If you are an entrepreneur, your skill set is probably not in accounting. You are a visionary, a risk taker, you have guts, you have passion and you are trying to add value to the world by solving a problem.
But your accounting is important.
In this article, you will learn:
- What is accounting for entrepreneurs and who does it?
- Why accounting is important for entrepreneurs
- What to expect as your business grows
- 3 key takeaways related to accounting for entrepreneurs
Let’s dive in.
What is Accounting for Entrepreneurs and Who Does it?
Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to:
- Oversight agencies
- Leadership teams
- Tax collection entities
We encourage all entrepreneurs to engage in the process of accounting from day one. But the extent depends on the needs of the business and it evolves over time.
Many entrepreneurs that have under $1,000,000 in raised capital or revenue will take the “do it yourself” approach. But Entrepreneurial companies with over $1,000,000 in raised capital or revenue will seek the support of a remote outsourced accountant.
Accounting takes work. There is a setting up of an accounting platform like QuickBooks online. Setting up bank feeds into the platform. Categorizing transactions. Completing all the detailed reconciliations. Creating and executing accounting policies. Yes, we can automate and use A.I. but it still takes work.
The accounting is done with the purpose to produce timely and accurate financial statements to provide you with financial information to make smart decisions to build and grow your business.
Why is Accounting for Entrepreneurs Important?
There are a few different reasons why accounting for entrepreneurs is important.
But most importantly, the accounting will result in having financial statements that will help you access the financial condition of your business. You will be able to use it to ensure you are on track to achieve your goals.
Here are a few other reasons why accounting for entrepreneurs is important:
- IRS – You are going to be required to file an accurate tax return for your business at the end of the year. The accounting that is done will allow you to efficiently and effectively file this tax return with the IRS and keep you out of jail 🙂
- Inventors or Banks – By engaging in the process of accounting you will be able to provide financial information your investors will be asking for, like financial statements to determine the financial health of your business.
- Leadership Teams or Decision makers – These folks are responsible for ensuring the strategic plan is on track and making business decisions. By producing a monthly financial statement from your accounting process, this team will be able to evaluate if the business is on or off track with its financial plan and overall business strategy. If there is no leadership team in place, this information is still very useful to the CEO or business owner. The idea is to use the data to make smart decisions and not just go off your “gut” or how much cash you have in the bank. This is probably the most important reason to engage in accounting for your entrepreneurial business.
What to Expect as the Business Grows?
As your business grows things will get a bit more complicated and your systems process and team will need to evolve.
Initially, your accounting team might just need an accountant. This team member will be focused on more tactical things like running payroll, paying your bills, invoicing your customers, and maintaining your Quickbooks Online.
When your business grows, you are going to need more timely and accurate financial statements. These financials will help you to make smart business decisions. This team member that will be working with you on understanding your financial results is a Controller. They are also responsible for setting processes and policies that will evolve as your business grows.
As your business keeps growing it may require additional funding from an investor or bank. At this point in time, you might need a Chief Financial Officer (CFO). They are the right hand to the CEO or business owner and thinking about the future of the business and helping to provide future visibility in the form of a budget or projection.
At New Economy, we provide a little bit of each to our clients. Since we work with growing Entrepreneurial companies, there is a need for both tactical and strategic support to help the business achieve its goals.
As for Technology, much of it is scalable.
In our experience, there is some relatively inexpensive technology that is supporting businesses doing $5-$10M in revenue or in fundraising.
Here is a bit of the technology stack that we use at New Economy:
- Quickbooks Online or Xero for the accounting platform
- Bill.com for vendor payment and customer invoicing and collections
- Gusto or Rippling for payroll
- Expensify for employee expense reimbursement
- Carta for cap table management
- Jirav for budgeting and projections
There is lots of technology out there and a remote accounting firm like New Economy can help you to determine the right fit for your business.
3 Key Takeaways Related to Accounting for Entrepreneurs
Being an entrepreneur is hard enough. You don’t need to worry about your accounting. You should be focused on building your Company and let us help you gain control of your finances to make smart business decisions.
Here are three key takeaways related to accounting for entrepreneurs:
- No matter where you are in the business lifecycle make sure you have a certain level of accounting in place. If you are under $1M in revenue or funding it might be “DIY”. If it is more consider outsourcing your accounting to a remote accountant.
- Continue to assess the accounting team you have in place. As your business grows, you should be increasing the depth of your accounting team to go from tactical support to more strategic support.
- Leverage your accounting to help you achieve your goals. Your accounting will produce financial statements that will tell you if you are on track to meet your business goals. Use them well to make smart business decisions.
New Economy Team Members are Experts in Accounting for Entrepreneurs
Getting your accounting done and done right is the key to financial peace of mind for you and your business. That’s why our team at New Economy is an excellent partner.
We help entrepreneurs gain control of their finances to make smart decisions to build and grow their business.
Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.