Startup Accounting Specialist Josh Fisher on the Right Time to Enlist Professional Financial Help
Even if you have a background in accounting or finance, there will still likely be a point in your startup journey when handling your company’s books becomes a challenge (and it’s okay if that’s the case from the very beginning.) Labs expert Josh Fisher, VP of corporate development at SCL Consulting (an outsourced accounting firm) and startup accounting advisor, held a Labs session where he shared his advice on when to bring on outside help, why knowing your exit strategy matters early on, and more. Here are five of his top tips.
Tip 1: Don’t try to do your startup’s taxes yourself
Even if you’ve done your own personal taxes before, business taxes are another story. “Seek an expert’s help for taxes,” Fisher says. “The security of knowing they’re done correctly is well worth it. And I guarantee your accountant will uncover opportunities to save you money. You might spend $750 on their service but I’d be shocked if they don’t uncover areas where you will be able to save much more than that.”
Tip 2: Reconcile your accounts early and often
“It’s very important to make sure you set up a chart of accounts early on,” Fisher says. (A chart of accounts is a listing of all of the accounts your business uses to record transactions in your general ledger.) “And make sure you reconcile your transactions periodically. Daily is great in a perfect world, but not realistic if you are doing it on your own. We suggest at the minimum, weekly," Fisher says. "Who remembers what they did two weeks ago? If you wait more than a week, you’ll be missing transactions and invoices and missing times when you’re being overcharged or under-invoiced.”
Tip 3: Know your short and long term objectives
“This is a big question we ask every small business we work with,” Fisher says: “What’s your exit strategy? Do you want to be a Fortune 500 company, do you want to IPO, do you want to sell to a bigger company? It’s important to know what you plan is because that’s going to dictate how you do business.”
“You need to figure out where you see your business going short term and long term, and we suggest carving out a plan within the first three to six months,” Fisher says. “You need to have an understanding of who you want to be. It helps you figure out how you want to get there. You can always change, but you need to have a clear plan of what the goal is.”
“To me, it’s less about ‘exit strategy’ and more just about short and long-term objectives,” Fisher says. “The question we constantly get is: ‘Can I afford to do XX?’ The answer is always, ‘It depends...what are your short and long term goals?’
Tip 4: Outsource bookkeeping and accounting services when the following scenarios come up
- “An owner/executive doing the books, but not spending nearly enough time on making sure they are accurate, or more often, simply just not having the accounting background and skills to do it accurately,” Fisher says.
- “An assistant or non-accountant support person doing the books who doesn’t have the technical or organizational skills to make sure there’s integrity in the numbers,” Fisher says. “Furthermore, that position is usually too junior to add the higher-level analysis that most small businesses need when it relates to their financials.”
- “Everyone seems to have a friend who ‘does accounting,’” Fisher says. “Often times these friends are retained for free, and it’s a classic example of, ‘You get what you pay for.’ When someone is offering cheap or free services, it’s difficult to hold them accountable to deadlines and the inevitable neediness of a small business. Pay more to get more.”
Tip 5: Make sure you’re working with an accounting firm if you’re looking for outside investment
“Lean on an accountant or a firm that can present your books in a way that paints you in the best possible light,” Fisher says. “Most founders don’t know how to present their financials, and leaning on a firm that has a track record of working with outside investors will only strengthen your chances of receiving capital. Recognize revenue in the way investors want to see, that’s where professionals excel. The numbers themselves don’t change—it’s about how you position them and how you communicate them.”
Learn more about startup finance and accounting best practices.
This post is based on content from a WeWork Labs programming session.
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