How you manage your business’ financial records when you open your doors can come back to haunt you if you don’t think ahead. Plan for success by setting up systems that will scale as your business grows — including your bookkeeping system.
Slicing a Bigger Piece of the Pie
Here's what we're talking about in practical terms: Say you have a side business selling home-baked blueberry pies at a local farm stand. Before you know it, your pies are the talk of the town and you decide to turn that sideline into a full-time business. Obviously, you can't just keep picking blueberries in your backyard and baking pies one or two at a time in your kitchen to meet the demand. It’s time scale up to a full-size bakery.
Moving into your new space is exciting and business is growing. You’ve made a substantial investment in new equipment, infrastructure, employees and vendors, so you might be tempted to try to continue with farm-stand-level bookkeeping. However, half-baked bookkeeping could be just as harmful to your business as half-baked pies.
The Good News? Scalability Is Easier Than Ever
Given the quantity and quality of software programs available today, there's simply no reason why any new business shouldn't have a scalable bookkeeping system in place from day one.
The key word there is "scalable." You might be able to do the books yourself using a simple spreadsheet for invoicing and bill-paying when your business is in the startup phase. Unless you plan to stay in the startup phase forever, though, that's not a good approach. The amount of "busy work" required to maintain a spreadsheet system as your business grows would soon overwhelm you and could stagnate the growth of your business.
It's far better to invest in a cloud-based software system from the beginning. Besides growing with your business, it will minimize paper recordkeeping and make it much easier to share your files with an outside CPA or outsourced bookkeeping services provider when the time comes.
Your Financial Controls Should Scale, Too
It's perfectly acceptable to run a lean operation with a small staff at a startup or early-growth-stage company. What's not acceptable, however, is allowing any single staff member to have complete oversight over any aspect of your company's finances. The opportunities for fraud are simply too great.
Our recommendation? Implement an automated, cloud-based bookkeeping system that updates in real time. The built-in financial controls alone are worth the cost. It's far harder to commit fraud using electronic funds transfer than it is with, say, paper checks. Also, a cloud-based system isn't just scalable, it's shareable — with outside auditors as well as the aforementioned CPA or a bookkeeping services provider.
It's not Just About Keeping the Books
As a business leader, your focus is on building your company. That alone should be reason enough to automate and delegate/outsource your bookkeeping responsibilities, but there's another bonus: Automated software programs can provide valuable insight into your business' key performance indicators (KPIs).
While KPIs vary from one company to the next — some business leaders want to know revenue per transaction, while others are more concerned with monthly sales — every company can derive enormous benefit from having instant access to critical financial data. Think of KPIs as your company's financial EKG. That information can be especially critical for a growing business.
Tip the Scales in Your Favor
Given the growing complexity of tax regulations and labor laws, it's vital that your company implement professional-level human resources from the outset. That means, for example, hiring a payroll services company — even if you're the only one on the payroll and creating an employee handbook before you have an employee to give it to. Set the processes you envision your company to run by as soon as you start your company.
With Scalable Systems, Success Is Baked In
Okay, now that we've outlined the benefits of scalable bookkeeping and operational support, let's revisit that hypothetical bakery we talked about at the beginning. Can you imagine scaling up from a home-based sideline to a full-size bakery — but continuing to do business with a cash box and handwritten receipts? Of course not. Imagine instead a business that sets up a cloud-based bookkeeping system right from the beginning. This business has the infrastructure in place to handle the increase in sales and personnel, allowing the business leader to focus on growing the business — not catching up on paperwork.