You probably know that the majority of startups fail within the first five years. In reality, 90% of them fail. What you may not know is that 82% fail due to poor cash flow management, according to a study by a US Bank. In their study, they found that most businesses fail due to poor understanding of cash flow and lack of a well-developed business plan. With staggering statistics like these, it’s clear that startups need to come up with affordable ways to handle their accounting services needs in order to avoid bankruptcy.
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While hiring a CPA may be quite costly for a startup that is yet to establish a footing in the business world, it does have its own benefits. In this guide, you’ll learn the various affordable accountancy solutions available for startups.
1. Accounting Software
Most startups are very simple, and the vast majority of them are sole proprietorships.
As a result, most of their owners’ energy goes towards getting customers. Needless to say, you don’t need to hire a CPA for his or her accounting services on day one.
For instance, if you start a land surveying company today, you’re not going to count money, until you start making money. So, why would you need an accountant? In such cases, accounting software will do just fine.
Numerous accounting systems such as QuickBooks Online, FreshBooks, and Wave exist to help small business owners perform basic accounting tasks in the early stages. With just simple accounting software, you’ll be able to:
- Track sales and expenses
- Generate invoices
- Perform inventory management
- File tax reports
- Prepare financial statements
- Send invoice reminders
And the best part; you don’t need formal training to use accounting software. Moreover, some accounting programs like QuickBooks Online are very affordable, and you can get one for as low as $20 per month.
However, after some time when your business expands and you start generating more revenue, you may want to hire a CPA (learn more about CPA’s.)
A CPA can provide professional financial planning advice that can save you money down the line, especially when it comes to taxation. And a CPA’s advice on business strategy cannot be replicated by even the most sophisticated piece of accounting software. Other benefits worth mentioning include their experience in dealing with the IRS, seeking financing, company structuring and if you should ever choose to sell, buy or merge with another business.
2. Hire a Bookkeeper
Sometimes, your business may be growing but you don’t have enough resources to hire a CPA. In such cases, hiring a certified bookkeeper may be a viable option.
A certified bookkeeper possesses expert-level accounting knowledge required to perform all the basic accounting services functions for small businesses. According to the American Institute of Certified Bookkeepers (AICB), certified bookkeepers can perform many accountancy functions, such as:
- Conduct monthly bank reconciliations
- Prepare end of period adjustments
- Account for and record depreciation
You’ll find many bookkeepers on Craigslist, but to ensure you’re getting the best bang for the back, hire only those who are certified by AICB.
Outsourcing accounting services remain one of the most affordable accounting solutions for small and medium scaled businesses. Many entrepreneurs opt for hourly pricing plans with outsourced accounting firms. This way, they not only save on costs but also get professional business advice.
What accounting solution are you using for your business? Share with us in the comments section below.