Top five reasons why early stage companies should adopt cloud accounting solutions
It’s easy to see why so many early stage companies de-emphasize their bookkeeping and accounting. After all, in those crucial first few years, the focus is on product development and marketing, and the priority is saving money. Many early stage companies don’t want to spend anything on an accountant until they absolutely have to.
However, there are far-reaching consequences to letting your bookkeeping slide. This is particularly apparent when it comes to raising money.
“We’ve seen deals that have had to be delayed significantly because the company is not up to date on their books,” says Amit Khanna, Senior Advisor for Deloitte Private. Sooner or later, a potential investor is going to ask for financial data. “You can either have the data the next day and start the process, or take a month to get your information together,” Khanna continues. “That means a month of burn and a month more of uncertainty.”
Rather than look at accounting as an expense, Khanna advises early stage organizations to consider it an investment. Well-maintained books will bolster your credibility, show you where money is being spent, and give you the ability to make better, more data-driven decisions.
Of course, while properly maintained accounting and bookkeeping is beneficial, it’s in the cloud where the advantages are most evident, particularly for early stage companies. Here are the top five reasons why.
1. Real-time access from anywhere
Rapidly growing startups often cite the cloud’s ability to provide real-time, 24/7 access from any location as a critical advantage.
“Most helpful was that I could, in more or less real time, get an accurate picture of the business,” says Ravin Shah, founder and former co-CEO of Quick Tap Survey, a recently acquired online survey platform. “I could run my financial reports on demand, and see the impact of what we’d been doing over the last week, the last month, the last year. That meant I’d be able to adjust really quickly and flag areas where we overspent or underspent. That was super powerful and allowed us to make really good decisions around where we were going to take risks and what our exposure was. And I didn’t have to rely on, ‘Oh, hey, can you get me a report?’ I just log in.”
This provides a significant speed advantage over competitors. “Having anything on a desktop is making you very un-agile,” warns Corey Noyek, Finance Manager at online catering platform Platterz and a former Deloitte professional. “Once, I was on an engagement and someone couldn’t make it into the office. It slowed down the whole process because they didn’t have any of their information.”
“Having everything cloud-based, where everyone can check in from wherever they are is, I think, a game-changer,” echoes Sabaa Quao, founder of content marketing company Newsrooms. “Even though we have an office, I’m a father of two young boys, so my day can change suddenly. Being able to access information from anywhere allows the flexibility I need.”
Cloud-based accounting allows startups to provide the same timely access to data for other stakeholders as well. Impromptu meeting with your advisor? Sudden demand for financials from a potential investor? With a cloud solution, you can call up any piece of data you need, on the spot, and keep key players informed with minimal effort.
2. Built-in scalability
Virtually every early stage company leader we spoke to pointed out another key benefit of cloud accounting: its ability to seamlessly scale.
“We’re growing the team,” says Nishaant Sangaavi, co-founder and CEO of EnergyX, an energy management solutions business. “So as we keep adding more and more people to our payroll, it’s so easy just to go ahead and make that happen.”
As business needs change and expand, you’ll need different, more advanced tools. “With cloud accounting,” Amit Khanna points out, “all the apps are plug and play. So you can add what you need without having to buy the whole suite at the beginning.”
3. Automated operations
At many early stage organizations, it can sometimes feel like there’s simply no time for the accounting. That’s why cloud solutions’ ability to cut out the paperwork and automate processes is so valuable.
“We were effectively paperless,” says Ravin Shah. “And we automated a lot of the back office stuff. I rarely had to collect receipts. Other than cash purchases, everything else was done behind the scenes. I never touched a single expense. It was all just magically fed into my profit-and-loss report.”
The contrast with less agile competitors is clear. “A lot of non-cloud computing still involves manual work, physical copying and downloading,” adds Corey Noyek. “I found that when using Xero and Netsuite, everything—for example, an audit trail—is maintained in the actual system, and you can get it from anywhere.”
4. Analytics and insights
Of course, it’s not just about automating data. Cloud solutions offer the ability to take that data and use it to generate reports and big-picture views.
“The analytics that come with our accounting software allow us to really know exactly where we are in the sales cycle,” says Nishaant Sangaavi. “We’re constantly measuring some key metrics: MRR, user growth, and cost of customer acquisition, for example. We continually look at those metrics in terms of how we evaluate our own business growth. Then we course correct every month. It truly becomes very integrated with the way we grow the company.”
5. No-surprises pricing
In business, no one likes surprises, especially when it comes to expenses. Cloud-based accounting, with its fixed monthly subscription cost, offers a high degree of certainty.
“By having the cloud take care of a lot of the input, and leveraging automated categorization, the bookkeepers can spend more time doing focused work instead of the boring, monotonous work,” says Ravin Shah. “It was a huge cost advantage for us, and it’s predictable: I know what I’m paying every month. It’s not like one month we pay $300 and the next month it’s $700.”
6. Which solution is right for your business?
It’s not hard to see how cloud-based accounting benefits all early stage organizations. With a few simple guidelines, selecting the right solution for your business can be straightforward as well.
“Plan out, and see where you’re going to grow,” Corey Noyek advises, to ensure the solution meets your organization’s needs. Noyek points to his company’s current option, which, he says, “is great for local operations. But now that we’re multinational, multi-currency, multi-entity, it doesn’t actually do the accounting that we need.”
“They’re all good to a certain degree, but they’re not all the same,” says Amit Khanna. “For instance, some systems don’t integrate with other systems, so make sure you have an integrated solution in which all the apps you’ll need can talk to each other.”
You’ll want your solution to come with excellent backing as well. A free app might look appealing, but will often require you to pay for any support. “Free does come with costs down the line,” Khanna warns.
“Similarly,” he adds, “scalability is very important. You don’t want to choose a system that caps out a capability you’re probably going to break through quickly.”
Finally, it can make sense to investigate what additional advantages each solution offers beyond the basics.
Among the business leaders we spoke to, each went with a different option based on their specific requirements. Sabaa Quao chose Deloitte’s own solution, ctrl. “It’s great to have Deloitte’s name when you’re starting out,” he explains. “It actually changes the tone of the discussion. People are less likely to say, ‘Oh, someone’s gaming around the books.’ Huge difference.”
Quao was also drawn to the fact that ctrl includes the services of a Deloitte advisor. “It’s a big deal because, when you ask a question, they’re coming at it neutrally,” he says. “They answer in a very neutral way, as opposed to someone who, within your organization, may be worried about making a mistake. I find I get incredibly clean guidance and answers to my questions.”
No matter which solution you choose, cloud accounting is a smart investment. And while cloud-based services won’t make your challenges go away, they will make it easier for you to handle them.