6 Tips for Setting Up Startup Financial Systems

At Kruze Consulting we work with hundreds of startups and we see it all -  shoeboxes full of receipts, hand-written, coffee-stained financial ledgers and even a contract on a cocktail napkin! We take these types of situations and bring order to the chaos by instituting practices that lead to long-term financial health for businesses. We’ve helped startups raise more than $500M in the past 12 months by leveraging technology and automation to set up financial systems for our clients that will take their businesses to the next level. To investors, having a few key things buttoned up and organized can make all the difference. Here are six tips for setting up a startup’s financial systems that we think every founder should get started with today. 

  1. Set up an accounting system for accurate tracking and financial planning. A good accounting system like Quickbooks will reduce the amount of time founders spend on financial record-keeping, provide founders with an Income Statement, Balance Sheet and Cash Flow Statement any time an investor asks, and tie directly to your bank account so you’re protected from fraud, malicious vendors, etc. Most modern accounting software integrates with expense, payroll, benefits and other software so everything can run seamlessly behind the scenes and you can stay focused on your business.

  2. Next, set up a system to help with expense tracking. You can even set up an Expensify account before you incorporate or set up a business bank account. You want to make sure you have everything tracked properly in case you are audited by the IRS or need to produce clean, organized financial statements for a sudden investor meeting. Shoe boxes full of receipts don’t need to exist! Now, anyone with a smartphone can catalogue and track expenses digitally, so nothing falls through the cracks. Most expense tracking software will link directly with your accounting software, so much of the process can be automated.

  3. Setting up a good payroll system from the start ensures that your payroll runs smoothly, all your federal and state payroll taxes are submitted on time and you stay out of trouble. Unwinding payroll and payroll tax problems can be complicated, expensive and take up precious time and money that could’ve been spent elsewhere. Using a service like Gusto Investors want to see a smooth-operating, well-oiled machine that’s poised for rapid growth. Like expense tracking, most payroll software will integrate with your accounting software so it’s easy to automate a significant portion of the work.

  4. In addition to using the best software tools to run your business, we want to make sure you’re keeping on top of taxes. Missing tax deadlines can cost $10,000+! You’ll want to research deadlines relevant to your business and set calendar reminders. However, you choose to do it, make sure you’re paying attention to the IRS website and following the deadlines closely. We’ve put together a Tax Compliance Calendar integration for Google Calendar, so you can set reminders to go out in advance of any important tax deadlines.

  5. Now that we’ve covered financial best practices and tax compliance, it’s time to build a financial model. There are plenty of free model templates you can use along with videos on how to build them. Once you’ve combined your expenses, payroll and accounting systems a good model should be easy to generate. Investors are looking for organized, thoughtful, precise models that are able to weather a barrage of fluctuating variables and conditions. By integrating automated accounting, benefits, expense and payroll software, it’s easy to adjust your model around specific inputs because you’ve got a solid data set available for analysis.

  6. Lastly, be ready for venture capital and M&A due diligence by creating a checklist. We like this one, but however you prefer to do it, it’s important to have all your ducks in a row. By keeping a checklist up to date you can be sure that you’ll be ready to pounce when that perfect funding opportunity presents itself. Create a folder where you can store the data as it is created, ensuring that you are organized for your next venture round. Save future you some time! The next venture round or sudden acquisition suitor always happens at the least convenient time, so make sure you’re prepared ahead of time!

Although startups are often complicated, fast-moving beasts - with the right tools and habits, Founders can bring order to the chaos and ensure long-term financial health for their businesses. By following the six tips above startup founders can not only be organized and prepared for the next funding round but also be more attentive to the core of the business. Often times as companies grow, the logistical burdens can suddenly fall to a few shoulders, forcing founders to focus on things they never intended to do and are not very good at. By instituting software tools and systems early on in the business, these sudden burdens can be alleviated and business owners can remain focused on the things they’re good at that got them into this business in the first place! At Kruze seen the benefits of this first-hand and I’d advise any startup founder to follow the tips above as early on as possible.