Q. Name one overlooked bookkeeping strategy you would recommend to new entrepreneurs.
The following answers are provided by the Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.
1. Be Granular With Your Marketing Spend
It’s very tough to figure out where to invest marketing dollars. Ideally, you figure out which marketing channels — Facebook, email, AdWords, live events — are performing well, and invest heavily there. Start segmenting expenses in your books from day one, and you will be able to see trends much more clearly.
– Aaron Schwartz, Modify Watches
2. File Tax-Related Receipts as They Come In
By filing tax-related receipts as they come in throughout the year, you can cut down on the time you or your accountant spend preparing your return. It also decreases the chance of you losing the documentation needed for your deductions.
– Andrew Schrage, Money Crashers Personal Finance
3. Plan Your Categories of Expenses
Planning the categories of your expenses makes it very easy to complete your accounting faster and more efficiently. We learned the hard way. We had to go back over three years worth of bookkeeping to ensure that we had all of the expenses labeled correctly since we would label the same expense differently every year.
– Derek Capo, Next Step China
4. Use Accrual Accounting Methods
Use a GAAP compliant accrual-basis accounting method when doing your bookkeeping. Cash-basis is tempting because it’s simple and elegant, but if you get acquired, there’s a 99 percent chance that your acquirer will be using a GAAP accrual method. Thus, your acquisition due diligence will be much easier by having your books reported on an accrual basis.
– Eric Bahn, Hustle Con Media
5. Outsource Your Bookkeeping
6. Take a Bookkeeping Class
Even if it’s a big time commitment for you, I strongly recommend taking a bookkeeping class — and, if you can, an accounting class. I’m sure you’re going to automate and outsource your bookkeeping as much as possible, but if you don’t have a basic grounding, you won’t be able to evaluate potential tools or contractors. You need to know the fundamentals.
– Thursday Bram, Hyper Modern Consulting
7. Use Payment Reminders
Most major credit card companies have an option (usually under “Account Preferences”) that will generate an email to you two or three days before your credit card payment is due. Enrolling in this feature and having one less thing to write down or set a reminder for is always a win. This simple strategy is easy to set up, and it’s almost always overlooked by new entrepreneurs!
– Kim Kaupe, ‘ZinePak
8. Record Everything
Start with Evernote. Then get Expensify. Then start paying your bills using Bill.com. All of these Web services will provide you with an audit trail and make your life much easier when you make your first real bookkeeping investment. When you start losing financial data, you start losing real money. It’s better to record everything early.
– Ryan Buckley, Scripted, Inc.
9. Do It Yourself
What’s more important than understanding your company’s finances at a granular level? Most founders don’t have that level of understanding. I’d recommend keeping the books yourself in the beginning. Or, doing a very, very thorough review with the accountant/CFO. It will make you more cost-conscious and scrappy — two very positive qualities for any founder to have.
– Mitch Gordon, Go Overseas
10. Hire Somone to Help You
Ninety-nine percent of all entrepreneurs overlook the fact that bookkeeping for tax purposes is different than bookkeeping for a business strategy purpose. One has an inherent goal to minimize tax (and therefore the profit shown), while the latter strives to illustrate reality so that the entrepreneur may act accordingly to maximize profit. Hiring someone to help you understand both may be key to your financial success.
– W. Michael Hsu, DeepSky
Image Credit: Shutterstock.comSubscribe to the Podcast