If you hate numbers, or would simply rather do alot of other things besides math, then you are not alone. In fact, that makes you a very normal person! or a cute kitten (I have never seen a cat do accounting, have you?) However, accounting is one of THE most important aspects of starting and operating a successful business.
Business owners you have been warned! It’s easy to get caught up in your clever business idea, the creative energy of designing your website or choosing the perfect name, hiring your first employees, or spending all day on Zoom talking to prospective clients. But if you don’t have a solid understanding of your numbers, then ultimately you are very unlikely to succeed.
This is a year like no other. Whether you are surviving, thriving, or failing: what you gain as an entrepreneur from all these experiences will ultimately come down to your financial clarity.
One-Third of Small Businesses Fail Because They Ignored their Numbers
The Small Business Administration (SBA) put together a list of the top 11 reasons why small businesses to fail. About 1/3 of their listed reasons are related to financial management. They suggest that the number one mistake entrepreneurs make is “believing you can do everything yourself.” This Business Kitty was very prone to that mistake in younger days. Every entrepreneur has a tendency to want to do everything themselves and control everything. Or you worry about money and don’t want to invest it in your business. That pattern can lead you to an unhealthy cycle of doing it all yourself, and not being able to grow or even survive.
Hiring an Accounting Professional
Unless you are an experienced accountant, it is much smarter to hire a professional to set up your financial systems from the get-go. Most reputable bookkeeping and accounting services, such as Atlas Bookkeeping, will spend hours cleaning up your past books in order to do your current financials correctly. You might be pushing off work that you’ll pay for later anyway, or you’ll end up incurring even more costs because bad bookkeeping will always cost you money.
One thing you should ask early in the process: do I need a bookkeeper or an accountant?
What a Bookkeeper can Do
Each startup situation is unique, but most startups can begin with a bookkeeper. Atlas Bookkeeping is not a CPA firm, but given our depth of public company and small business background, we have the expertise to set everything up (and maintain it) to a quality level of a CPA: accrual based and GAAP compliant. We don’t do the work that might be required to have a CPA (such as audits or complex tax work). But we do make it easier for the CPAs to do their work. Overall a bookkeeper can get you going with a good record-keeping system, handle your financial transactions, and produce your financial statements.
What an Accountant can Do
Hiring an accountant makes sense as you are scaling your business to a deeper level of complexity and size, and for CPA-level work such as audits, M&A, IPOs, SPACs, etc. Atlas Bookkeeping collaborates very effectively with accountants, doing the lower level work that they need to do their jobs correctly, at value pricing.
Many entrepreneurs start with a spreadsheet and then hire a bookkeeper or accountant later. Spreadsheets are unable to handle the level of complexity needed for a growing business to support year end tax planning, cash flow, profit and loss, fundraising, or other key needs. If you are tracking your financials on a spreadsheet, or using Quickbooks on a very basic level – it’s a good start but it won’t carry you very far and can create a larger mess for bookkeepers or accountants to clean up later. Even if you can’t afford a monthly service right away, we at Atlas Bookkeeping are glad to set you up for a small fee, and come on board later once you are more established.
Cash vs. Accrual Accounting Methods
There are only two generally accepted accounting methods: cash accounting and accrual accounting. Some small businesses have the option of choosing between these two, while other small businesses (corporations) are legally required to use the accrual method. If you’re required to use the accrual method legally, then you absolutely do not want to do this work yourself unless you are a CPA or trained accountant. But if you are a founder wearing many hats – why weaken your business and your personal energy by taking on too many responsibilities? Let us help you.