November 11

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4 Signs You’ve Grown out of Start-Up Accounting Practices

We help companies get through the initial stages and guide them through the appropriate financial and management practices needed to build a truly lasting business. We know that 75% of startups will fail. We firmly believe that as long as they have the right processes and systems, our startups can be in the 25% of successful companies. Leaving the “start-up” stage has nothing to do with investors or market attractiveness. deeper. This is related to how your company operates. Here are some signs that you have exited the startup mode and entered a stable state.

 

1. You Review the Books Regularly

You or someone on the team is already responsible for ensuring monthly checks and reconciliations. You and your team are reviewing the results, getting guidance when needed, and making changes in response. You see the value of agility, in timely data.

Every business needs proper accounting software. They are getting cheaper and easier to use, and there are many applications and add-ons that enable them to perform your business specific functions. Therefore, please implement it now.

2. You Have an Annual Budget and Monthly Forecasts, and You Review Them Regularly

Your annual budget line by line represents your financial goals for this year. You have considered the additional costs required to support the additional income you expect. Please no ‘hopes’.

Your forecast is a prediction of where you are actually heading and is updated monthly with real data from closed books. This keeps you laser focused on where you need to make improvements, and creates accountability for your team to get real about (1) how things are really going, and (2) who needs to jump in to fix things. For example, if revenues are forecasted to be lower than budget, you might bring in a sales or marketing consultant for some fresh ideas. Or if production costs are forecasted to be lower than budget, you might have some extra cash to spend on growth in the coming months.

 

3. You Know The Gross Profit Margin of Each Major Product or Service You Offer

Investors don’t care about revenue, they care about making money. You may grow into a company with more than than $100 million in revenue and lose money every year.

Mature companies use accounting software properly to track income and expenses related to main products. In this way, you can calculate the gross profit margin of these products and determine which products and services are killing you and which are helping you. Then you can make adjustments as needed. Once you have this information, you can review your pricing strategy and ensure that you don’t make excessive decisions against the competition and bankrupt yourself.

 

4. Reliable Revenue Above Break-Even

You can reasonably rely on income streams that are above the break-even point, so you can ensure that you can make a profit every month, and there is no problem. The premise is that you know the break-even point, and the premise is that you understand the fixed expenses and variable expenses. Got it? Now you have some decisions about expansion and how to determine fixed, semi-fixed and variable expenses. It’s important to ask for help with this from a professional CFO.

 

Conclusion

There are many ways your startup can fail due to poor accounting and finance practices, but only a few ways to be successful. We suggest you get expert help in this area. Please contact us to find out more about how to set your accounting, finance and HR functions up for success.

 

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