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Messy Bookkeeping? How to Clean Up Your Financial Processes

For a lot of startup business owners, the company’s bookkeeping can feel like a financial underwear drawer. You know what’s in there and where to find things, but it’s usually a mess and can be embarrassing if someone takes a look. It doesn’t (and shouldn’t) have to be like that! The goal for your bookkeeping is to produce clean, organized, timely financial records that help you make better decisions for the future of your company. If your financial underwear drawer needs to be cleaned up, we have a few suggestions for where to start.

What’s the Big Deal with Organized Bookkeeping?

First things first. Why does it matter to focus on the bookkeeping? You know you should, but what’s the value? Plenty.

Disorganized bookkeeping = lost money, missed opportunities and potential fines and penalties in worst case scenarios. There isn’t reliable data to make forward-looking predictions. Lenders and investors can’t trust the accuracy. The business is going somewhere, but it’s impossible to steer the ship in the best direction.

No one starts out intending to maintain messy books; over time, it’s easy to procrastinate, rely on less experienced staff or consultants, and overlook small transactions. The problem is, when these bad habits turn into regular, inefficient processes, it can really impact the startup’s financial health.

Where to Start

When startup owners realize that their company’s financial picture is not as clear as it could be, there are a few key steps to take early on to make the process easier and more productive.

The best place to start is by hiring a professional bookkeeper. As startups grow, they need a financial team that can grow with them. Too often, when payroll, accounts payable or accounts receivable are managed in-house, the process of managing increasingly complex books falls on an employee who just may not understand what to do with all the information. Spend the money, hire the bookkeeper and take control over the startup’s financial future.

Get on the cloud. Integrate accounting, bookkeeping and even payroll to cloud-based and AI-driven software. The integrations will improve existing processes, save time and sync the company’s financial information in real-time. In-app dashboards can be viewed on a phone, computer or tablet from anywhere. This often unlocks a whole new world for startups who have been used to manual, in-house bookkeeping.

Standardize the financial reporting and reconciliation processes. This might sound boring – to us, it’s exciting stuff – but it’s crucial to clean up messy, disorganized books and records. Standardization also paves the way for automation, which is another game changer.

Standardized processes can start with aging reports, accounts receivable, the balance sheet and period reporting. From there, document, document, document. Make sure everyone involved is on the same page.

Once key processes are standardized and documented, look at the internal controls. Every business is at risk for fraud and cybersecurity breaches. Strong internal controls are the best offensive strategy for effective risk management. Your accountant can help you analyze gaps and decide how to implement controls.

Potential Accounting Mistakes

A few other mistakes startups make that can stall growth are:

  • Comingling personal and business accounts

  • Forgetting important tax deadlines

  • Losing or misplacing documents and records

  • Miscoding transactions

If the first point above describes your startup, separate the business and personal accounts now! And while hiring an experienced bookkeeper can completely mitigate the second and third points, it’s also easy to set reminders on your calendar in advance of dates like when estimated taxes, payroll deposits and other tax filings are due. And miscoding transactions is the hallmark characteristic of an inexperienced, yet well-meaning, employee.

Would you like to see if your startup’s financial underwear drawer is as organized as it could be? Send us a message to talk through your situation. For additional resources, check out bookkeeping and clean up.

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