Bookkeeping For Startups

As a startup founder, your priority is running your business, and managing your own financial data takes time and energy away from that. That’s why more and more startup and early-stage companies are outsourcing their bookkeeping. A remote bookkeeper is:

Cost-effective. As a small business, you probably don’t need a full-time bookkeeper. Remote bookkeepers normally offer part-time services that will meet your business needs.

Professional. Established remote bookkeeping firms have an extensive client base, which means you’ll have an experienced team helping you.

Flexible. An outsourced bookkeeper can adjust to your needs and response to your requests quickly and effectively.

Efficient. Bookkeeping can be time-consuming, and outsourcing your financial activities allows you to focus on developing your startup.

Objective. An outside bookkeeper provides a fresh and unbiased perspective on your financial situation, providing you with alternatives and options you may not have considered.

Accurate. You can’t effectively manage your business without accurate information, and a remote bookkeeper can provide you with financial data to help you reduce inefficient spending, increase your productivity, and prepare for growth.

Organized. An outsourced bookkeeper can help monitor your invoices, payments, billing and other transactions to make sure you’re collecting funds that are due to you, as well as paying your vendors and contractors on time.

Outsourcing your bookkeeping needs can be essential to growing your business, and accurate bookkeeping gives you a basis to improve your cash management, monitor your financial position, and provide accurate reports to your board and investors.

Kruze’s startup bookkeepers will help your company have accurate, up-to-date financial statements that you can use to manage your business’ growth and cash flow. The basic tasks we will handle are the same as what any other quality bookkeeping provider would do - except that we have developed highly automated systems, and our team is experienced handling the nuances of early-stage, venture funded companies.

Our account managers have an average of 11 years of experience, and are experts on helping young, funded businesses with their bookkeeping. But that experience helps our team go beyond simple, outsourced bookkeeping, and offer financial advice and due diligence help that other accounting firms can not match.

We think bookkeepers for startups should provide the following services to early-stage, VC backed companies:

RECORDING FINANCIAL TRANSACTIONS

When revenue or expenses happen, it’s your startup bookkeeper’s job to record these into your company’s accounting system. This probably involves categorizing the “transaction” in a way that makes sense, say a payment to your payroll provider as a payroll expense.

Traditionally this work was all done manually, but Kruze is a pioneer is using automated systems to make this process faster (and cheaper for our clients!) By using a combination of off-the-shelf accounting solutions like Brex, Ramp and Bill.com, plus custom built software, Kruze can quickly and accurately record the vast majority of your company’s transactions without you or your Kruze bookkeeper having to do anything. However, automation is not enough.

Early-stage companies move quickly, and you need an experienced bookkeeper or accountant to review your books and financial records to make sure that the automated systems haven’t made any errors. There are particular moments when automated systems are likely to introduce mistakes, such as when employee benefits are changed.

Our team is trained to look for specific errors based on your company’s stage.

REVENUE RECOGNITION

Many companies raise their next round of venture capital based on their revenue growth. Many early-stage CEOs use a variety of dashboards to visualize their revenue.

Smart VCs will check to see what the difference is between the CEO’s revenue number and the actual financial statements recognized revenue.

Making the financial statements correctly mirror these dashboards is not as simple as it sounds! Kruze uses automated systems to record the revenue. But, correct accounting relies on more than just data feeds, and our team knows the questions to ask our CEOs for the information needed to produce GAAP revenue.

Incorrect revenue recognition is one of the biggest reasons startups switch to Kruze as their bookkeeper, especially the online bookkeepers with questionable accounting experience that claim to do everything with “automation” - which is really a code word for the founder having to code everything correctly.

RECONCILING ACCOUNTS

Companies that raise venture capital need to have accurate books - in fact, a company’s executives typically promise recurring delivery of accurate financial records to venture investors in the funding documents.

Reconciliation is an important step in bookkeeping. This is when your bookkeeper makes sure that the different records balance, and that the money leaving an account (like your company’s bank account) matches the actual money spent.

Reconciliation is an especially important part of bookkeeping for funded companies, since investors (and potential acquirer) expect accrual accounting and financials that are close to GAAP. Kruze helps set up connected, automated systems that help do much of this work automatically. But, we go the next step and have our experienced team do several levels of reviews to help catch anything that the automated systems might miss.

