Start-up Advice
SIN #6 FAILING TO MANAGE YOUR ACCOUNTS Adam Goff Founder of premium house share company Capital Living
“As any start up knows, income-producing activities always take priority over other daily tasks; but what happens when the income your business generates isn’t managed with sophisticated accounting? We found out the hard way. By our second year of business, we had grown rapidly and were turning over £1 million, without any proper accounting software; in fact, all of our books were kept through Excel! These spreadsheets were extremely time consuming, and believe it or not, but we had around 70,000 transactions recorded here! The functionality was limited, and didn’t allow us to see the necessary details drilled out as we would have liked.
“We knew we needed to migrate to Sage, but it took us about 10 months to finally start this transition, and in the end, not prioritising using proper accounting software cost us a fortune. Our financial control was faced with the very laborious challenge of imputing all previous transactions into our new system while keeping up with the daily transactions. My advice; don’t delay do something about your accounting now. There is affordable cloud-based accounting software available, and if you are starting a business you need to know about accounts. In addition, having drilled out accounting information will help you secure investors, often at unexpected points in your first few years.
SIN #7 OVERLOOKING THE LEGALS David Willbe Lawyer, Crowell & Moring
“One of the deadly sins that entrepreneurs often commit is treating ‘the legals’ as though they’re all one thing, rather than a category of things across the business which should be considered independently. When a start-up has only limited funds available, it may well be a good decision not to engage lawyers on some or most of their legal issues, but so many entrepreneurs treat it as an all-or-nothing proposition. The decision shouldn’t be ‘have we got enough spare cash to get lawyers involved in our business?’, it should be ‘what is the cost-benefit analysis of having lawyers look at issue x? Issue y? Issue z?’.
“The result of this is that all too often lawyers are not engaged in areas that are critical to the business or the structure of the company.
Startup A, which uses its website purely to market itself, might get away with writing the site’s terms and
conditions itself, but Startup B, which will sign up its users and conduct all of its business through its site, should be getting its terms drafted by professionals as a serious error there could severely damage its prospects of future investment or even continued trading. At best, the small saving today will lead to a bigger legal bill down the line when lawyers have to be engaged to fix the problem. Viewed in isolation that seems obvious, but in practice Startup B’s founders are likely used to thinking about ‘the legals’ as one thing, on which they can’t afford to get help – rather than considering the position each time there’s an issue.”
38 entrepreneurcountry
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