Stephanie G. TRAVIS
Providing outsourced bookkeeping and payroll services to several of Gainesville’s tech startups is fun and rewarding work. The founders use the latest and greatest productivity tools, keeping almost everything in the cloud. They are fired up, focused, motivated and creative. I’m inspired by these startups daily, and I’ve done well in my business by running it as a “lean startup.” I’ve also learned valuable lessons while working with Gainesville’s startups as I witnessed their failures and successes from the inside.
LESSON 1: KEEP IT “OLD-SCHOOL” WHEN CHOOSING ACCOUNTING SOFTWARE.
New cloud accounting software continues to pop up in attempts to carve out a share of the market and throw Intuit (QuickBooks) off the mountain. You must use software that CPAs and investors trust and know. When you need to provide a valuation, raise capital or sell your company, due diligence will be performed. If you are using software that is not trusted, you could lose the opportunity or be tasked with entering all your financial transactions into a trusted accounting software service.
I’ve seen startups mistake software that performs some of the accounting functions, such as tracking employees’ time and invoicing customers, for acceptable accounting software. Freshbooks and Harvest are good examples. A few years ago, Wave Accounting was popular among startups. Wave’s first iteration did not include a bank reconciliation function. This was a deal-breaker, and Wave knew it. Eventually, they added the feature.
LESSON 2: SAVE ALL YOUR BANK STATEMENTS, CANCELED CHECKS AND EXPENSE RECEIPTS.
Many of you who grew up in the cloud assume once a document is in the cloud, it can always be obtained. That is not true. When an investor or buyer performs due diligence, they will ask for bank statements, canceled check images and receipts for expenses. Get a system in place to save all these documents in a hybrid paper/electronic filing system. Also, make sure your bank statement (whether paper or electronic) contains images of canceled checks.
LESSON 3: MAKE SURE YOUR CONDUCT, EMPLOYEE’S CONDUCT AND COMPANY COMMUNICATIONS ARE PROFESSIONAL.
Although it may feel like you are operating in the Wild West and the traditional, stuffy rules of the corporate world do not apply to you, they do when it comes to professional conduct. If you or your employees engage in inappropriate conduct or speech (this includes spoken and electronic communications), you could be vulnerable to a lawsuit by an employee. I’ve seen this happen, and coincidentally it happened just after the startup received millions of dollars from investors.
LESSON 4: KEEP AS MUCH CONTROL AS YOU CAN OVER COMMUNICATIONS WITH EMPLOYEES AND CONTRACTORS.
There may be circumstances where you need to access past communications, or you are discussing sensitive information. Make sure all employees and individuals working as contractors use your company email domain to communicate. Don’t let them use their personal email. Now that we have Slack and other project management communication tools, stop using Skype. Skype accounts belong to individuals. If you are attached to Skype, then use Skype for Business.
LESSON 5: LEARN ABOUT THE LABOR LAWS AND FOLLOW THEM.
There are three areas where startups often violate labor laws and IRS rules:
1. Hiring unpaid interns without following the six criteria set forth by the Department of Labor.
2. Incorrectly classifying employees as exempt from overtime or not paying overtime to hourly employees.
3. Misclassifying workers as contractors when they should be paid as employees.
LESSON 6: MAKE SURE ALL FOUNDERS KNOW THE FINANCIAL NUMBERS AND ARE INVOLVED IN FINANCIAL DECISIONS.
Most startups designate one founder to be responsible for the financial issues. Segregation of duties is understandable, but each founder needs to report to the others and include each other in decisions. Keeping the peace among founders can be difficult, so transparency and open communication will serve you well.
Your startup is a non-traditional business model that operates lean so you can pivot fast. You need to take advantage of cutting-edge technology, workflow and management models. But you are still subject to many federal and state laws as well as financial and business best practices. When you know what the right thing to do is, do it. Don’t rationalize taking shortcuts thinking you are too small of a company, that you don’t have time or that you can’t afford to do it right. Taking shortcuts often creates situations that cost you more in the long run. Doing the right thing is always the lean way to go.
Stephanie G Travis lives in Gainesville, FL, providing bookkeeping services to Gainesville’s tech startups under her company One Source Accounting. She also provides cash flow management tools and consulting to SMBs under her company Cash Flow Signals.