Did you know that 90% of tech startups fail? It’s a tough field to crack. Especially if you want to be the next Google or are hoping to operate in Silicon Valley. While most tech startups look to talent acquisition, market positioning, or business development to stop their dream from becoming “just a statistic,” hiring an outsourced accounting department can prevent new companies from going under.
When you hire an outsourced accountant, you’re hiring a team whose top priority is to keep your tech startup’s finances on track and your business afloat. While a business development professional can bring in new business or better market positioning can help you sell more of your product, an outsourced accounting department brings balance to your organization.
Here’s how:
Outsourced Accounting Provides Financial Strategy
What’s your current financial strategy? Too often the go-to financial strategy is to just move fast and break stuff – sell more or cut expenses or hire superstar talent. Unfortunately for failing tech startups, financial strategy involves much more than just moving product.
If you want your tech startup to succeed, you need an expert who can guide your company through financial challenges. Your financial strategy should involve tracking key metrics, creating monthly or weekly reports, setting goals and working hard to achieve them. Your finances are the black-and-white of how well your company is performing. Are you growing or stagnant? Do you have enough cash to last the month?
Without an expert financial strategy, it’s easy to find yourself drowning in debt or barely breaking even. An outsourced accountant can help you find balance with your finances, even through a period of rapid growth or steep decline.
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Track the Right Metrics for Success
What metrics are you tracking for your company? Are you tracking the right ones? None at all? Data is the hardline truth for your company. If you’re just tracking your income and expenses or other generic metrics, then you’re not doing enough. An outsourced accounting department can help you track metrics that matter to give you an accurate picture of how your company is performing.
When recorded properly, financial metrics can point out possible future challenges or areas you can expand into. Great record keeping can also help you define how much your tech startup is worth. For example, your gross and net margin can help you nail down your company’s profitability. Sales growth over time can show you the worth of your product or service.
Tracking metrics and creating reports may not seem glamorous or entrepreneurial. But it’s important to show you if your company is on the path to success or the road to failure.
Prevent Surprise Issues
Red flags should never come as a surprise. If they do, then you haven’t been tracking your metrics correctly. An outsourced accounting department can not only create vital reports but also provide you with the expertise you need to analyze your company’s metrics. Your accountant can point out any red flags before they become a true problem. Your gross margin has dropped for the second month in a row? That might be something to fix.
Good analysis of financial reports doesn’t just prevent financial issues, it can point to issues in other departments as well. Business development employees might be spending too much on schmoozing with potential clients. Or your developer could be inefficient and taking far too long managing client requests or building product. This inefficiency or over-spending all shows up on the financial reports.
Understanding the ins and outs of financial reporting can help you make important decisions in various departments across your startup.
Forecast Financial Goals
What are your goals for the future of your startup? Maybe you want to take it public or grow to over 100 employees. In order to reach any of your goals, no matter what they may be, you need to have financial goals as well. Financial goals could include an increased profit margin, a higher average employee salary, or at least 10% profit growth year over year.
Achieving your financial goals can have a tremendous impact across your company. An increased profit margin means more cash flow and more flexibility with expenses to provide your employees with better benefits. A higher average employee salary allows you to attract better talent. 10% year over year growth means your company is growing at an impressive pace.
An outsourced accounting department can help you identify which financial goals are feasible and which should be reconsidered. Without realistic growth based on pre-defined financial goals, your tech startup could stagnate and fail. Your accounting team can prevent that by showing you how to reach your goals.
Grow with Global Shared Services
Global Shared Services has been helping tech startups like you beat the statistics and become part of the 10% that succeed. We’re proud to help your startup grow and reach its goals. Position your business for success with F&A services priced below the market and led by a team that performs above it. If you’re ready to increase the operational efficiency of your startup, let’s talk.