The tech industry is growing around the world, and tech companies are popping up around every corner nowadays. In such a lucrative market, it’s only natural that you should try to build your own successful tech company, and expand your business in the months and years to come. However, even though this is a promising sector, this doesn’t mean that success is a guarantee.
It’s important to remember that the sheer number of competitors can make it difficult to break even in the first three years and that meticulous financial management is paramount to success. If you want to succeed as a tech company, then you need to manage your finances wisely, make the right investments, and optimize your cash flow to stay afloat.
With that in mind, let’s take a look at some common accounting issues that tech companies come across and how to avoid or solve them quickly.
1. Not understanding basic accounting needs
Tech companies are typically led by leaders who are tech innovators and leaders rather than financial experts or investors. While this is good for the sake of the company and its innovation and development process, it’s important to remember that a tech leader needs professional accounting assistance if they themselves do not understand basic accounting processes.
Many a time, tech leaders will be so focused on the innovation and development processes, that they will let important financial issues slip through the cracks. It is imperative that you keep accurate, complete, and readable financial records throughout the year, understand your tax obligations, and create actionable financial reports. This ensures your tech company minimizes financial liability across the board, which is why it’s usually best to delegate these processes to professional accountants.
2. Subpar payroll management
For a tech startup, one of the main problems is how to manage your workforce, which positions and departments to invest in, and how to structure your payroll strategy. This is a crucial issue that you need to resolve as soon as possible in order to avoid financial waste and optimize your expenditure. Because after all, the top talented tech experts are not cheap, so you need to manage your investments wisely.
To that end, it’s important to let your accountants help you make the right decisions and structure a payroll plan that works for you and your employees. You should also consider outsourcing and tapping into the freelancing talent pool because the gig economy is pretty big right now across the globe.
With a good communication strategy, you should have no problem running a remote team. More often than not, you will find skilled employees across the country or even around the world that will do an amazing job but will cost you less than hiring full-time, on-site staff.
3. Lack of clear and actionable reporting
Bookkeeping and reporting are two of the most important accounting processes that can make or break a growth-oriented tech company, especially in today’s overly saturated market. If you are working in a competitive area, then you need to work with professional accountants who will generate actionable reports for your business that out can use to make data-driven decisions. For example, in competitive tech markets like Australia, comprehensive reporting has become paramount to success.
This is why tech companies working with experienced accountants in Sydney will make sure that their accountants are able to produce more detailed and accurate reports that focus on the goals and long-term objectives of the company. Using actionable financial data to fuel the reporting and forecasting process is the only way for tech companies to retain control over the finances in such a booming market. Wherever your tech company is stationed, make sure to use this approach and leverage more comprehensive reporting to grow.
4. Poor cash flow management
Cash flow is always a big problem in tech companies, whether they are startups or established businesses that have solidified their position in the market. Cash flow is the lifeblood of your business, and you need to constantly manage your account payables and receivables to ensure a continuous income stream and a cash flow balance.
Make sure to keep close track of your cash flow on a daily basis with your essential business tech, and plan ahead. It’s important to identify potential cash flow issues and bottlenecks before they develop and harm your company. Use your accounting forecasts to prepare for economic downturns and socio-political changes that might affect consumer behavior.
5. Balancing maintenance vs innovation
Last but not least, it’s imperative for a tech company to balance its investments when it comes to product maintenance and innovation. Keep in mind that innovation is the driving force behind business success in the fast-paced tech industry, but that you also need to maximize the lifecycle of your other products and keep dishing out updates and upgrades to keep your customers happy.
The best way to balance your finances and optimize both investments is to work with a dedicated financial team. These experts will identify the opportunities in the market and advise you on the best course of action for your existing products and your innovation strategy.
Wrapping up
Accounting and financial management are essential pillars of success in the tech industry. Don’t let these accounting issues slow you down, and make sure to use these tips to build a successful tech business in 2021 and beyond.
