Timely or accurate financial information – which one is more important for a tech startup? Both, I hear you say. You are not wrong, and in an ideal world you have accurate financial information at your fingertips in a timely manner. However, in a growing company, like a tech startup, speed can be essential when it comes to decision-making. To facilitate those decisions, you need timely information that is roughly right more than you need absolutely perfect information. Here are the reasons why.
The Basis of All Decisions
Financial information influences all business decisions to some degree. Perhaps that was not obvious when you were sitting at your kitchen table sketching your big idea on a napkin. But part of you would have been considering whether you can make money from your idea someday. As your idea became a startup and then a growing company, you made more decisions based on finances.
Could you afford to upgrade your office equipment? How much funding do you need to generate to help you hire the team you need? Are your first sales enough to hire another salesperson? To answer any of these questions with any certainty you need to look at your financial information.
But here is the thing: to answer your questions roughly right information is good enough. What do I mean by that?
The concept is simple: for most early-stage business decisions, up-to-date, roughly right information benefits you more than data that is perfect but months old.
Take the start of the pandemic, for example. Within weeks, many industries had to make severe adjustments to survive. Looking at their figures from 12 months prior didn’t provide the information they needed. Last month’s sales figures, even if they were not yet perfectly tidied up, were much more useful.
Those recent figures allowed owners to decide how to shepherd the business through pandemic requirements. Accuracy to the penny was not required, and there was no time to prepare reports to that level.
How to Get Easy Access to Timely Financial Information
As a founder or business owner, you don’t need to be an accountant to get an overview of the company’s financial situation.
Modern bookkeeping and accounting software like Xero is designed with the user experience in mind. That means you have a dashboard that allows you to assess your company’s financial situation at a glance. At the same time, the software gives your finance team access to the sophisticated professional-level tools they need to ensure you don’t miss tax deadlines or other important payments.
By using automation tools such as Hubdoc or Dext Prepare where possible, you can cut down on the time needed to compile financial reports, too. Bank feeds mean transactions can be added to your accounts system much faster, giving you access to near real-time information.
Your bookkeeper or accountant may make some adjustments at the end of the month, but they rarely change the bigger picture. No matter when you log in, you quickly gain a good grasp of your company’s financial situation.
Why Regularity Sometimes Trumps Accuracy
Especially if numbers are not your forte, it’s too easy to avoid looking at financial information regularly. However, that could be a mistake. Ignoring numbers for too long can lead to nasty surprises.
Reviewing finances regularly has several benefits:
- More insight: you will understand your business better if you review its financial situation regularly. You will see seasonal sales trends but also spot tight spots before they become problematic.
- No missed opportunities: becoming familiar with your company’s financial situation helps you spot and take advantage of business opportunities. You can make decisions faster, based on solid facts.
- More comfort: even if numbers are not your favourite, checking your company’s finances regularly means you extend your comfort zone. Numbers may just become something better than a necessary evil.
The alternative would be to wait for fully prepared, detailed financial information from your accountants. However, this type of information is often prepared in retrospect. By the time it needs to be supplied to the authorities it can be too late to take advantage of ad-hoc business opportunities. It might also be too late to prevent cashflow issues as they arise.
Timely financial information that is accurate enough is one of the most versatile tools at your disposal to help run your early-stage business successfully. If you’re not using bookkeeping and accounting software yet, we highly recommend you consider it. Feel free to get in touch to find out more.