Top 10 Tips for clean & crisp Financial Structures in Start-Ups

1st of the top 10 tips for clean & crisp financial structures:

A hole puncher

Buy yourself a hole puncher 😉 Going completely paperless probably won’t happen so quickly (at least in Germany) and there are documents that must be stored (by law). See retention periods in Germany: https://aufbewahrungsfristen.org/. A few folders, some dividers and a hole puncher will bring order to mountains of paper. Clean up your desk once a week. Believe me, a hole puncher is a good start.

As a side-note: the retention period also applies to the invoices incoming via email. Here you should create an online-archive that cannot be deleted.

2nd of the top 10 tips for clean & crisp financial structures:

The right team

Who should join the finance team first? Do I need an accountant from the very start?

I recommend that you leave the accounting to the tax advisor for now. Focus on your idea and the development of your business. If you have finance know-how yourself as a founder, you can look for a reliable person for the preliminary accounting and other administrative tasks. Maybe an office manager can take care of the preliminary accounting, but in my experience, he/she often lacks numerical understanding. I recommend hiring a finance all-rounder, who take the load off from you in caring about processes, accounting set-ups, receipts or any financial issues and is taking care of contracts, orders, controlling set-up, analysis and communication with the tax consultant.

3rd of the top 10 tips for clean & crisp financial structures:

The right tax advisor

For me, one of the most important (and the most difficult) tasks. A good tax advisor will save you a lot of headaches. It is important that you can work with him/her digitally. Unfortunately, there are still relatively few of them. To be able to transmit your receipts in a digital form is a must. Pre-booking is done directly in the cloud. Also, check if your potential tax accountant is familiar with travel expense tools and pre-booking tools that have interfaces to his/her accounting software. Your tax advisor should help you setting up everything up as automated as possible and not ask you to send him any binders with papers.

4th of the top 10 tips for clean & crisp financial structures:

Chart of accounts and guidelines

Your tax advisor will help you choosing a chart of accounts. If your business is still in its infancy, I recommend keeping it as uncomplicated as possible. The chart of accounts should be aligned with your financial structure and help you monitoring and understanding income and expenses. Agree with your tax advisor not to inflate the chart of accounts unnecessarily. In my Toolbox, I show you an example of how a simple chart of accounts could look like. It also makes sense to invest some time in an Accounting Guideline. It should be clear what is booked to the respective accounts and what should not. Clear guidelines simplify the pre-accounting and allow you to get more reliable outcome to analyze. You probably know the sentence „shit in – shit out“. If you invest a little time in setting up clear structures right at the beginning the less chaos will be on the accounts once your business is growing. Here too, I provide you with more insights in my Toolbox like sample templates and a process guideline that you can use as a reference.

5th of the top 10 tips for clean & crisp financial structures:

Invoice ledger and approval process

No booking without a receipt: It is important to have an overview of all incoming invoices. Whether for the suppliers who ask why this or that invoice has not been paid, whether for internal questions or for cash planning. It is tedious and time-consuming to ask the tax consultant every time for the answer to the above-mentioned questions. In my experience, a very simple excel sheet is sufficient for the stage you are currently in. You add invoice date, supplier, short description of what the invoice was for, payment date, payment method, if and by whom it was approved, and account + cost center. You can find a template in my Toolbox. I promise you, once you get more than 10 invoices per week, this list will save you some headaches. How can I make sure that invoices don’t get lost? Create an invoice@adress. Most invoices probably come via email anyway. In the inbox create a few folders, e.g. to-do, approved, open, etc. More detailed examples plus a process description you can find in chapter 2 of my Toolbox. The more organized you are, the less grey hair you will have at the end of the year when it’s time for the tax return and the year-end closing. All the above-mentioned examples are super easy and free to implement.

6th of the top 10 tips for clean & crisp financial structures:

Buy the right tools

One day you may reach the point where excel is not enough anymore. There are many great tool providers on the market, but also a lot of nonsense. If you want to implement tools, talk to your tax advisor. It is important that the integration with your accounting system is available. Otherwise, this step is of no use at all. There are many tools that help you to collect invoices for purchasing, travel expenses, budgeting, pre-booking, etc. Do not make hasty decisions. Look at multiple solutions, talk to other departments that should also work with the tools to get their buy-in. Ask yourself the right questions and what exactly needs to be solved. I will be happy to evaluate your processes with you and advise you on this. In my Toolbox, I present a landscape showing where tools can help and how the perfect process could look like to implement those.

7th of the top 10 tips for clean & crisp financial structures:

Monthly closing and checklist

Whether you are already reporting to investors or not, set a fixed date with your accountant and do a monthly closing. As a founder, you need regular reports and evaluations to manage your company and make the right decisions. Now, a monthly closing is indispensable. It provides you with the necessary data basis and helps to understand how much money you burn in the month and for what. In my Toolbox I have a this list for you, which should be checked off monthly by you or your finance team. With a checklist nothing will be forgotten. A clean monthly financial statement will let you sleep better, and you have the transparency you always need for taking the right decisions. It doesn’t have to be a science, but the basics should always be ticked. It also makes it easier for you to close the year and you don’t have to go back to day 1, running for old receipts or documents.

8th of the top 10 tips for clean & crisp financial structures:

Managing Cash

What most start-ups lack is not ideas, but money. It is therefore even more important to know exactly when your last cent will be used up and not just a week before. Long-term cash planning will save your butt. Fundraising is not planned within 2 weeks, so you need to know at least 6-12 months in advance where the journey is going or how long your cash will be enough to cover all fixed costs. Set up a simple cash reporting system. This includes the actual monthly inflows (bank deposits) and outflows plus your cash forecast, which is then adjusted weekly or monthly in the cash reporting. How much outflow do you anticipate? Also think about tax payments, such as payroll tax or sales tax. Which customer payments are planned? The cash forecast is not to be confused with your business plan/budget. More about this in the tutorial in my Toolbox.

9th of the top 10 tips for clean & crisp financial structures:

Reporting and KPIs

Set reporting deadlines. Whether it’s for investors or the Founder Team, having regular reporting is super important. It doesn’t have to be a fancy PowerPoint presentation. It can just be an email, a simple excel spreadsheet that contains your planning vs. actuals, or whatever you deem useful. What is important are the KPIs and goals you set and track regularly. These could be a number of customers, recurring revenue, burn rate, runway, costs, etc. You should not just report any key figures, but those that control your business. Those that decide whether your business survives and if so, for how long.

10th of the top 10 tips for clean & crisp financial structures:

Cost monsters

Yes, documentation and filing are not the most exciting topics, but the faster you scale and the greater the fluctuation, the more complicated the admin area becomes. Often, e.g. licenses can quickly become hidden costs if there is no overview (user, term, contract duration). Due to fluctuation in an early-stage company one very common mistake is losing the admin access to manage the licenses, because someone with the email address has left the company. Easily those licenses are forgotten to cancel, and you pay and pay and pay. Start already with the first purchased licenses to maintain them in a simple list. The main thing is that you and all relevant employees can find the overview quickly. You can find an excel template in my Toolbox. The same applies to any kind of contract. Further cost monsters are all kind of infrastructure contracts, like phone contracts, internet, energy, insurances etc. After 2 years, no one knows who signed what and when. This applies to all areas: sales, suppliers, licenses, office services – with a little planning and discipline you always have full cost control. You can find examples & templates to monitor in my Toolbox.

Of course, the above-mentioned points are not complete, but cover the basics only. I would be happy to support you in your finance process optimization. Please have a look at my Toolbox. Here I cover a lot of topics in 10 short videos and with templates for an uncomplicated start into the orderly start-up life.

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