Where Did All The Money Go?

“Where did all the money go?”

This is a question startups often ask themselves once they have burned through a round of funding, and it’s not always an easy one to answer. Is it a gap in accounting? Or is it simply a purchase that required a lot more than expected? Whatever the case, there are a few steps that you can take to better position yourself to answer this question quickly and effectively.

First, ensure that your accounting system is set up properly and make sure your record keeper understands the purpose of each expense. Oftentimes, the person coding transactions is not intimately involved with the situation surrounding a purchase, so he or she doesn’t know much about it. This disconnect can create issues categorizing each amount spent. We recommend that someone with knowledge of the expense code it through a purchase order or at least take part in the review. Spreading ownership of your cash outflows helps motivate more employees to spend money in the right way, because they can see how important each expense is – and how those expenses can add up quickly.

Secondly, do you have a budget or projection that is updated periodically? This is a great idea to ensure your expenses are well planned and cash flow is spent strategically. Outline what your immediate future needs will be, research the costs for major expenditures, and create a budget to make sure you can afford them. Once this is set up, make sure it is reviewed periodically and adjusted as necessary. This review will help identify any amounts that were miscalculated and can help redirect cash flows to more important areas of your company. It’s always a better idea to discover these issues early so make sure this is a process your team adopts early.

Finally, consider using a software application to track your company’s spending. Many of them can use pictures of receipts to create and log expenses, saving you valuable time (and making it more likely that you’ll track them). Some also allow you to approve expense reports, book airfare and hotels, check itineraries and more. These apps are especially useful if you travel a lot for business; snapping quick pictures of receipts from dinners, taxis and other expenses is a lot easier than saving little pieces of paper and having to enter the information manually.

Tracking cash usually isn’t the way most business owners like to spend their time. But making the process as simple and easy as possible means you’re more likely to do it – and less likely to be faced with that burning question later.

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