There is more to Accounting than AP… more to HR than Payroll
As Founder or CEO of an early stage company, activities like Accounting and Human Resources are often over-looked in order to focus solely on product development, sales, and engineering. While it’s true a sound business concept and plan are essential to starting, key back-office functions like accounting and HR must not be ignored. As quickly as money is invested, spent, and allocated — proper booking and recording of it is essential. As your VC-backed business starts to grow, the basic bookkeeping function must quickly transform into a professional and scalable accounting function. To arm the business down the road with detailed analyses such as a financial model, cash flow statement, and the basic ability to understand the business and its performance — implementing a good accounting function is critical.
Isn’t accounting just a simple process to track basic functions like Accounts Payable (AP) and Accounting Receivable (AR)?
While the foundation of accounting starts with posting debits & credits and handling the transactional side such as AP and AR, it goes way beyond these core activities as you continue to grow and scale your business. If one of your investors asks questions around cash runway or your strategy related to minimizing your expenses, how can you provide an answer unless you have been properly tracking the numbers and taking the time to understand what they mean. This is just one way in which accounting is more than handling your AP for example. Every business has its own cadence to its growth curve, but there is a lot more to accounting than simply processing AP. Additionally, your accounting function will consist of Month-end Close, Credit & Collections, Budgeting & Forecasting, and Cash Management.
Similarly, your Human Resources function is more than just processing payroll. While this may seem like the most important aspect of HR, it’s just one of the aspects of creating a strong HR function. In the aforementioned description of why Accounting is more than AP, building and maintaining a scalable HR function is equally as important. From hiring your first employee, there are many tasks to consider including implementing the right benefits program, selecting a 401(k) plan, creating an Employee Handbook, etc. Especially in a good economic climate, such as the current one, it’s vital to offer an attractive and competitive package for your employees. In a tightening labor market for core positions such as engineers, designers, app dev, it’s critical to develop an HR function to be able to hire and manage your employees.
While Accounting and HR may seem like back-office functions that aren’t relevant to the growth plan and future success of your business, they are in fact very important to align with core activities. Taking the time now in the early stage, startup mode to think about and set up Accounting and HR will help propel your business for future success.