Finance for Founders Part 1: How to Choose the Right Bookkeeping Firm from Day One

Finance for Founders Part 1: How to Choose the Right Bookkeeping Firm from Day One

Building a strong foundation for your company’s financial operations is essential from the very beginning. As a founder, you’ll face countless decisions about where to invest your time, energy, and resources. Among those decisions, selecting the right bookkeeping firm can help propel the company forward and free up the founding team to focus on the product and growth.

This post is part of the Finance for Founders series, designed to guide founders through the investment they should make in their accounting and finance infrastructure at different stages of their company’s growth. In this first edition, we’ll focus on why you need a bookkeeping firm from day one, what to look for, and how to avoid common pitfalls.

Why Bookkeeping Matters from the Start

Bookkeeping is the backbone of sound financial management. It involves processing transactions and closing the books on a monthly basis, creating the financial data your company needs for tax preparation, investor reporting, and strategic decision-making.

Without organized and accurate bookkeeping, you’ll face significant challenges when it’s time to:

• Pass due diligence: Historical financials are non-negotiable for most investors. Failing to provide them can delay funding or even derail a deal.
• File taxes: Tax accountants rely on clean, organized financials to prepare returns.
• Report to investors: Existing and prospective investors will request detailed financial statements, often during critical moments like fundraising.

As Jeff Bezos famously said, companies should focus on “what makes their beer taste better” and outsource everything else. Bookkeeping is a prime example of something founders should delegate so they can concentrate on growth and product development.

What to Look for in a Bookkeeping Firm

Not all bookkeeping firms are created equal, and early-stage companies have unique needs that not every firm is equipped to handle. Here’s what to consider when choosing the right partner:

1. Experience with Venture-Backed Startups

Bookkeeping for a venture-backed company differs significantly from other types of businesses. These firms need to understand:

• Revenue recognition for the type of business you operate.
• How to account for transactions that are common with venture-backed companies such as stock-based compensation and fundraising legal expenses.
• The scrutiny that comes with working alongside investors and boards.

Without this expertise, you risk credibility issues and potential setbacks when presenting financials to stakeholders.

2. Operational Style and Communication

Some bookkeeping firms market themselves as “tech-enabled,” which often means they’ve developed proprietary software for client communication. While this might sound appealing, it can lead to unnecessary complexity for founders.

In Topo’s experience, founders prefer firms that adapt to their existing workflows, whether that’s email, Slack, or shared file systems. The best firms streamline processes for founders without adding friction.

3. Price vs. Value

Price is always a consideration, but it’s essential to evaluate what you’re getting in return.

• Low-cost providers: While the lower price is appealing, this often comes with tradeoffs in timeliness or quality.
• Higher-cost providers: Typically offer more embedded services and additional levels of expertise for the cost.

Choosing a firm solely based on price can lead to hidden costs down the line if accounting errors or delays arise.

The Long-Term Role of Bookkeeping

Even as your company grows and you bring on your first finance hire, it often makes sense to continue outsourcing bookkeeping. Hiring a full-time controller or accountant can be expensive, and a quality bookkeeping firm will continue to handle day to day accounting while allowing the first finance hire to focus on more strategic areas of the business.

Conclusion

Partnering with the right bookkeeping firm from day one sets your company up for long-term success. By choosing a firm that understands venture-backed startups, aligns with your operational style, and provides the right balance of price and value, you’ll ensure your financial foundation is solid.

The next post in this series will explore factors to consider when choosing a tax accountant, and how this investment can impact your company as it grows.

Stay tuned for more insights in the Finance for Founders series!

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