Founders spend a lot of time growing their business, bringing ideas to fruition, and networking. But when it comes to accounting, it’s usually put on the back burner for when the startup has more money.
Startup accounting services go well beyond preparing quarterly tax returns.
Even before you start your business, right in the initial formation stages, hiring an accountant can help your business.
Why are Startup Accounting Services Important to Your Business’ Success?
Small business owners can’t do it all. When you first start your business, you’re making some of the most important decisions on a whim. It’s easy to register a business online, but there’s a difference between registering and choosing the right entity for your business.
Accountants can help in a lot of ways, and it’s not uncommon for startups to meet with accountants regularly while forming their business.
Because accountants offer a variety of key services, some of which include:
- Choosing a legal entity. Forming a business as an LLC is what a lot of businesses do. It’s a safe choice as an entity, but it’s not the right choice for every business. In May 2021 alone, there were over 500,000 business applications These businesses needed to choose an entity: sole proprietorship, partnership, C corporation, S Corporation, or limited liability company. Accountants can help you understand the advantages and disadvantages of each entity type based on your industry.
- Business classification. What classification do your business’ operations fall under? Accountants can help you determine what your Standard Industrial Classification is and ensure that your business is classified properly.
- Classifying employees. Employee classifications can also be confusing. You need to properly classify employees, and this may include full-time and part-time employees, temp workers, independent contractors, non-employees, interns, and even volunteers. As your business grows and so does your workforce, the complexity of classifying employees can grow more complex. If you misclassify, this can lead to fines by the IRS.
- State compliance. Do you know what your state requires you to operate a business in compliance with? What paperwork needs to be filed? What deadlines need to be met? An accountant will ensure that you have everything in order to keep your startup compliant.
- Federal compliance. On top of state compliance, you also need to meet government regulations. You need to remain compliant with licensing, taxes, labor laws and so much more.
Startup accounting makes sure that when you start your business, you’re on the right track from the start.
The services above are just a few of the many services that an accountant may offer to your startup. Accountants can help with a variety of tasks, including but not limited to:
- Determining the right accounting method for your business
- Identifying areas of improvement
- Acting as a trusted advisor
- Creating forecast reports
- Setting up your business correctly
- Working to save you money
- Helping you spot business opportunities
- Working on tax planning
- So much more
A lot of accounting firms also offer startup consulting (we do) to help startups put the right systems in place from the beginning stages of their business.
Software Options for Basic Bookkeeping
When a startup is just starting out, one of the most integral steps that they can take is choosing the right accounting software to help with basic bookkeeping. When you have all of your receipts, statements, invoices, and other important financial data in order, it will make it a lot easier to do taxes, forecast business growth, and understand your finances.
There are a lot of options available, but two of the most popular are:
- QuickBooks Online
You’ll find a lot of other systems, too. But these software options offer cloud-based solutions that can be managed from anywhere that have an Internet connection. You also don’t have to spend a lot of overhead on hardware, software, and IT to run these software solutions because they’re sold as software-as-a-service.
Quick Rundown of QuickBooks Online
QuickBooks is one of the most popular options because it does most of the work for you. Come tax time, you can be sure that your books are balanced properly. When you use this software, you’ll have the option to choose:
- Freelancer or Self Employed
- Small business
- Mid-sized business
You can use QuickBooks for payments, invoicing, time tracking, inventory, and as a quick and easy way to manage all of your income and expenses. Complete bill management is built-in, so you can be sure that you’re paying your bills on time and can take advantage of early payment discounts, too.
If you’re working with independent contractors, you can even create and file 1099s for these contractors right inside of QuickBooks.
Quick Rundown of Xero
Xero is another great option because the developer has designed their product around one basic principle: simplifying everyday business tasks. Pricing is very affordable, and the system allows you to:
- Pay bills
- Claim expenses
- View spending
- Connect to bank feeds
- Accept payments
- Track projects
- Use Gusto for payroll
- Bank reconciliation
- Capture data
And you can also create your own smart lists, contacts and upload files to the system, too. Have a contract or physical receipt that you want to file away? Upload it to the system. You can also run a variety of reports, send quotes and invoices and do so much more through Xero.
It’s not enough to just sign up and start using these accounting solutions. You need to set them up and use them properly. non-advanced users that don’t have experience with accounting software often miss integral features that can help them manage accounting tasks with greater ease.
An accountant can help walk you through these systems and ensure that everything is set up properly. Your accountant can also assist with charting accountants and streamlining the bookkeeping process as much as possible.
Working with an accountant or a startup consultant that understands business formation, classification, compliance, and how to put systems in place for bookkeeping can be an invaluable part of your startup’s journey.
Accountants can, from the very start of your business, help you start saving money and remain compliant as your business grows.