How do bootstrapping start-ups in New York handle accounting?
Do they have an in-house bookkeeper or a consultant? What would be a normal monthly expense for a small company with no employees (just founders)? Where could one find a reliable accountant? There are thousands on craigslist but no way do differentiate.
It really depends on the size and scope of your operation – and especially how many transactions you need to keep track of. Consider the difference between functions and jobs. There are a number of finance related FUNCTIONS that every business needs to perform. In large companies some of these may involve a full time department let alone position. But in super small companies they can all be done part time by one person. The functions are needed in all companies – if there’s enough work, it becomes a job.
Here’s a short (incomplete) list of financial functions.
Bookkeeping – this function records all the transactions in a timely and appropriate way. Appropriate means not only in regards to laws and such but in a way that yields the kind of reports that the company cares about. Some companies, for example, need profitability reports by customer and job so the transactions need to be entered with that level of detail by whoever does the bookkeeping.
Collections – this function needs to know who owes you money, how much and since when (thus bookkeeping has to put that info in) and works to get the money in the door. If you have a retail operation where no one owes you money, then you don’t need anyone to perform this function.
Accountant – I’m generalizing here, but this function in a small company is usually outsourced to someone who can file taxes. They may also oversee the bookkeeping to make sure it’s done appropriately. They usually run “standard” financial reports: Profit/Loss, balance sheet, cash flow. Good ones help you understand what those reports mean.
CFO and Financial analysis – This function understands how management decisions affect the cash situation of the business. They are usually responsible for raising cash (through loans or investment) to cover the cash needs of what management decides to do. Also they should be able to run reports that tie financial data to the real world: which products are generating the most and the least profit / what does it cost to acquire a customer / what is the lifetime value of that customer.
So, back to your original question. Define your needs and work load in these various categories. Decide which ones you want to handle yourself and which ones you want someone else to do. Then depending on the scope of the work either hire someone or outsource it. To determine the qualities of that someone you want to use, ask around. Ask your lawyer or even other business owners you know who are successful. Then talk with the people and see how good they are at explaining what they do to someone who doesn’t speak accounting.
Two warnings: 1) You should always, always, always pay enough attention to your finances to understand what is going on and find mistakes (or malfeasance) as soon as possible. You can’t outsource the responsibility. So you should not have the same person responsible to record income, make bank deposits and reconcile the bank account.
2) If yours is a start-up that is likely to grow and need to raise outside funds in the future – even if you’re bootstrapping now – then you need to have the systems set up by someone who’s familiar with what the future needs will be. Otherwise you’re asking for a large problem down the line.