Managing company spend was a common question from our webinar, so as part of our #FinancialConfidence series, we’re sharing our 5-step framework to help founders monitor spend. Overcome challenges including keeping track of expenses and working from worthless financial reports, with a framework that will help you increase ROI and stress less about your finances. Check out our video presentation below for all the highlights so you can get on top of your finances.
Setting up your chart of accounts
A chart of accounts is how you decide to organise all of your transactions. For example, if you spend money on a tool or service, how will you classify that expense on your financial reports? If you use accounting software, it probably already provides some classification options that you can easily adopt. However, as your startup scales up, you’ll want more in-depth information from your financials expenses so organising those different transactions will become increasingly important.
Creating a budget
It’s not uncommon to hear founders complain that they’re looking at their financial reports but failing to get value out of them. For example, if you spent £50,000 on marketing last month, how do you show whether or not that was an overspend or an underspend? By having a budget with a monthly benchmark figure to compare it to, you’ll have a better idea of what your actual marketing spend is so you can tell if you’re performing well against the financial plan that you’ve put in place.
Solid reporting software
The key recommended tools for bookkeeping are Excel or Google sheets for more simple finance management, Xero or QuickBooks for easy online accounting software and Fathom for financial reporting. Upgrading from paperwork to an online tool helps to automate most manual processes so once you set up your budget, you can upload it to get a nicely organised monthly report.
Upgrading your finance team
A common frustration from founders is their accountants are incompetent and not providing sufficient value or return on investment. As your startup grows, the business expectations will naturally change so you need smart accountants who will help you stay ahead. When profits and expenses start to increase, processes will have to change accordingly and you may need to upgrade your team to support the business growth to meet expectations.
Monthly finance reviews
Make sure you’re gathering the right people for your monthly reviews, whether that’s your accountant, bookkeeper, CFO or finance manager, this person is going to be your accountability partner. So you need to make sure that everyone is kept up to speed on your financial plans. The review is also an opportunity to share feedback on key numbers and transactions so the whole team has visibility over the company spend. This feedback loop will help you come up with a budget comparison and a transactions list. With the budget comparison, you’ll be looking for variances in estimated and actual spend. The transactions list provides details on each business transaction on a more granular level and that’s the feedback loop that will be extremely helpful for your finance team.