Establishing an Accounting Department
Every start-up has the goal of rapid expansion, which may be measured by expedited development, bringing a product to market or through growth in sales. A company’s ability to garner investor funding in order to minimize obligations, can oftentimes be driven by one or more of these benchmarks. While growth is every company’s primary objective, it is easy to overlook investing in the accounting function. Many companies consider the accounting function unnecessary overhead, that can be costly. However, it is important to recognize that having a functioning accounting department helps to achieve this primary goal of growth. The accounting function, if well structured, can provide a better picture of how the company is doing financially (on a close to real time basis) and can help management decision making. Additionally, investors will want to see accurate financial statements before they invest.
Here a few things that you can do to develop the accounting department:
- Hire a qualified person, preferably a CPA. This person should have experience in GAAP reporting (or IFRS) and relevant industry experience. While this person may start out as a “one-person” show, he or she will be responsible for building the accounting team overtime.
- Establish processes for general areas such as: cash disbursements and receipts; receivables/sales; payables/purchases; inventory; equity contributions and disbursements; payroll; and maintaining customer data.
- Establish effective internal controls and policies. The processes listed above require effective internal controls to detect and monitor operations. Some internal controls to consider are proper segregation of duties and approval amongst company personnel, proper security of both the company’s and customer’s data, database to maintain all documents such as purchase invoices, purchase receipts, purchase orders, delivery/shipping documents, sales invoices, sales orders, checks, and contracts, and frequent account reconciliations. Most of these items can be accomplished through the use of quality accounting software and qualified personnel.
By giving the above items serious consideration, you will see the benefits outweigh the costs associated with building out this function.
Written by: Annette Tolentino, Manager