One or more investors and entrepreneurs often control startups. This is why most of the freshly started businesses are looking to sell a new product or service quickly and onboard more investments. The founder’s fund is brought to set up a startup initially. They spend a lot of time and money on research. Young entrepreneurs mostly engage in the process. As startups don’t have a strong history initially, they must keep financial records of every business activity. This is what brings us to understand the value of accounting and bookkeeping services for startups.
Bookkeeping involves recording the business’s method of financial transactions, including sales, purchases, receipts, payments, etc. It is part of a robust accounting ecosystem that documents the company’s financial affairs as journal entries.
It is merely a way to enter data into the excel accounting system. Accurate and full bookkeeping thus becomes a significant information source for all forms of enterprise, including startups.
However, bookkeeping services are often not an essential activity for startups in the initial phase of their operations. Primarily because it is falsely perceived as an activity that costs extra, and thereby cutting corners would often mean neglecting bookkeeping.
Many startups often find themselves trapped in some problems related to the finances of compliances. The ideal way out is to ensure keeping standard accounting and bookkeeping practices in place. Here’s why:
#1. Better growth monitoring:
For startups, monitoring their growth is critical as they are in their initial phase of operations and spending a significant amount of time and money. Outsourcing bookkeeping services, therefore offers information on profit and development. A company will only grow if you evaluate growth through the financial records given only through correct bookkeeping.
#2. Timeless preparation of financial reports:
The preparation of financial statements (balance sheet, profit and loss account, cash flow, and fund flow statements) is made simple with record keeping.
#3. Ordered Accounts:
An ordered database of financial transactions performed by startups plays a vital role in monitoring their incomes and expenditures.
#4. Future budget and action planning:
Bookkeeping is about preparing structured accounts that allow startups to prepare the future budget. Financial transactions become transparent when proper accounts are held for each date. Any money earned or spent is obvious. Startups schedule their resources accordingly for an action plan.
#5. Better decisions and analysis by startup management:
When startups opt for bookkeeping services, they analyze financial data such as revenue, expenditures, profit margin, revenues, buying, seller’s information, tax, etc. They evaluate these data and conclude that they benefit. You can adapt quickly according to market demand if you know your financial position.
#6. Better market overview:
Maintaining books of accounts offers an overview of the organization from time to time so that startups can assess their current situation.
#7. A proper audit of accounts:
Bookkeeping becomes important during the audit of the accounts, as it provides the auditor with consistent and periodic data. The auditor’s questions can also be answered correctly if the auditee keeps accurate account books. This protects the auditor from picking out any business concerns and thereby increasing the investor’s trust.
#8. Help to get bank loans:
It is easier for startups to apply for banks or financial institutions’ loans, as they can depend on books of account prepared and re-payments can be made in compliance with the time constraints.
#9. Better management of the financial sector:
Monitoring books offer better responses to questions like where the company spends money, which it pays for, dues outstanding, payments outstanding, etc. It also allows startups to handle their finances better.
Any company has to pay income taxes and indirect taxes, including GST registration online in India. You must file tax returns and GST returns on due dates. Comprehensive and reliable records on exact benefit, sales, purchase, etc. are needed. In this case, startups are provided with account information, and bookkeeping helps estimate the two types of taxes. The accounts maintained also helps evaluate the financial transactions that can be used for tax planning in detail.
#11. Legal requirement:
There is mandatory compliance around bookkeeping, depending on your business structure. Ensure this to keep legal issues at bay.
#12. Better reporting to account users (i.e., stakeholders):
Includes owners, creditors, debtors, etc. You may want to know from time to time the financial state of the startup. External and internal parties like vendors and employees, respectively, both want reliable and full details. Bookkeeping services in Perth provide top management with ready-made accounts to make better data-backed decisions.
#13. Organizational Objectives Preparation:
To accomplish short and long-term goals, startups must concentrate on their plans and control their progress. This can only be achieved if they are expert in bookkeeping and accounting.
#14. No hassle for company owners:
When startups choose good bookkeeping services, they can focus on their plans and priorities instead of managing books. Their function is limited to checking and evaluating the outcomes of financial transactions.
#15. Streamline other departments:
While this may appear to be an intangible benefit, it is still an important one for startups. Most other departments will need to set up spending limits for a marketing budget, sales budget, operations, etc. This way, managing the books of accounts can help identify each departmental needs and provide it with the necessary funding for sustainable growth.
Timely bookkeeping is the best way to keep track of the organisation’s financial efficiency. It helps management to make informed decisions knowing how the business performs and what corrective steps are needed. Startups should also not underestimate bookkeeping value, as it is a measure of financial success in the industry. The cost of bookkeeping is, therefore, not a burden, and bookkeeping services should be selected.