Startup Lessons Learned: Revenue Reconciliation

Screen Shot 2016-03-21 at 4.25.09 PMIn the early days of just about any startup, any sale seems like a good sale, right? And that’s great. But early on, before you have fancy accountants and real revenue recognition processes, it’s easy to let things get a bit sloppy in terms of reconciling sales, because hey, any sale’s a good sale, right?!

Recently I started spotting a few small inconsistencies in our sales reporting. Our bank account said one thing, our manual sales reporting another, our billing system another. Now, I’m just talking a few hundred bucks, but as sales grow month over month, a few hundy can turn into thousands if you don’t identify gaps in your reporting and plug them…now.

So what to do? First, identify your reporting sources. For us, we use Stripe for credit card processing. We use Salesforce.com to record our sales contracts. We also back that up with an old school Google Sheet since we don’t have all the bells and whistles we need in SFDC yet. We use Quickbooks Online for accounting. And we bank with First Republic.

If you get on this early, it’s really pretty easy to spot some omissions or simply mis-understanding or gaps in the process. What’d I find?

  • We have a handful of 6 and 12-month prepays in Stripe. So that entire payment tracked as single month monthly recurring revenue, and overstated our MRR. We’ve fixed that problem!
  • We had a few larger deals that (even though we really push for credit cards), were invoiced but it wasn’t clearly noted that this was the case. So that understated our revenue, plus since there is almost always a lag in payment on invoices, they weren’t reflected in our P&L either. We now flag these in Salesforce and in our old school Google Sheet and it all rolls into QBO and eventually into our P&L.

That brought things into line! Now, are we prepared for daily revenue recognition? Nope. But we’re now tracking very closely to actuals on all fronts. Who’s job is this to do in a small start-up? Yours, if you’re the CEO.

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