How Do Startups Handle Accounting?
Accounting is essential backend work for every business, but it’s particularly important for startups. As a founder, your goal is to grow your company. The only way you can do that is if you’re starting with an accurate financial picture.
The question, then, is not if you should make accounting a priority as a startup, but what your method for doing so should be. You’ll find an analysis of three common strategies below to help you make that decision.
Three Ways Startups Handle Accounting
The best way for your startup to do its accounting work can vary based on your growth stage. That means each of the following options will work for different types of startups, and you may need to change your strategy as your company expands.
1. Do it Yourself
First, you can do the accounting work yourself as the startup’s founder. This can be a viable option when your company is just getting started or your finances are simple enough to track them on your own.
There are two key advantages to this approach. One is that you’ll save money by not having to pay someone else to do the work. The second is that you’ll have an intimate understanding of your startup’s financial health and will learn new skills that can pay dividends down the road.
If you decide to handle accounting yourself, focus on practicing good accounting hygiene. Keep personal and business costs separate, and be sure to categorize expenses.
2. Hire Someone
The next option is adding an accountant or bookkeeper to your team. This can be a smart strategy if your company has grown to the point of being able to support a full-time backend financial worker.
When you hire someone, you get an expert whose only job is to help your company succeed financially. They may be able to spot problems and opportunities you might not have uncovered on your own.
Plus, you won’t have to do this work yourself anymore, which frees up time in your schedule for tasks that generate more value for the business. However, you will need to pay a competitive salary and benefits to attract top talent. This may not fit in your budget.
3. Outsource
Your last option is to outsource your accounting to a third-party firm. This can be a good middle-ground between doing the work yourself and adding someone to your team.
Through outsourcing, you get access to expert talent without needing to make a long-term financial commitment. This keeps your schedule free, gives you access to high-level financial analysis, and saves you money as compared to hiring someone full-time.
Outsourced accounting also tends to be highly scalable. You can easily add or subtract services as your needs change.
Finding Your Best Option
Many founders ultimately conclude that outsourcing is the right approach because of the unique blend of benefits it offers. Whether you’ve made that decision already or not, CFO Hub can help you find the right accounting solution for your startup.
Get in touch with us for an accounting consultation to learn more about how we can help.