As I grow, how should I think about my bookkeeping?
Q: Currently, my business is small enough that I use spreadsheets to keep track of things and do everything manually. As I grow, how should I think about my bookkeeping? What should I automate first, what tools should I consider?
A: This is such a great question! I hear this a lot from my fellow business owners. It’s great that you are taking your organization seriously and seeking ways to be more efficient (go, you!). Here’s my advice for those of you who rely on spreadsheets for your finances and what I recommend to make the process even more seamless.
When you’re first starting out it’s tempting to exclusively use Excel to track your revenue/expenses. I mean, it’s user-friendly and probably already downloaded on your computer, I totally get it. However, you don’t have access to great metrics and you rely on manual entry. We’re all human and mistakes happen, so let’s leave minimal room for error and consider investing in an accounting system.
Retroactively updating your books can be time consuming and errors will end up costing you more in the long run and as always, we want to work smarter, not harder! Without the use of an accounting system, it’s more difficult to keep an eye on trends, data, payments, inventory, what products/services are bringing in the most money, how much you are paying each of your vendors, etc. You may be missing things that lead to overspending or not getting paid in a timely manner (or at all for that matter). This also pushes you to create good habits with tracking your finances. You don’t have to start anywhere too complex. Just start. My clients and team use QuickBooks Online, which offers multiple packages based on your needs, though there are various other softwares to choose from.
Here’s a short checklist of things to think about before you make the switch.
Do you need to create invoices and/or take online payments?
Do you need to track expenses/reimbursements from clients?
Does your business provide products or services?
Do you track inventory?
After you get a handle on your current needs, do your best to anticipate future ones and then you are ready to get started. If you still feel wary of getting onto an accounting platform, consider hiring a financial guide to at least help you get set up. You can read more about this in our recent Ask Ruchi!
Here’s to your prosperity!
-Ruchi