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Accounting Basics for Start-Ups

Accounting Basics for Start-Ups

There’s no doubt that accounting is a tough subject that can’t be learned overnight. It includes many rules, regulations, and nuances that can even be tough to master for people who have been involved with accounting for quite a while. The problem is startup founders don’t have the ability to hire huge accounting teams. In fact, sometimes they can’t hire any accountants and might end up doing all the finance work. So, it’s critical for them to learn some accounting basics so they can get their financial house in order.

Accounting Basics for Startups

If you’re operating a startup then it’s important to know the basics of maintaining your company’s accounting. Here are some key issues:

  • Outsource Accounting

It’s important for your company to have a quality accountant that make sure you’re dealing with your company’s financial data effectively. If you can hire a full-time accountant it’s a good idea. However, this isn’t always an option for some companies including small businesses. Another option is to hire the services of an outsourcing company that provides outsourced accounting services.

This option is a good option since it can provide your company with the right accounting support for your business. Your company can then focus on issues like ways to achieve business growth. This is critical for your company in order to achieve success. It’s definitely a situation you’ll want to be in. The Internet has made it easier than ever to hire and work with a virtual accountant.

  • Spend Money on Technology

It’s important for your company to spend money on quality accounting software. Technology is one of the cornerstones of today’s companies. The number of software packages available is high so it’s just a matter of flicking the software package that best suits your company’s needs.

You can find all sorts of accounting software including packages designed for startups and small businesses. Make sure you pick one that it’s too complex and only provides the user with the features they need. If your company is small then the software should be basic. Look for software that lets you do activities like financial reporting and reconciliation. The software should also give you the ability to prepare financial/regulatory statements. These are important for any business so it’s critical to have the right software for your needs.

  • Organize Documents

It’s critical to ensure all your documents are in order. That includes bank statements, legal agreements, payroll info, credit card statements, security agreements, tax documents, etc. It’s critical to keep all of these documents in a place that’s safe. However, the documents should also be accessed easily when regulators request it.

It’s highly recommended that you store all the data in digital forms. This will make it easier to access, change, and share the data. On the other hand, if you’re using a paper-bade system it can reduce the efficiency of your company in terms of handling all the data. That’s certainly a situation you’ll want to avoid.

  • Improve Budgeting

It’s critical to learn how to develop a company budget. You should also make sure you prepare one whenever you need to. It’s important to know how much money your company has to spend and have a plan to spend it. If you take this approach it will help to avoid a chaotic situation and out-of-control finances. That’s definitely a situation you’ll want to avoid as it can have a negative effect on your company.

It’s important to also have a budget for every fiscal year and possibly for each quarter/month. This will provide a specific path for your company to follow during those intervals. On the other hand, without having a budget it will be tougher since you won’t have a blueprint to follow. That’s definitely a situation you’ll want to avoid as it can result in spending spiraling out of control, for example. That’s definitely a situation you’ll want to avoid.

  • Montero your Financial Statements

Keep an eye on your company’s financial statements. You might have an accenting doing your number crunching. That’s definitely a good start since it will help to make sure you’re processing all your numbers. IT’s important to know where your revenues are originating from and how you’re spending your money. It’s also important to know your company’s assets and liabilities.

This is a critical step in helping to run your company as smoothly as possible. Meanwhile, without knowing such info it can cause problems that you’ll likely want to avoid like the business not running at an optimum level.

  • Maintain Accounting Books

When launching a company, it’s important to either learn the basics from an accountant or take an accounting class. Since you’re a startup you probably won’t have many business lines or modes of investments. Instead, you’ll probably be focusing on one business venture. In that case, you could be working with a small number of vendors.

As a result, it shouldn’t be too tough to maintain your accounting books. After you learn the basics it’s just a matter of using discipline in order to keep your company’s figures in order. The effort is definitely worthwhile since it can help your company to run more smoothly, which is something you’ll definitely want to do.

  • Pay your Taxes

Make sure to make your tax payments. This is one of the most important steps your company can take. Your business should have a process for the tax preparation that’s completed before the payment date and on time. Keep in mind that not paying business taxes can be quite high. In fact, if you default o the taxes financial regulators can shell out some very tough penalties. That’s a situation you’ll definitely want to avoid since it could affect your company’s revenue and stability. That, in turn, is definitely a situation you’ll want to avoid.

  • Keep Personal/Business Accounts Separate

It’s important for you to separate your business records and personal records. This is a general rule you should always follow but it’s especially important during tax season. Don’t enter personal data into your company accounting systems. In addition, keep all the paperwork separate and mostly at home. That will prevent your business/personal paperwork getting mixed up.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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