Accounting for startup growth is often viewed in the rearview mirror for the business, but instead it should be considered a driving factor.
It’s something to keep track of profitability and cash or simply a tool to ensure regulatory compliance. They see accounting as a basic requirement to be met, not as a tool that can be used to grow their business.
But that’s not the whole story. Accounting can also be an indispensable tool to help your startup prepare for the future.
Here’s how you can use accounting to drive startup growth.
Build Out a Strong Tech Stack
The foundation of your accounting system will be a strong tech stack made up of tools that make managing your finances easier.
Ideally, each tool in your tech stack will integrate together, ensuring accuracy, efficiency, and accessibility.
Virtually everything that’s done manually for your finances can be automated. Here are a few examples:
- Bookkeeping
- With the help of QuickBooks Online, your books can be accessed anywhere and you don’t have to worry about tracking income and expenses, the tool does it for you.
- Payroll
- Gusto is a favored payroll tool. It automates almost the entire HR process.
- Payments
- You can easily manage your accounts payable and receivable with the help of bill.com. It syncs with top bookkeeping software to reconcile your accounts as well.
- Equity management
- Carta lets you manage your cap tables, valuations, investments, and equity plans.
There are plenty of other tools you can use to build your tech stack, but these will help you lay the strong foundation needed for your growing startup.
Create a Rolling Forecast
A growing startup needs to see where it’s going, and a good forecasting process allows you to peer into the future.
But forecasting isn’t about making up numbers. It’s about defining your expectations and making better decisions.
Many young companies only forecast once a year or at most once a quarter. However, a monthly 3-, 6-, or 12-month rolling forecast is more effective. You’ll be operating from the latest assumptions and can better steer the profitability of the business.
Consistently updating your forecast also enables more accurate predictions. You’re constantly improving the process by learning what works and what doesn’t. You’ll quickly see which assumptions are valid and what metrics are easy to predict.
Don’t forget to forecast your cash as well. For a fledgling startup, closely monitoring cash flow is essential for preventing bottlenecks and critical situations.
Build a Detailed Budget
Like a rolling forecast, budgeting is also about planning the future. The process of building your budget for the year gives company management a chance to make decisions in advance about how to allocate limited resources.
The gold standard is a detailed, driver-based budget. In a driver-based budget, the financials are linked to key drivers. Changing one variable can cause a cascade of effects throughout the entire model.
Unfortunately, we can’t know in advance how the future will be. Budgeting for a few scenarios can provide extra comfort for a changing economy.
With the right tools, this scenario modeling can be pretty straightforward, and you’ll be ready for anything.
Virtual CFO Services
Small and large companies alike would benefit from a CFO or a CFO’s services.
The advice a professional CFO provides, whether for developing and implementing financial systems or assistance with reporting, planning, and forecasting, is invaluable.
A good CFO will help you define the company’s direction and how to get there.
Although getting things right in the beginning is essential for securing your company’s long-term goals, hiring a dedicated, in-house CFO can be out of reach for an early-stage company. A full-time CFO’s package can start in the $180k range.
Fortunately, there’s another option.
Engaging the services of a virtual CFO can be an excellent alternative. You’ll only pay for the services you need, which is much more realizable for an early-stage startup.
Grow Your Startup with Growth-Focused Accounting
Indeed, many view accounting merely as a requirement for maintaining compliance and filing taxes. But there’s much more to how accounting can influence your startup.
Audits, forecasting, budgets, and CFO services are significant aspects of growth-focused accounting. These can act as levers to fuel your business’s success with the right partner.
However, on your own, you might struggle to implement these tools well. Here’s where an experienced partner can help.
Founder’s CPA has a team of startup-focused accounting and finance professionals. Together, we can make sure your startup is on the right path from a financial perspective.
Set up a free consultation with our expert team if you’re ready to start taking more control of your startup’s finances. Your company will benefit from a solid financial basis no matter where you are in the process.
