Make Your Startup’s Accounting Accountable

Money managed well makes for a well-managed company. Hiring a bookkeeper or financial assistant may not be feasible for your business right now, but that does not mean that responsible and effective accounting principles cannot be implemented to help run your business. Though a seemingly daunting task, Matt Orton, CPA and senior tax manager at Allinial Global, promises that any business owner can get started.

Matt Orton and Dave Olson, one of Orton’s business partners and expert in information systems, have helped many small business owners navigate financial planning. They delivered a workshop explaining accounting basics to our student entrepreneurs, and in case you missed it, the following are their top tips.

1. “Here is an equation that will change your life. A = L + OE.”

A lot of lingo gets thrown around by banks and other financial supporters you may have, and it is extremely important that you know what they are going to ask to see from you. Above all, know your balance sheet: assets are equal to liabilities plus owner’s equity. If you are attempting to acquire a loan, it is important that your net equity is positive. Oftentimes, these documents are requested to be compiled annually, even though they should be continuously updated and represent “a snapshot” of your finances on any given day.

But what do these words mean? Assets are made of cash, equipment, inventory, accounts receivable (commonly abbreviated to “A/R”) and other intangibles such as software licenses or customer lists. Liabilities include accounts payable, or “A/P,” loans and accrued expenses. Lastly, equity is comprised of capital contributions, capital distributions, profit and loss statements and retained earnings, or money made that stays within the business.

2. “The main use for your financials is for you to help you run your business and make decisions.”

In other words, get organized early on. Add your assets and liabilities often so you can assure yourself and any partners or financial supporters that the company’s equity is accurate.

You may be wondering if there is an easier way to track your startup’s transactions, and this is where information systems comes in. Any financial transaction involving your company goes into your database, but there are programs that can help.

But before you get started, remember the following tip.

3. “Stay away from free online accounting packages.”

The programming is often fickle and untrustworthy, according to Orton and Olson. Save yourself the headache and worry and spend the few extra dollars on a trustworthy and user-friendly software. Prevent big mistakes by simply reviewing your alternate accounting methods. Some of Orton and Olson’s top picks for any service you may need include:

  • Payroll: Use Gusto! This program uses automated verification to reduce paperwork and can also help you keep track of onboarding and time sheets.
  • Balance Sheet Management: Both Xero and Quickbooks have easy to manage qualities and the ability to integrate other programs’ data to help you stay organized. But as your business grows, you may need to increase the capabilities (and price) of these programs or switch brands entirely.
  • Credit: Expensify and Divvy are comparable in price and skill. They allow you to automatically link your expenses and categorize them in your company’s database.
  • Bills: Bill.com is a well-organized platform that both Orton and Olson have recommended for years.

Once these components are organized, you can move on to the fun stuff: projection.

4. “There is only one rule about projection models: they’re always wrong.”

Though they can be informative, projection models are more often misleading, especially for new companies. Keep your projections rolling based on actuals that you accumulate from your database. Begin by using your starting financials and manipulating variables to analyze what will happen going forward. Be inspired by your company’s potential and stay organized.


About the Author:

Julia Dominesey Julia is an undergraduate student at the University of Utah studying mechanical engineering. Her passion for public speaking and networking has led to her frequent contributions and involvement at the Lassonde Institute.

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