Startup India is becoming a reality with new entrepreneurs emerging from many towns and cities across the country. With thousands of businesses being set up in India every day, entrepreneurship is the newest lifestyle aspiration for many Indians.
But as the number of budding businesses increases, so does the competition. This means that access to funds (whether its business loans or equity investment) becomes harder and harder for new businesses.
In such a situation, bootstrapping your business makes a lot of sense. Bootstrapping means you start your business with your own savings and then use the cash flow generated by the operations to grow the business. Bootstrapping is one of the best ways to build a business that is lean and financially sustainable.
At the same time, businesses that are bootstrapped have a constant shortage of resources, whether it’s financial or manpower. In such a scenario, auxiliary functions of the business like accounting tend to get ignored.
But in a country like India with ample legal and financial regulations, ignoring bookkeeping and accounting can be lethal for a young business. From huge penalties, legal cases to problems during future fundraising, companies often pay a very heavy price for poor accounting practices. Especially in the case of a bootstrapped business, where cash flow is king, ignore accounting and bookkeeping can mean the difference between life and death.
Here are the three key accounting and bookkeeping tips to keep in mind if you are bootstrapping your business:
#Do Not Ignore Accounting In the Beginning
In the early days of a business, there seem to be a million different tasks, all of which seem important. From acquiring your first customer to hiring people to customer service, all tasks demand your attention.
At this point, accounting seems like a low priority task and often gets ignored, especially as most entrepreneurs are not from an accounting background themselves. You end up making all kinds of rookie mistakes like not having receipts for transactions and conducting your personal and business transactions from the same account.
6 to 12 months down the line, you come across some regulatory hurdle and then you realize that you none of your transactions have been documented properly. And then you end up spending way too much time and energy going back in time to remember and rectify your transactions.
This is why it’s important to be aware that proper bookkeeping is a critical part of your business and should be done meticulously from Day 1!
#Outsource Your Accounting
This cannot be overemphasized enough. As a bootstrapped business owner, you may feel that you don’t want to spend excess money on an auxiliary function like accounting and can handle it yourself. But there are three reasons why outsourcing your accounting function, in the beginning, is not just desirable but practically mandatory:
1) Accounting is a very specialized field. There are many rules and compliances and there is no way a layperson can keep track of all of them. And the penalty for non-compliances is huge. Hence, accounting is best left to an expert.
2)As an entrepreneur, your focus should be on the core business such as marketing and customer satisfaction. So choose to keep accounting out of your concern by handing it over to a professional.
3) In the early stages of the business, hiring full-time accountants is very expensive. If you spend less, you will get inexperienced accountants. Plus you won’t have too many transactions in the initial days and won’t need full-time staff. Outsourcing your accounting works perfectly in this scenario.
A good outsourced agency will use the latest accounting software to maintain your accounts. This will ensure that your accounts are maintained in an optimal way and you can even generate MIS reports when required. This kind of data will help you make insightful business decisions.
Make sure you outsource your accounting to an expert company which knows what they’re doing and have handled accounts for similar businesses before.
#Regular Review and Monitoring
Even after outsourcing your accounting, you cannot sit back and relax. However good an accounting firm is, at the end of the day the record of transactions (bills, receipts, etc) has to be maintained by you. Do make sure that you are sharing these records with your accountant on a weekly basis.
Also, set up regular times (usually once a month) to go over the books with your accounting team. This will help you check whether everything is being maintained properly. Make sure you understand from your accountant what taxes and other government fees need to be paid and when. It’s absolutely critical to make these payments on time to avoid hefty penalties.
Apart from regular monitoring, it is also good to do unscheduled reviews of the books once in a while. This will keep your accounting firm on its toes and also satisfy you that everything is in order.
Partner With the Best Today!
You may not realize it when you start out, but proper accounting practices are a necessary evil in every business. The more you avoid it or do it inefficiently, the more you suffer later. With these accounting and bookkeeping tips, you can ensure that the accounting aspect of your business doesn’t get neglected.
You can also avail the services of Paysquare, who are experts in this arena coming with varied reports and plentiful added advantages. So go on and partner with the best service provider in town today!