By David Rosa | Founders of small and fast-growing businesses have countless items to think about. Their most important job is to build and expand their product or service, but they also have other hats to wear, including managing the company finances.Having a robust financial management system in place is one of the most crucial aspects of starting a business. As a startup founder myself, I have learned that having strong foundations is critical and that skipping one of these steps can lead to headaches down the line.
First, to properly manage spending you will need to separate corporate and personal finances. Do this before you start receiving or making any payments–it’s easier to handle earnings and taxes later.
Some jurisdictions, such as Hong Kong, legally require a yearly accounting audit and separating your finances will simplify both bookkeeping and auditing. For that, you can open a traditional business bank account, or consider alternatives such as a digital bank account, which enables startups to open a current business account online and start operating sooner.
Proper bookkeeping is essential, so keep records of all transactions. I recommend using a cloud accounting service from day one. It’s easy and affordable to get started and has numerous advantages over Microsoft Excel, such as automated reporting. It will also be much simpler to share your data if you later decide to outsource your accounting to a third party.
It’s easy to track expenses when a company first starts up with a small team. Founders can see what’s being spent on things like transport and office supplies with just a few people.
However, a fast-growing startup will quickly bring on more staff who will need to make business purchases. With more people purchasing on behalf of the business and claiming expenses, management might lose visibility into spending, especially as they’re likely busy scaling the business. Worse yet, the company may get strangled because the boss is spending precious time managing every single expense.
Avoid spending hours reconciling paper receipts by relying on a digital expense management solution where staff can easily add pictures of receipts for every transaction, even on the go. The system then automatically creates a vital chronological record, saving a considerable amount of time in situations such as potential investors wanting to see your books.
Also, keeping track of deductible expenses makes it easier to prepare tax returns and can lower your tax bill. Moreover, having digital records of receipts attached to each transaction rather than keeping physical copies and manually sorting them will save hours each month.
When new businesses overlook these steps and take shortcuts, it can be challenging to establish processes or regain control later. Putting these processes in place will set you up for success.
David is a FinTech entrepreneur. He is the CEO and Co-Founder of Neat, Asia’s alternative to a traditional bank account for startups and young SMEs. David started his career at Citi where he became their youngest Managing Director in Asia. He then co-founded the Asian arm of Integral Capital Management which he sold in 2014 to focus on FinTech. Throughout his career he has been exposed to the extremes of managing teams across times zones in complex corporate environments all the way to agile business development for startups and related pivots to find product-market-fit.
David holds a BSc in Economics from the London School of Economics and is a Responsible Officer (Types 1, 4 and 9) under the Hong Kong SFC. David has been based in Hong Kong for the last 17 years.