The following is condensed from an interview with Slava from Intelli Bookkeeping. Intelli is a Cambridge, MA bookkeeping, payroll, and tax services company. They specialize in online and cloud-based services for startups.
- How did you get started with professional bookkeeping? What are your specialities?
About 7 years ago I used to work independently for various small businesses. I used to go place to place to work on their desktop software like Quickbooks Pro. But it didn’t seem scalable, and I couldn’t do that full-time, so I decided to go cloud-based.
Our specialty is fast-paced growing startups. We work especially well with technology startups, like Renoviso, which is a tech-based general contractor. As part of their business, Renoviso does a lot of transactions and a lot of payments. They’re very high velocity, because in the last 3 years they’ve gotten 3 rounds of funding from venture capitalists. Intelli set up a financial “stack” for all of Renoviso’s financial back-office needs to handle their velocity.
- What’s the advantage of using a professional bookkeeper, instead of employing a part-time bookkeeper or Quickbooks?
Going through it yourself with Quickbooks is not scalable. A startup needs to focus on sales, operations, marketing, etc., not trying to figure out bookkeeping.
The reason not to hire a part-time service is first of all cost, because your part-time bookkeeper has to pay for their cost of living, their travel time, and everything else. Intelli, on the other hand, leverages technology so we don’t have to spend the same amount of time and cost the same amount that a part-time bookkeeper would.
- At what point in a startup’s lifecycle should it shell out for a bookkeeper?
A startup should get a bookkeeper once it has a threshold of transactions that it can no longer handle. There are only so many hours in the day. If you don’t know the tech of bookkeeping, then it’ll take too much time. This is especially true if you’ve received any amount of funding. The reason you got funding is that there’s an expectation you can provide some sort of product or service. You should be spending time developing a product.
Besides, I’ve seen so many times when we’ve come in and the books are a complete disaster. Literally as soon as you are a business with more than 10-20 transactions a month, definitely hire. We have pricepoints to match your budget.
- If startups are interested in using a bookkeeper, should they prepare anything first?
Not really. Just have a bank account and a legal team so you’re properly incorporated.
- What are the common mistakes that startups make when trying to do bookkeeping?
There are a number of them. Let me list a few: not reporting payroll correctly, not reconciling the account at the end of the month, using 500 different methods of paying people, too many moving parts.
Another common one is way too many credit cards, because the startup is trying to figure out how to manage cash flow. You need to consolidate that into one line of credit. You’re going to make payments all the time. Basically, keep it simple stupid.
- What should a startup do with receipts? Can they scan them and get rid of them?
You can leverage tools so you don’t have to hold physical receipts. We use Expensify to just track the receipt, or Xero mobile. It’s not a big deal because it doesn’t matter a lot if it’s a small receipt, and anything big usually comes in email. Receipts that come in email we can just store it in management software. Oh, and scanned receipts are okay for tax time too.
- How does a bookkeeper work with a CPA?
Communication. We provide the financial reports at the end of the year, and they tell us how it should be coded. They provide adjustments at the end of the year: depreciation on assets, amortization, interest expense on loans, any adjustments on owner’s draw, research and development credits. This is why Intelli has an internal CPA for a symbiotic relationship. This prevents there from being 5 different vendors for finance and bookkeeping.
- What is cash vs. accrual? What should a startup be using?
Startups should definitely be using cash accounting at first. No need to use accrual until financing or until GAAP accounting mandates it. So, for instance, with GAAP accounting, you’d need to amortize a subscription. It’ll start out as deferred revenue, then moves into true revenue on the income statement.
Thank you for your time.