In a startup’s infancy, the business often begins as a solo operation and becomes more complex over time. More people, more offerings, and more money add complexity. But on the very first day, you as the founder wear all the hats and juggle each role (including accounting) before reaching the next level.
In these early days, your primary focus is on refining products and services, finding suppliers, marketing them to the target buyer, raising capital, and doing everything in your power to make the business successful. Establishing a solid foundation of financial processes and controls for the business – such as keeping a general ledger, setting up accounts payable and receivables processes, and organizing reporting and compliance – is often overlooked. Yet, getting this foundation in place in the early stages is essential for long-term success. This is especially important when launching and operating a startup in uncertain business conditions. Gaining visibility and control of the financial health of your business will make your startup more adaptable to the many challenges facing businesses today, including inflation, supply chain delays, and labor shortages.
Thankfully, comprehensive accounting software systems are available to help your startup stay organized and keep finances in order – giving you time back to do what you do best: innovate. Waiting to invest in an accounting system can be costly down the line, or worse, kill momentum when you’ve started hitting your stride. But how do you find the right software for your business? And when is the right time to invest in a system?
Of all the early investments your startup will make, comprehensive accounting software needs to be one of them. Here are three reasons why:
Comprehensive accounting software helps you focus your time on strategic initiatives
Accounting software might not be the first thing you think of when launching your company, but it should be considered early on. Comprehensive accounting software is intended to simplify the back end of the business and allow you to keep focus on the areas most deserving of your time and energy. Not to say that billing, posting journal entries, issuing purchase orders, reconciling bank and credit statements, and running financial reports aren’t important, but doing these activities manually aren’t the most worthwhile use of your valuable time when tools exist to help.
Let’s also contemplate this: will a spreadsheet actually do the trick? Sure, it’s affordable and accessible. But it’s also time-consuming, has limitations, and won’t scale. Rather than tracking sales, expenses, and figuring out margins with spreadsheets – or even entry-level bookkeeping software you will quickly outgrow – it is worthwhile to invest in a comprehensive cloud accounting system right away. As your company increases revenue and operations, financials become increasingly complex.
You can even take it a step further by investing in an ERP system, which includes comprehensive accounting capabilities. ERP systems are equipped to do much more than just manage the books. They also can bring other parts of your business together, such as manufacturing, inventory management, warehouse management, or project management, into one system to better manage the business.
You may quickly outgrow entry-level bookkeeping software
The future limitations of entry-level bookkeeping software are also important to consider early on. Unfortunately, most business will know they’ve outgrown their bookkeeping software when they feel it – missing data, errors in calculations, and administrative overburden. These pain points, as well as manual processes and workarounds, are clear indicators that your software is no longer a fit.
A common mistake to remedy the gap in basic software and the growing demands of the business is to purchase additional applications for each department. With all these disjointed systems comes the increased likelihood of inaccurate reporting and inability to share information across departments. Businesses running into these issues will eventually need to reinvest in a comprehensive business system that streamlines operations across the company and allows leadership to have full visibility into the company.
It is far better to anticipate the limitations of an entry-level software than to experience them. As startups really take off, they enter a phase when they should be investing into the product or into marketing to capitalize on their newfound success, but instead their bookkeeping software can become a hindrance. Best to get ahead of it and minimize the growing pains.
You will reap the rewards of early adoption
When you elect to invest in comprehensive accounting software, or even an ERP system early, you reap the rewards when the software scales with the business as it grows in complexity. Not all tools are created equal, and few are designed to scale alongside your business. With scalable solutions in place, startups set the foundation for adaptable operations in the future as the business reaches growth milestones. This pays huge dividends as you get ready for one of the most important business milestones: preparing for an IPO. The history of financial record keeping plays a factor in charting the path to a successful IPO. The scrupulous financial reporting a company must disclose prior to hitting the market takes time. However, the longer an ERP system has been in place, the less complicated and tedious this process is.
Today’s cloud-based, SaaS-enabled ERP systems can roll out with basic accounting and can build from there. Add users and functionality, like inventory management, order management, or CRM, down the line when you need them. Oracle NetSuite’s ERP system is one example of a comprehensive business suite designed to grow with you from startup to IPO.
With the right technology infrastructure in place, businesses are equipped to make informed decisions when it comes to reaching new markets or launching new products. The business insights gained from unified data can help guide these decisions and allow startups to scale and adapt to changing business conditions. While software is a costly investment for any startup, the money spent upfront on a comprehensive solution will save valuable time and resources down the road.
Lisa Schwarz is Senior Director of Global Product Marketing for the Oracle NetSuite Global Business Unit. She is responsible for driving the go-to-market messaging and positioning for NetSuite solutions.