Lean Accounting for Startups

Everyone is looking for bookkeeping that can be done automatically ‘at the touch of a button’.

 

 

According to their website Kashoo is the #1 accounting software for ease-of-use

 

 

 

 

 

And it’s pretty clear that Intuit’s Quickbooks™ would like you to believe that Quickbooks™ is quick and easy to use

The sad truth is that any double entry accounting system isn’t really simple or quick, particularly if you’re not trained as a bookkeeper. It isn’t as simple as linking your bank accounts and credit cards to an online accounting package and having the software do it all for you automatically – in spite of what software vendors say.

That isn’t to say that there aren’t good online accounting software packages. In fact we recommend these 3:

1 Quickbooks
2 Xero
3 Wave Accounting

However these systems are designed for bookkeepers. They actually require a knowledge of double-entry bookkeeping to use well. If you have a good bookkeeper they will recommend an accounting package that they are comfortable with. Put your effort into hiring a good bookkeeper if you really need reliable monthly financials. 

While monthly bookkeeping may be optional for some startups, the same can’t be said for invoicing, accounts receivable and payroll. All of us need  regular doses of cash to survive. And we need to do a good job of record-keeping, which isn’t the same as bookkeeping.

When I first started working as an accountant – a long time ago now – public accountants invariably relied on paper-based spreadsheets called columnar journals for their small business clients. They had their clients or their staff ‘write up the bank’ in journals transcribed from printed bank statements and ‘cancelled cheques’. That was surprisingly efficient and virtually all small, local CPA firms used similar systems.

Online Banking Makes After-The-Fact Bookkeeping Much Simpler

These days most banks offer online banking which means that you can download bank and credit card transactions into a spreadsheet-compatible file (typically CSV for ‘comma separated value’). A skilled technician can take a downloaded file, restructure it somewhat for ease-of-use with lookup tables etc., categorize individual records and then summarize a year’s worth of transactions in minutes using pivot tables.

To be honest we often do something similar with online accounting records provided by startups. Frequently the bookkeeping can’t actually be relied upon. So the first step is often to export the bank accounts to a spreadsheet and compare them with the bank statements in order to identify missing and incorrectly recorded transactions.