There are at least 3 processes involved:
- keeping and storing records
- recording and compiling transactions
- financial reporting
from a startup’s perspective, accounting software is very badly designed – because the focus is on financial reporting instead of the first 2 processes – and startups are more interested in tax compliance than financial reporting.
If you think about it from the perspective of accounting software publishers, it makes sense from a marketing point of view to put the focus on ‘producing financial statements at the press of a button’
It doesn’t matter much that the numbers aren’t reliable and that management doesn’t know how to interpret them. They look exactly like financial statements – and you don’t need to pay an accountant to produce them. After all, you may not really understand your accountant’s statements either.
As a software developer would you really want to build a sales campaign around something that is supposed to keep your books and records organized? Perhaps the campaign would look like:
Makes Keeping Records Fun!
Try saying that with a straight face. Keeping books and records is necessary for any business. However it is hard to think of it as fun!
The good news is that financial reporting is rarely an issue for startups. It only becomes an issue when other people put money in your business and are sophisticated enough to demand – and understand – financial statements. For startups and seed stage companies, only friends and family are likely (stupid enough) to put money in your company.
Of course you will still need to report to the tax authorities.