By : Akhil Gopakumar
Maintaining Financial Records in a Startup
Having good clients and maintaining good relation with them is most important part for the successful running of a startup company. This will also make sure the money inflow is good. When the money inflow is good, then comes the next important and challenging task of maintaining proper financial records. It is the cleanest and proper way to show the outside world of what progress you are making. This task can be done without much headache if you do it on a daily basis. So let’s discuss how to maintain proper financial records and how to control the money flow in an effective way.
Bookkeeping involves recording of all financial transactions like income generated for completing a job and expenses such as salary, inventory purchase, rent payable (if any), repayment of loan (if any), bill payments (electricity, internet etc.) and miscellaneous expenses. So do it in such a way that it also provide all the essential information against a particular financial transaction.
In a startup firm employing someone to maintain financial records is quite difficult. So it is advisable that any of the co-founder take over this task as it won’t be that difficult in the starting. You can use excel sheets for maintaining it in the beginning and later can use the help of any accounting software (eg. Tally).
Key points which will help in maintaining proper financial records:
1) Collect and keep in safe custody of all the documents like cheque book records, bank deposit slips, bills and receipts from various vendors for the purchase of any items, invoices issued to customers and finally the bank statements.
2) Record all the details of expenses in company voucher and pin it together with collected documents (bills, receipts) and file it. The same information should also be recorded in excel sheets with relevant details and date of the transaction. This will also allow you to have a hard copy of the transaction along with bills or other documents, and a soft copy of the same for a quicker glance.
3) Keep all the hard copies in safe custody according to the date these transactions took place. All these things does matter because at the end of the financial year, it will be easy for your auditor to file your returns. Because you have maintained it in a simple but effective way. Rather providing him with a bunch of bills, receipts and other documents, some of them even you won’t be having no idea of what it is. Also writing vouchers and keeping the documents tied with them gives a good idea of what transaction took place and when it happened.
Introduction to Account Books
Most of the transactions will be going through the cash account. So always keep an eye on it. Record the details of cash-in-hand and cash-in-bank. Record any inflow or outflow occurring in any of these two accounts with proper documents (bills, invoices etc.). As a result you will be able to know how much money you have left with you so that you will be able to plan according that.
This book is to record the money which is due from your customers/clients for any products sold or for services provided to them.
This account book should consist of all the inventory you have purchased for the company. It can include the number of computer systems purchased, number of keyboards, mouse, mobile phones purchased for testing (for IT firms) and all other related accessories. For hardware or physical goods manufacturing firms all the details of goods which are ready to sell, work in progress and the details of raw materials can be entered into this book. This book should be updated periodically. By doing this you will be able to track how much goods or raw materials are used and how much are left and can plan accordingly.
This book should contain information about money your business owes to others. It may also include money payable to employees, money payable to government agencies as for tax etc.
This book has details regarding the amount loaned to company. It can be from the shareholders, banks, various government agencies or from any private party.
All the income received to the company comes under this book. The income generated can be from selling the products/goods or for services provided to the customers/clients by the company.
All the expenses incurred by the company comes in this book. For ease categorize them into office expenses, rents, electricity bills, internet bill and miscellaneous expenses etc.
This may be biggest expense for most of the companies. Categorize them into salary paid to the employee, bonus, allowances and insurance (if any).
These things can be done with minimal effort if they are done on day to day basis. As a result, proper records can be kept and maintained until you are big enough to employ a professionally qualified personnel.