Any IT startup or business, just like any other business, is about numbers. Sales revenues, budgets, costs, expenses — everything to do with numbers directly relates to your success.
Most small IT businesses will want to save costs yet deal confidently with the numbers. It’s a tricky balance. This blog aims at giving some basic accounting tips for IT businesses and startups.
1. Evaluate the cost of book-keeper v/s DIY accounting
It definitely helps to hire a book-keeper especially when you are an IT firm having employees with zero knowledge of accounting. But the limitation of this option is this — it doesn’t stop there. You still need a DIY accounting software because you want to access your accounts even without your book-keeper. For the most part, several online accounting software like Giddh give you a free and easy access to accounting. These software let you crunch the numbers yourself, guide you through the taxation laws in India and help you become independent about your finances.
2. Don’t ignore unpaid balances from the clients
Yes, as an IT outsourcing firm or an application development business, you need to maintain lasting relationship with your clients. But don’t let this principle affect your payment collections from clients. A good client is as good as the revenue he brings into your company. Don’t allow your clients to ignore regular payments. Insist them on paying earlier projects first before signing new projects. If you have delivered what you promised, they ought to pay as promised.
3. Distinguish clearly between receivable and borrowed money
As a small IT business, you will need financial help and/or loans for capital, marketing campaigns or for buying assets initially. Ensure that your loans don’t appear in the receivables. Use an online accounting software that clearly separates income from borrowed sources. Never lose sight of what belongs to you and what you need to pay back.
4. Make weekly budgets from daily expenses
Not only for IT businesses, any new business must keep records of everyday expenses. Get an accounting software that allows you to categorize and sub-categorize expenses so you can keep everyday expenses in detail. This would give you an overview of expenses on a weekly and monthly basis in order to plan ahead and make budgets.
5. Face losses or profits on a monthly basis
As a small IT business, you may be tempted to think that this is just the beginning so you can think about your losses later. The further you go in your business, the more complicated your numbers will be. Create an accurate system of expenditures and liabilities. Stop giving yourself the excuse that since you don’t know accounting, your book-keeper would take care of current losses. A clear picture of revenues and losses will help you plan better for the next month. A profitable business is all about one profit month at a time.
As an IT business or startup, you will find yourself at a more comfortable end of online accounting. And a DIY accounting software such as Giddh can help you become wiser about your finances.