More experienced business operators who might very well be working on a brand new start-up probably have an understanding at some level that budgeting can almost never be mentioned in isolation. There has to be an accounting side to proceedings and it usually involves a lot of attention and planning ahead. We’ll explore five financial tips that every start-up or SME should take into account if they want to have a methodical yet easy time dealing with their internal accounting issues.
Pay attention to the importance of budgeting and accounting
Under no circumstances should the importance of budgeting and accounting be downplayed. According to Logan Khan, most often SMEs and start-ups are faced with what is known as a mixture of pure excitement followed by stress that comes with having to take care of the day-to-day financial and accounting dealings of a firm in its early stages. Noted, it can be very easy to neglect the process of keeping the financial records along with a rigorous planning strategy. Perhaps in a bid to avoid this associated risk completely, consider the fact that most businesses that continue to survive and thrive, sometimes owe their survival to their ability to extract an operational methodology as suggested by the numbers around their business proceedings.
There are times when survival and even boosting profitability comes down to a matter of readjusting the budget on account of some clear patterns detected in the financial records kept through the accounting practices.
Formulate a budgeting plan based on sound research and forecasting
A start-up operation is essentially still in the searching phase of business, even if it happens to be operating on the back of a clear opportunity or market gap identified. Further down the line, we have SMEs, whose operational trajectory might lead them to a clear need of adapting to changing market forces. Although it’s important to have a business plan that is to be generally followed as the business goes along, room for some dynamism should be left.
Just as there might be a need for pivots in the manner through which you conduct the core business, there will probably be a corresponding need to dynamically adjust the budget as well. So always keep an eye open for opportunities to change and adjust your budgeting plans as you go along.
The corresponding financial record-keeping in the form of your accounting needs to be dynamic as well, especially given the surrounding changing factors around start-up businesses and growing SMEs. Professionals will definitely need to be roped in and that’s an operational area of your business wherein you don’t want to scrimp.
Start-ups and SMEs often tell a founding story of how the funds are tight, most of which even bootstrap their fledgeling operation. As a result, against their better judgement, founders and managers of start-up operations and SMEs overlook going with the best that the market has to offer in terms of accounting service providers.
That’s why the formula behind dynamic accounting simply involves implementing the help of professionals. Often, at the early stages of a start-up, the planning behind budgeting and accounting can either seem apparently easy or dreadfully complex and later on, it is usually bound to becoming a matter that is hard to handle.
Fortunately, though, the principle of applying dynamic accounting pretty much takes care of itself when one looks towards market leaders. Generally, accountants work with business on a service-fee model that falls in line with that particular business, so the fees would likely be levied as a percentage of your profits, for instance, as opposed to a blanket fee fixed for all businesses of all sizes. So your accounting needs should grow and evolve with the growth and evolution of your business.
Staying on top of proceedings
It’s not advised for a start-up or a growing SME to have in-house accountants on their payroll. The professional work of accounting should be left to the specialist professionals. This way you can be sure to stay on top of proceedings because things can get out of hand very quickly and cause a bit of chaos when something like the tax-filing season is fast approaching and you have to rush to get your books in order.
Taking responsibility for your business’s financials
At the end of the day, as the business owner or any other figure of authority, you are responsible for your business’s financials, so you should make it an on-going mission to learn the basics of budgeting and accounting for start-ups and SMEs.
As a final note, there are some subtle differences that may exist between an outright start-up and an established small-to-medium enterprise, but generally, the accounting and budgeting principles that you’ll have to adhere to remain the same.