The Startup’s Guide to Bookkeeping: Daniel Gertrudes and a Decade in the Trenches
When you're launching a startup, bookkeeping is probably the last thing on your mind. You're focused on building your product, landing customers, and maybe even raising capital. But after more than a decade of working with startups, I can tell you—ignore your financials at your own risk.
When I started GrowthLab, I wasn't thinking about accounting either and frankly, I did not offer bookkeeping or tax to my CFO customers. Then, I realized I couldn't advise customers effectively without solid and timely accounting. Therefore, how could management teams and founders understand their financial position?
The First Rule: Keep Personal and Business Finances Separate
I see it all the time. Founders mix personal and business expenses because, honestly, it’s just easier. Who wants to spend time at a bank opening up an account when there are a million other things to do? But today, there are plenty of online banking platforms that cater specifically to startups, making it super easy to get that business checking account and credit card set up.
Credit cards are a big culprit here. Let’s be honest—how many times have you been at a coffee shop, forgotten your business card, and just used your personal one instead? It happens. But over time, those little mix-ups add up, making it harder to understand your true financial picture. And don’t even get me started on business owners justifying personal expenses as business ones because they talked shop over dinner with friends. Buyer beware.
The Danger of Mixing Finances: It’ll Cost You
If you mix personal and business expenses, it’s going to come back to bite you. First, it skews your understanding of how much it actually costs to run your business. If you think you’re operating on $200K in expenses but some of those were actually personal, your numbers are way off.
Second, when it’s time to clean it all up, you’ll end up paying your accountant extra just to untangle the mess. Worst case? They’ll need to go through your personal finances line by line, asking you to identify business expenses. That’s not only expensive—it’s a waste of your time. And if you ever get audited? Well, let’s just say you don’t want to be the one explaining your financials to the
IRS when they have AI tools scanning tax returns for inconsistencies.
Picking the Right Bookkeeping System
I’m not here to debate cash vs. accrual accounting—most founders do just fine with cash basis early on. But choosing the right bookkeeping setup from day one saves you headaches down the road.
A lot of startups spend money on systems that are overkill for their size. If you’re in the early stages, keep it simple. The first step? Find a good accountant to help close the books at least quarterly. Check out our post on Bookkeeping Basics for Small Business Owners for more insights.
Next, pick a bookkeeping software that you’re comfortable with. QuickBooks Online and Xero are the go-to choices, but newer AI-native general ledgers are popping up, promising to automate bookkeeping (though they’re not quite there yet). The real game-changer is having a trusted advisor—a controller, financial analyst, or fractional CFO—to help interpret the numbers.
Another pro tip: set up at least two bank accounts—one for operating expenses and another for payroll. This adds a layer of protection so if something goes wrong with payroll withdrawals, you’re not jeopardizing your entire cash flow. And get a credit card for recurring business expenses—trust me, it’ll save you time.
The Monthly Habit That Separates Thriving Startups from Struggling Ones
The best founders I know have their finger on the pulse of their financials. The ones who don’t? They’re flying blind.
Reviewing your financials every month might sound like a drag, but it’s a game-changer. If you’ve read Atomic Habits, you know small, consistent habits add up over time. Spending 30-60 minutes a month reviewing your numbers is one of those habits. Once you start tracking actuals vs. budget, you’ll uncover insights that help you make smarter business decisions. It’s like checking your speed and GPS while driving—without it, you’re just hoping you’ll get to the right destination. Learn more about how our FP&A Services can help you stay on track.
Cash Flow: The Lifeline of Your Business
Here’s the reality: if you don’t have visibility into your future cash position (plus or minus 20% over the next 12 months), you’re setting yourself up for trouble.
Early on, most founders manage cash flow by checking their bank balance daily. Eventually, they move to tracking financials through their general ledger. But when they switch to accrual accounting, that’s when things get confusing.
One of the most frustrating moments for a founder is seeing a $300K profit on their income statement but realizing their bank account is down $50K. That’s when you need an FP&A team or fractional CFO to help you bridge the gap between accounting profits and actual cash flow.
Tracking Expenses Before They Spiral Out of Control
Just like in our personal lives, business expenses have a way of creeping up. By the end of the month, you’ve forgotten what you spent at the beginning. Worse, those recurring software subscriptions start piling up.
This is where an expense management platform comes in. Not only do they help track spending, but they also issue credit cards to employees, keeping expenses in check. Some founders resist because they love their Amex points, but trust me—control over your cash is way more valuable than credit card rewards.
Taxes: The Silent Killer (If You’re Not Careful)
If you’re a venture-backed startup, taxes might not seem like a big deal at first. But that doesn’t mean you can ignore them.
For LLCs and S-corps, what happens in the business flows through to the owner’s personal taxes. One mistake I see often? Founders paying down loans without accounting for tax liability. If you made $150K in profit last year but paid off $50K in loans, you’ve only got $100K in the bank—but you owe taxes on the full $150K. I call this “phantom profit,” and it’s a nasty surprise if you’re not prepared.
When to Bring in Professional Help
I always get asked: When should I bring in professional accounting help? The answer? It depends. If you’ve got the financial acumen and can dedicate 4-5 hours a month to managing your books, you might be fine in the early days. The good news with accounting is that you can always go back and clean up past mistakes.
But once your balance sheet starts getting complicated and you don’t have room for errors, it’s time to call in the pros. And no, bookkeeping alone isn’t enough. You need an accounting, FP&A, and tax team that work together—so there are no surprises at year-end.
HR is another area that gets overlooked but is just as strategic. Getting an HR partner early can save you from costly compliance mistakes down the road.
So, when’s the right time to bring in help? Simple: when you can’t afford not to.
Frequently Asked Questions
How often should I review my startup’s financials?
Regular financial reviews are a game-changer. Spending 30–60 minutes each month comparing actuals versus your budget can uncover insights that help you steer your business in the right direction.
This habit is crucial to avoid surprises and maintain steady growth.
When should I consider bringing in professional accounting help?
If you find yourself spending too much time juggling finances or notice that your balance sheet is getting more complex, it might be time to get professional help.
Whether it’s a dedicated accountant or a combined accounting, FP&A, and tax team, professional oversight can prevent costly errors.
What is “phantom profit” and how can I avoid it?
Phantom profit happens when your income statement shows a profit, but your actual cash position is lower due to factors like loan repayments or misallocated expenses. This discrepancy can be a costly surprise if not managed properly. Maintaining accurate books and regular financial reviews are key to avoiding phantom profit.
How do I choose the right bookkeeping system for my startup?
The right system depends on your business size and needs. Many early-stage startups do well with cash basis accounting using platforms like QuickBooks Online or Xero.
However, partnering with a trusted advisor—a controller, financial analyst, or fractional CFO—can help tailor the system to your growth stage.
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GrowthLab, a Finance-as-a-Service (FaaS) company serving founders and management teams with full-service Financial Planning & Analysis, Monthly Accounting, Virtual CFO, HR-People Advisory, and Business Tax.