Startup CXO

Chapter 12Operational Accounting

During the startup journey, establishing a scalable accounting back office will pay dividends later on. It's a lot easier to create an accounting back office early and modify it as you grow than find yourself scrambling to put something together under a tight deadline. An alternative to doing all the work yourself is to outsource some standard tasks, and many firms outsource bookkeeping, for example, but keep other activities in‐house. The benefit of this plan is that (1) you will not need to focus on basic vendor payments, expense logging, and revenue recognition, and (2) the third‐party company will typically set up a default chart of accounts and expense tagging approach that makes the most sense for your type of business. But there are few areas you want to keep an eye on even in the early days.

Early on, you will likely use a lightweight accounting system, especially if you're using a third‐party bookkeeper. During the onboarding of the bookkeeper, you will want to cover a few areas, most notably the chart of accounts. Review the chart of accounts to make sure you have the appropriate detail in them in order to do your required financial reporting. A useful process is to lay out what you would like your income statement and balance sheet to look like and ask yourself what questions you will need to answer. For example, how will revenue need to be broken out? Each journal entry needs proper support ideally attached to the entry in the system, ...