If you are starting a business, you’re going to need to do accounting at some level. What I’m going to talk to you about are three components that every business needs: the Process, the Systems, and the People.
Managing Process Accounting
The processes that we’re talking about here are broken down into several different categories. The first for example would be order to cash. From the time that you actually receive an order from a customer, all the way through until the time that you get paid, there are several steps along the way.
Document Each Step of Your Payment Paths
You want to make sure that every step is documented along the way, because anybody that you hire internally to actually do this work for you will need to follow this process for auditing purposes. For example, when you get an audit to be able present to an acquirer at some point down the road, having an established process is really one of the things that they look at to ensure that there is no fraud, for example, or that you have given enough thought into how the business actually manages the money.
Managing Systems Accounting
The next piece is systems. When we talk about systems, what we’re really talking about is software. There’s an abundance of software that tackles a specific problem at any given business; for example, accounting software will certainly help you with the accounting in the business.
General Ledger Software Handles Basic Accounting
You’ll need a basic accounting software, sometimes called GL, or General Ledger Software, or what most people would refer to as QuickBooks. But there are other solutions that exist as well. Depending on the type of business, you may have a need for a special billing software. Or, if you have employees that need to be reimbursed for expenses, you’ll want another system for that.
Billing, Payroll, Reimbursement
Certainly, payroll is a system in and of itself that want to have implemented at your business. What really the best practice is to be able to integrate all of the systems together to help you automate the processes that we had already spoken about.
Managing Your Personal Accountant(s)
The last thing that you want to consider is the people. Who is actually going to do the work? Well, depending on the size, stage, and complexity of your business, that’s going to depend on whether you need a full-time resource or part-time resource.
Chief Financial Officer Provides Strategic Vision
CFO for example; at a very early stage you probably wouldn’t need one of those. This is somebody that is responsible for the strategic vision & the forward-looking part of the business. They can help you establish pricing models and fundraising strategies so you can actually achieve the growth that you expect. But keep in mind, a part-time CFO usually my costs more than $200 an hour depending on the city that you live in. And while a CFO is generally responsible for everything financial at a business, you certainly don’t want to be paying a CFO his or her rates to simply perform duties that could easily be performed by a bookkeeper or by a piece of software.
A Controller Ensures Best Practices and Compliance
A level down from a CFO would be a Controller. This is the person that is actually responsible for making sure that all of your finance and accounting activity as reported on in generally accepted accounting principles or GAP. If you need to report financials to an investor or a bank, for example, making sure that those financial statements are true and accurate and in compliance with GAP are going to be something that’s critical for for the business.
A Bookkeeper Manages the Data
A lot of folks would probably consider just hiring a bookkeeper. A bookkeeper is really just responsible for manually entering in data into your accounting systems, following the processes that you’ve established. Some of the systems that are in place actually decrease the need for a bookkeeper these days.
About Jason Pulsifer
Jason Pulsifer is head of the Boston sales office for Consero, a business-finance consulting company. He has been working closely with entrepreneurs for more than 20 years. Often working as a “finance department of one,” he has been responsible for every aspect of a company’s financial process, from daily bookkeeping through presenting financials to the board of directors. His background includes experience in commercial lending, management consulting and technology startups. Prior to his current role, Jason was Founder of Starting11 (a successful financial automation company) which he sold to Consero in fall 2015.