Start-up Business – Options for Accounting and Financial Operations (Part 1)
There are 3 different options for managing your Start-Up venture’s accounting and financial operations, the Do-It-Yourself approach, outsourcing to a CFO/Accounting Firm, or hiring the employees directly. Each of these approaches has both positives and negatives and each may be the right fit for your Start-Up at different times of the growth cycle. This blog will address the first option: Do-it-Yourself approach.
The Do-It-Yourself (DIY) approach is where the entrepreneur will handle the accounting and financial operations themselves. There are many positive and negative aspects to this approach, so let’s address both aspects of this to help determine if this approach fits your current business needs.
Some of the positive aspects of the DIY approach are as follows:
- Low costs. Since the entrepreneur is providing the majority of the accounting and financial operations themselves there is little financial cost for doing so (ie. No need to hire any staff at a weekly or monthly cost).
- No staff training or oversight required of the entrepreneur. The burden of overseeing and managing employees will not exist if none are hired.
- Keeping overhead and staff to a minimum helps keep the start-up lean and flexible as the company starts out.
Some of the negative aspects to the DIY approach are as follows:
- Best use of the entrepreneur/owner’s time. Spending time managing the day to day cash management, bill paying, etc. can be very time consuming and take away from what the entrepreneur needs to be doing to grow the business effectively.
- Not having the expertise in managing financial operations can lead to missteps that could lead to stalling the company growth or even to its eventual failure.
When a new company is starting out the entrepreneur/owner can wear many hats and control many aspects of the company. They can keep the company lean during the early stages of development to better manage cash flows. In the early stages the cost savings by the DIY approach can outweigh the possible negative outcomes from doing so. In those instances it can make the most sense to take the DIY approach. It is recommended that you take this approach cautiously and continue to evaluate the need to move on to one of the other options (outsourcing or hiring employees.)