MANAGING BILL PAY

Early-stage companies need to carefully manage their burn, and best in class bill pay helps give founders the controls they need to preserve cash.

Kruze clients used to almost exclusively use bill.com, which is a provider of accounts payable for companies of all sizes. However, other vendors such as Ramp and Brex have emerged that provide similar services at a fraction of the cost (typically bundled with credit cards for free!) Regardless of the system, if you want to automate your startup bookkeeping, you need a solution for bill pay. That’s because an automated bill pay system integrates directly into accounting software, minimizing the amount of data entry and saving your startup bookkeeper time.

PREPARING FINANCIAL STATEMENTS

Investors, board members and experienced founders want to see three important financial statements, usually every month: the income statement, cash flow statement and balance sheet.

Bookkeepers have been preparing these financial packets for ages, but modern bookkeepers like Kruze use automated systems. We’ve built our own, specialized software that interfaces directly with QuickBooks API, and combine it with best-in-class off the shelf solutions to give early-stage startups low cost, highly accurate financial statements and financial reports.

However, not all founders are trained finance professionals - software and financial packets are only half the story. Kruze’s accounting team knows how to explain what financial statements mean and how important metrics impact a startup’s strategy.

No. When a business takes outside money, they need to have a firm understanding of their books, since investors usually demand transparency. Spreadsheets are great - every bookkeeper loves them - but you need to spend the $50 a month on a solid bookkeeping software like QuickBooks Online.

The transition from spreadsheets to actual bookkeeping software for financial management greatly benefits businesses in a few key ways:

• Accuracy: Bookkeeping software reduces the risk of errors that are common in manual calculations on spreadsheets. They have built-in error-checking tools and ensure that all financial records are accurate and consistent.
• Efficiency: Software automates various accounting tasks like reconciling bank statements, tracking expenses, and calculating financial ratios, saving valuable time and effort. They also make tax reporting efficient and easy.
• Scalability: As a business grows, its financial data becomes more complex and voluminous. Bookkeeping software can easily handle this growth, even at an exponential rate.
• Integrations: The best bookkeeping tools, like QuickBooks, can integrate with various systems like bank accounts, payroll systems, and revenue systems for seamless scalability. This means data comes in automatically - unlike with a spreadsheet where you need to manually key in information. And I’m sure you didn’t found your startup to do data entry!

Additionally, software gives you:

• Version Control: With the right software, businesses own their data and it will always be theirs regardless of who is doing the bookkeeping work. Spreadsheets are ripe for version control issues, meaning it’s hard to have multiple people make updates without causing possible conflicts.
• Insights and Reporting: Accounting software provides startups with important financial data information like burn rate, revenues, cash flows, etc. QuickBooks, for instance, has built-in Income Statement and Balance Sheet reports. This helps the business gain insights into its financial health and performance and make informed decisions.
• Ease of Use: Using off the shelf software like QuickBooks ensures that virtually any accountant or CPA can operate it as it’s an industry-standard system. As businesses grow and shift their bookkeeping from in-house to outsourced services and vice versa, this interoperability is crucial. Unlike a custom spreadsheet, which requires training. 
• Double-Entry Bookkeeping: A cornerstone of sound accounting, the double-entry bookkeeping system is designed to keep your financial equation—assets = liabilities + equity—always balanced. While spreadsheets allow for manual double-entry bookkeeping, the process is prone to human error and can be extremely time-consuming. In contrast, specialized accounting software has built-in capabilities for double-entry accounting. This feature ensures automatic balancing; when you record an entry in one account, a corresponding entry is automatically made in another. The system also enhances financial accuracy by providing an additional layer of verification—should your accounting equation ever fail to balance, it’s a red flag that prompts you to search for discrepancies. Furthermore, as startups evolve and engage in increasingly complex financial transactions, a built-in double-entry system simplifies these complexities by clearly detailing both the cause and effect of each transaction in your financial statements.

In conclusion, upgrading from spreadsheets to accounting software can considerably increase the accuracy, efficiency, and scalability of financial management in businesses, besides offering additional benefits. Nobody wants to accidentally run out of money… or fail to raise a Series A round due to messy books!

So, here are the basics of bookkeeping for startups - in particular, early-stage companies that have or are going to raise outside venture capital or seed funding.