8 Rules of Startup Finance (Investors will look for #4)
In the early stages of your company, it can be tempting for you as a founder to want to handle all the financial aspects of your business. From payroll to accounting and everything in between, you want to have control and know what's going on with your growing business at all times. In reality, though, the time you spend on these tasks is taking away from the time and resources you spend on other important aspects of growing your business. With this is mind, it's a good idea to set up an internal finance and accounting team from the very beginning
1. Like A Good Suit, Your Solution Should Be Tailored For Your BusinessOf course, you don't want just any finance and accounting team for your business. One of the biggest mistakes founders tend to make is looking for a "white whale" that can handle all of their finance and/or accounting needs in a general, universal way with incredibly low rates. The truth is that you'll need to find professionals who are tailored to your company's specific needs, and this can be time consuming. You'll essentially be building a team—a team that will grow and scale with your business.
2. Start By Solving Your Current And Short-term Financial NeedsThink about it this way. You don't want to hire a full-time senior accountant right off-the-bat to handle all your finance and accounting needs because more than likely, a senior accountant won't be interested in handling smaller and menial accounting tasks for very long without getting bored. On the same token, hiring a junior accountant fresh out of school or a basic bookkeeper for all these tasks may not be ideal because they may not have the experience needed to handle more complex tasks. As an example, consider a company that has a lot of manual billing, accounts payable, and accounts receivable work, but a relatively Iight amount of accounting to complete each month to close its books. In this case, it may make more sense to hire a full-time junior and part-time senior accountant to suit your company's diverse needs.
3. It’s Far More Expensive To Fix Than Get It Right The First TimeFiguring out your finance/accounting needs and tailoring your team as you go will be more cost-effective, and it's always going to be cheaper and easier to get your accounting right the first time, rather than having to go back and fix issues later on. This is especially true when you have investors (or potential investors) that you don't want to look foolish in front of.
4. Delegation Still Requires OversightAs a founder, stepping away from micromanaging every tiny aspect of your company's finances and accounting is a must if you want to focus on growth. At the same time, it's still important to ensure the work being doing is correct as your vendor will not know your business as well as you, particularly as it grows and changes. Are new expenses being categorized accurately, and do the financial statements accurately reflect the business?
5. Always Know Your Financial KPIsIt’s also your fiduciary responsibility to know your business and where it stands from a financial standpoint. For example, you should be able to walk into a meeting and discuss some basic details about your accounting and finance, such as:
- monthly burn
- cash in the bank (and when you’ll run out)