So let’s face it: the reason we all start companies is to deal with the paperwork and admin that comes from owning your own business, right? Not. Still, it is a necessary evil and the truth is that running a tight back office goes a long towards helping you build a better business.
With that in mind, here’s a talk I gave to the Founderfuel teams this week along with some summary notes.
Back office is not core in the same way as product, development, etc. But it’s a foundation for your business. From accounting to payroll/ HR, legal, board and governance stuff you need to focus some effort on this if you want to build a great business.
The reason why it matters can be boiled down to one simple word: trust. If you and your stakeholders (employees, investors, customers, etc) have the right info, then they will trust more. And if your stakeholders don’t trust you, it’s game over.
When it comes to accounting software, the big clunky desktop offerings of Quickbooks and Simply Accounting are still the gold standard. And your accountants only know how to use them. They don’t know how to use web-based accounting software. Of all the web offerings in the market, Xero is the best. Whatever you do, don’t use excel or a google doc for your accounting.
There are good services like Shoeboxed and Expensify that make it easy to record cash transactions.
To save time and $ get your bookkeeper involved no more than 2x/ month.
For payroll, don’t do this in house. It’s complicated and time consuming. And if you get it wrong the cost savings vs. using a 3rd party service will be eaten up in government fines. ADP and Ceridian are the main ones.
Only downside of 3rd party services is that you pay your payroll taxes upfront vs. 15 days after the month, so if you’re bootstrapping this can hurt cash-flow.
Startup success comes down to a few big moments, and they all involve complex legal docs. Don’t have your cousin the local legal practitioner as your lawyer. Only work with firms that specialize in this sector.
You don’t need your lawyer to look at every doc you sign. Biztree offers a very comprehensive set of legal and business document templates.
Don’t cobble together parts of various documents into a “frankenstein” agreement.
Scan all documents and build an organized and searchable archive.
Don’t just send investors an export of your accounting system. This is too much detail. Summarize and include a little blurb along with a dashboard. This saves investors time and saves you time as well as it gives them what they need so they won’t call you as much.
I’m biased but I think CFOs, especially operational ones can play a big role in a startup. You should have a part time one as soon as you’re getting ready to raise a series A.
Investor reporting / governance
As mentioned above, a monthly package with a dashboard and CEO report is the standard. You can report more frequently the earlier stage you are. If you have issues or negative surprises, use 1 on 1 calls with investors before a board meeting to deal with them.
And never hide or sugar coat issues. Give full disclosure of the good, the bad and the ugly. Again this is all about trust. If your investors don’t trust they are getting full info, bad things happen.