Book of Accounts, Tool for right valuation that the Startups need

Most of the startups are small in size. All of their energy is concentrated on generating the revenues and increasing their customer base. They rarely think of maintaining their accounts. The main reason is their perception of maintaining the accounts. They think maintaining an account is a big company’s job rather than a startup, “I am not going to count the money until and unless I make it”.

Despite emerging Accelerators all around the world including in Nepal most of the creative startups are not getting the right funding they want and the above said  perception is one of the biggest reasons why. As they are the startups, nobody expects them to be a good business model in the beginning. As Steve Blank says “A startup is a temporary organization designed to search for a repeatable and scalable business model.” All expect them to be the ones learning from doing and making a lot of mistakes while doing what they love to do. For constant learning by doing they need funds. For the funds they need investors. Finally, the investors invest in those startups which are constantly in a practice of maintaining their logs of what they do. A well maintained book of accounts is the perfect log book for the investors to know how the startups are running their businesses. As we all know most of the huge investors are either Venture Capitalist or Private Equities, these entities know capital isn't this pile of money sitting somewhere; it's an accounting construct.

 We can take a startup life cycle as a baby’s journey from its birth to its youth. As a newborn we are concerned about its breaths in the beginning, is it breathing well or not. Then as the baby grows, we incorporate additional ways to monitor the baby’s nutrition, health, education and so on.As the startups, they can start by maintaining their daily revenues and expenses. This practice doesn’t need any fancy software or an accountant, just a Notebook and a Pen is enough. Then as they grow, they can maintain the revenues, expenses, cash flow and so on adding up new ways of accounting in their growth process. This will be a great source of activity log for the startups. This will eventually lead them to become investor friendly and get the maximum of their valuation when funded.

As Richard Harroch of VantagePoint Capital Partners puts it, “It’s almost always harder to raise capital than you thought it would be, and it always takes longer. So plan for that.” So, for the startups wanting the funding, let the Accelerator program know that you are already one of the best candidates for selection in the program and will get the best of valuation in future by maintaining your activity log through accounts.

Asistwa Sharma