when the time comes, they themselves will approach you when they think you need a full time, in-house accountant with whom they will deal with directly. Hence, minimizing the load of your chest.
- Two, you should have a different person who is your auditor and a different person who’s managing your day to day jobs. So, the daily accountant will report to the CA you eventually get onboard.
Another important thing to keep in mind…
Your resource should give you data and reports that aid you in decision making. So, when you’ve hired somebody make sure they understand your business and that they give you the exact reports that you want. People talk about balance sheets, and profit and loss accounts. However, if you want to get a report on a certain type of customer or TG and you do not have a marketing team in place, then your only play is to leverage your accountant to create these insightful reports for you. You need to try and find someone whose thought process isn’t like that of a traditional accountant but someone who understands business and what it means to be an entrepreneur.
Once you get an accountant on board, it doesn’t mean your job is done…
You cannot leave everything up to the accountant and expect him to feel for your company as strongly as you do. You must be aware of everything from your list of compliances to where your money is going. This is the bare minimum expected of you as a founder! If you are going to think about scaling up, hiring and opening new departments in the future, you’ll have to be aware of your finances in order to know whether or not it is viable for you to do so.
You can end up on either side of the coin…
One, where seven months down the line you realise that you haven’t recorded anything and suddenly you need to make up for lost time. Or two, if you’ve consciously decided that you know your numbers and so can afford to let things be initially, till you hire somebody. However, this case in point only works if you are absolutely thorough with your holistic numbers.
This was the final post in the series ‘Accounting Basics for Indian Startups’, we hope you enjoyed them and learnt some useful tips. In case you missed the previous posts, you can view Part -I and Part-II. Keep coming back to this space to learn about everything pertaining to startups and the Indian startup ecosystem.
*Thoughts and words by Sambhav Mehrotra, VP – Finance, 91springboard.