You are working with limited resources. You are working long hours. You are burning the candle at both ends trying to raise funding, develop your product, keep the team motivated and scale your business. Probably the last thing on your mind is to think about your accounting and collecting receipts for your bookkeeper. This is where the beauty of online accounting for tech startups comes into play...
Online accounting has everything to do with not only bringing your accounting software into the cloud, but also your relationship with your accounting professionals. Once you bring your accounting software and services online, there is arguably no other space that allows you to reap the benefits more than the tech startup space. Let's look into 3 ways online accounting can help your tech startup to scale.
1) Automation of Your Accounting Process
When your resources are scarce, you need to make the best of what you have. Typically, your most important resources are your team's capacity and your cash. While your accounting is a necessary evil, it can be taxing on you and your team's time due to the manual tasks that are typically associated with it and therefore, comes at a cost to both your team's capacity and, indirectly, your bank account. This means, less time that is able to be dedicated to mission critical tasks as well as less burn.
On top of that, many, but not all, tech startups are high transaction volume businesses due to their subscription billing model. As such, as your tech startup scales, you might be faced with hundreds or thousands of transactions each month. With that type of transaction volume, it's easy to get tied up in the manual part of accounting if you're dealing with spreadsheets and desktop accounting software.
Taking your accounting online and into the cloud enables us to leverage some of the latest technology to automate some of your more manual accounting processes. The value of online accounting derives itself from being able to connect and integrate various pieces of software together. When this happens, we can funnel mostly all of your financial transactions directly into your cloud accounting system with the push of a button.
Yes, there are a few follow up steps that need to take place, typically by your bookkeeper, but the hard part of collecting your financial data and dumping it into your accounting system (a task that many founders and team members get dragged into without the right systems in place) can be greatly automated because of online accounting software.
2) Reporting & Financial Metrics
Tech startups are data driven. You might, for instance, calculate different metrics related to your online marketing efforts, but one thing that is often lacking or can be improved upon is the visibility into financial reports and metrics to help reinforce and guide your decision making.
As an example, many SaaS businesses have several financial key performance indicators (KPI's) that are critical to monitor to help guide their decision-making, churn rate being one of them. I spoke with a SaaS business that had been around for several years and only started calculating their churn rate in the past year. They were able to get their churn from 5% monthly (quite high) down to 1.9% (still high, but a good improvement after a short period of time) only after a few months as these metrics provided insight into certain areas of their process where current customers were dropping out and "churning". The impact of having access to this metric allowed this company to make quick, minimal changes but ones that had a direct impact on their revenues and therefore their bottom line.
These are the kinds of things that can help grow your business. Creating these reports & metrics relies on compiling, consolidating and manipulating financial data. Again, this process alone takes time.
So how does online accounting help provide more insight into reporting and financial metrics to assist in your decision making?
Simply put, there are apps out there that can do this automatically. They will pull data directly from your cloud accounting system and output the reports and metrics you want.
On top of that, online accounting helps you have your data at your fingertips, no matter where you or your accountant are. Everyone can share the same data, at the same time, in real time, thus improving collaboration.
3) Improved Focus
Maybe most important of all, I argue that moving all aspects of your accounting (software + services) to the cloud will provide the founder and team members with increased focus. The devil is in the details. There are so many tiny, moving parts when dealing with a company's accounting process, that eliminating just a few minor steps can help provide that much needed focus that all startups are looking for.
In a given day, you are probably bouncing around between 10 different things at once. Then, your accountant might ask you to download a bank statement, they might email you to help identify several credit card transactions or request a meeting to sign some documents at their office. These are just a few examples of how your day can be interfered with and get your mind off of what you should be focused on.
Sure, they might not seem like big tasks, but add all of these miniscule tasks up, and they all take you away from what all of your energy is supposed to be devoted towards. These tasks are all non-value added to your business and they need to be eliminated.
If implemented correctly, online accounting software and online accounting services, paired together, will eliminate these distractions by putting efficient workflows in place and create a working environment with your online accounting firm that is totally online and fully paperless, meaning, a reduction in many non-value added tasks.
The Scale of Your Tech Startup Revolves Around a Solid Foundation
Your company is only as good as its weakest link, and typically, that weak link tends to be the accounting. If you're looking to scale your tech startup, consider moving not only your accounting systems, but your accounting services online in order to help take advantage of the major benefits above.
About Xen Accounting
Xen Accounting is a 100% online professional accounting firm whose purpose is to provide easy, automated & paperless online accounting services to small businesses across Canada. Customers receive an all-inclusive plan that combines accounting services, cloud accounting apps and fast support from a team of tech-savvy accounting professionals.
Since 2013, Xen Accounting has been seen as a thought leader in the accounting space in Canada. Featured continuously in the press, selected to be on Intuit’s Accountant Council in 2015 and becoming the first accounting firm in Canada to accept bitcoins as payment, Xen Accounting is constantly looking to break the mold of what an accounting firm would look like in the digital age.
For more information, please check out www.xenaccounting.com or our Twitter handle @XenAccounting.