Entrepreneurs need to take care of a multitude of functions to ensure a smooth operation of a business. Operations management, marketing, sales, and human resources are commonly talked about. As per Rumki Majumdar 90% startups fail in 1st 5 years, 45-50% die before seed funding, hence financial record keeping is equally critical and shouldn’t be overlooked.
In a survey carried out by Deloitte, financial discipline emerged as a critical factor for an organisation’s longevity and for optimising shareholder returns, as approximately 35% of participants affirmed.
Just like a compass helps a sailor navigate the sea, accurate financial records help startups remain on course, make informed decisions, and navigate the ever-changing economic landscape. Without smart financial management, business owners may fail to steer clear of potential financial pitfalls, face penalties, and miss out on achieving business opportunities.
However, not every Indian startup understands how to do smart financial record-keeping. In this blog, Finsmart Accounting – one of the most trusted accounting outsourcing companies in India – will outline its approach to financial management.
We will also share some valuable tips and insights that will help startups maintain accurate financial records, minimize losses, manage cash flow, meet legal, regulatory, and taxation authority needs, and improve financial analytics. Let’s get started!
What are Some Useful Tips and Insights to Smart Financial Record Keeping?
The following are useful tips and insights for Indian startups to consider for smart financial record keeping:
#1 Set a Schedule
Annie Dillard once said, “A schedule defends from chaos and whim. A net for catching days.” We agree with her. By setting a schedule for financial record-keeping, you can stay organized and avoid missing important financial deadlines.
Consider the following points in order to dedicate regular time to update your records:
- Frequency: First things first. Determine how often you need to update and maintain your financial records. Do you want to update them daily, weekly, or monthly?
- Timeframe: Done setting the frequency? Next, you need to set aside a specific time frame for financial record-keeping. For instance, you can schedule 30 minutes at the beginning or end of the workday to manage records.
- Type of records: Once you are done with deciding on frequency and time frame, think of the financial records type that needs your attention during each session. This might include updating your budget, reconciling your bank statements, or categorizing your expenses.
Make sure to stick with the newly-formed record management schedule as unwaveringly as possible. This will help you develop good habits and keep you on top of your startup’s finances.
#2 Get a Reliable System in Place
Since you run a startup in India, you already have so much on your plate. Maintaining financial paper records can add another layer of complexity to your already busy workload. How about getting a reliable system in place? Invest in accounting software solutions like Quickbooks, Sage, Xero, and Zoho Finance.
Not only do these accounting solutions handle a volume of financial records and make record-keeping much more efficient and less time-consuming but they also minimize the risks of errors and inaccuracies and provide easy access to the information you need to make informed financial decisions.
Getting a reliable system in place is especially beneficial for those startups whose time and resources are often in short supply. Just make certain to customize accounting software solutions to your specific needs. Invest some time to comprehend how to use them. Seek assistance if required.
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#3 Separate Professional and Personal Record Finances
Our financial experts believe that it’s best to think of your business as a separate individual. And by this, they mean a person from which you can only take income in the form of wages, dividends, and in claiming back business expenses against receipts. So, it’s smart to set up a business bank account. Use it exclusively for business-related expenses like paying for supplies, equipment, or services.
Also, keep receipts and other documentation for all business-related purchases separate from your personal financial records. By creating a clear boundary between your personal and professional finances, startups can protect personal assets, ensure compliance with relevant regulations, and guarantee long-term success of their businesses.
#4 Tightly Manage Expenses
Do you know what they say when it comes to managing expenses?
“Be watchful of your expenses with a hawk’s eye.
Tighten the purse strings for profits to multiply.”
Meaning, controlling expenses is very important for startups to maximize profits and achieve long-term success. Failing to do so can soon turn your finances into a mess, leading to unnecessary stress and frustration.
Keep a close eye on your business expenses. Monitor your expenses regularly and track them using accounting software or tools. Identify the areas where you can cut costs or invest more strategically to improve the bottom line. Focus on crucial expenses such as rent, utilities, and payroll. Also, evaluate discretionary expenses carefully. This is how smart financial record keeping happens!
#5 Keep Receipts
One of the most vital financial record-keeping tips for Indian startups to consider in 2023. Keeping receipts for all business-related purchases will assure that you have accurate and complete records of your expenses and can provide valuable information for tax purposes.
Establish a receipt system that works for you. Some startups prefer to keep physical copies of their receipts in a file or binder. Others prefer to use digital tools to store or organize receipts. Of these two options, if you are planning to go with the former, keep them in a safe and secure location. In a fireproof safe or locked cabinet, for example.
Also, organize your physical receipts by category or by date. This will make things easier, especially when you need them. For the latter, however, choose a reliable and secure receipt management platform. There are many apps and software programs that can help you scan and store receipts for accurate financial record keeping.
Expensify, Smart Receipts, ABUKAI expenses, and Zoho are some best tools to scan and manage receipts.
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#6 Make Security Priority
In 2023, security is not an option, It’s a requirement. Your financial records are the lifeblood of your startup and keeping them safe should be your top priority. Why? Because financial records comprise sensitive and valuable information about your business including bank account numbers, tax identification numbers, and financial transactions.
Failing to secure these financial records can lead to serious financial losses, legal issues, and damage to the business’s reputation. Consider these tips to keep your financial records safe and secure:
- Use strong passwords that are difficult to guess
- Provide financial records’ access only to team members who need them
- Use encryption to protect sensitive financial data
- Regularly backup your financial records either to an external hard drive or a cloud-based service like Google Drive or Dropbox
- Educate yourself and your team members about phishing scams that hackers can use to steal your financial records
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#7 Hire Accounting Professionals
Another useful financial record-keeping advice for Indian startups! Let’s be honest! Maintaining accounting records is not everyone’s cup of tea. If you find yourself struggling to keep up with financial record-keeping or if you are not certain about the best way to organize your records or track your expenses, consider hiring accounting professionals.
Accounting experts at Finsmart are known to provide valuable accounting guidance to Indian startups and help them manage finances in an effective manner. They will greatly save you time and money, reduce errors, and help in making informed financial decisions so your business can thrive.
Don’t believe us? Check out what one of our clients have to say about us:
Financial Record-Keeping Tips and ideas: End Note
Above are some useful tips for startups in India to maintain their financial records in 2023. By implementing these tips, you can make certain that your financial records are accurate, up-to-date, and attainable whenever you need them. We know implementing all these at once isn’t going to be an easy task. However, by executing them one by one at a time, you will be able to make informed decisions, reduce errors, and improve the financial health of your business.
Got any queries to ask? Send them to email@example.com and have them answered by our accounting experts.
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Shalaka Joshi is the founder of Finsmart Accounting and operates in the capacity of Director. A Chartered Accountant passionate about outsourcing and problem-solving, Shalaka has more than 20 years of experience in the field of accounting, payroll and MIS reports.