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The Ultimate Accounting Guide for New Startups

Often, startups entrust accounting tasks to the person best at managing data within the company, or, in the absence of such a person, the founder takes on yet another role. However, lacking accounting experience and knowledge can hinder a startup’s agility and growth potential.

If your startup depends on the person most skilled with numbers for accounting, you might be setting yourself up for various failures, such as misinterpreting cash flows, legal troubles, stunted growth, missing out on funding or contracts, and errors or omissions in critical data for making major decisions. Becoming a certified public accountant (CPA) requires years of higher education (150 credit hours), passing an exam, and meeting continuing education requirements.

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Specialized knowledge from accountants can significantly support your startup in many ways. This article will explore the services startups need from accountants and what accountants watch for in their work.

Many reasons underpin the established generally accepted accounting principles (GAAP), refined over decades. Investors, for instance, value these principles to compare investments effectively. Even if you believe your startup isn’t ready for investors, you might still need a bank, a line of credit, or even a credit card, necessitating industry-standard financial metrics.

By the end of this post, you will better understand a startup accountant’s duties, enabling you to ask the right questions when it’s time to hire one.

Accounting Services for Startups: What Sets Them Apart?

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Startups and small businesses might seem similar in terms of employees, sales, and market share, often presenting small or negative figures. While both operate on a similar scale, startups aim for rapid growth, influencing their administrative and financing strategies.

Focused on Growth: Startups as Emerging Big Businesses

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Startups aim for rapid expansion, designing operational structures for quick scaling of the organization and revenue. This ambition necessitates a complexity in accounting practices not typically seen in small businesses within the same industry.

To support this complexity, it’s crucial for startups to adopt the right tools from the start, like software and professional advice, to manage data and workflows with the scrutiny akin to a public company, attracting serious investors.

The Need for Funds: A Guide to Startup Fundraising

investor update

Our guide on fundraising outlines essential information for securing investments for your next growth phase.

For example, small businesses might use simple accounting software like QuickBooks and scheduling software like Homebase. However, startups, depending on their industry and aspirations, might benefit from more complex enterprise resource planning software like Oracle Netsuite.

Distributed Teams and Industry-Specific Needs

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Startups, unlike small businesses, often operate with distributed teams and are not confined to a single location, necessitating a broader approach to accounting to accommodate various tax and labor laws.

Innovations in industries, such as the Software as a Service (SaaS) sector or eCommerce, present unique accounting challenges, requiring specialized software integrations and accrual accounting for accurate financial reporting and investor appeal.

The Importance of Accounting for Startups

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Accounting plays a pivotal role in managing a startup’s chart of accounts, choosing the right accounting method, and planning for future cash flows and fundraising efforts. It also involves managing debt, distributing equity, and selecting appropriate tools for efficient operation.

A startup accountant not only keeps financial records in order but also aids in strategic planning, ensuring compliance, and optimizing operations for growth and funding success.

Selecting the Right Startup Accountant

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Choosing the right accountant involves considering their focus on growth, adherence to best practices, experience with startups and specific industries, and compatibility with your team’s culture.

A well-chosen accountant can provide invaluable support in navigating the unique challenges of startup finances, from fundraising to strategic financial planning and beyond.

Starting with the Right Accounting Approach

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Your startup’s success depends on more than just passion for your product or service. Building a strong financial foundation with the help of expert accountants, along with legal, HR, and executive support, is crucial for navigating the startup phase and scaling your business effectively.

Count has been supporting businesses with expert financial operations services for over a decade, helping startups achieve nationwide success. Reach out today to see how we can assist your startup in its growth journey.

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