Janine Dos, Executive Chronicles | Getting Started with Accounting for Your Startup | In the previous article, we discussed how to keep your startup finances under control. It is easy to get carried away with expenses and lose sight of what really matters. It is even more challenging to deal with the intricate details of business finances, including taxes and financial reports. However, these are the key foundations of your company; it all starts with good accounting.
The best way to go is getting the accounting side of your business nailed from the start. This way, you don’t have to worry about getting stuck in a financial mess later. These next three tips will help you get started with accounting for your startup.
Get an Accountant from the Start
Don’t wait until the business is off the ground before hiring an accountant. Whether you want to hire an accounting firm or someone with a bachelor’s degree in accounting to work in-house, it is best to do it as soon as you start the company. There are many other options for hiring someone to help you with your finances. For example, you may want to hire someone for fractional CFO services that will provide an overall financial strategy for your business. Some companies also offer hourly service, so you only pay for what you need. This way, every detail of the capital you put into the business to the investments you make on assets and equipment, can be recorded in proper accounting format.
According to studies compiled by Maryville University and its online bachelors of accounting program, accounting is a popular career choice because there are so many different options for accounting graduates. Because of this, more startups are recruiting accounting professionals and fresh graduates than ever before. You wouldn’t want your company to fall behind and suffer financial management issues later on, would you?
Incorporate a System
Next, incorporate an accounting system as soon as you start. Accounting is a very standardized element of a business, so choosing the right system to use is just a matter of figuring out your specific needs and requirements. There are plenty of systems to choose from.
Once again, having an accountant assisting you from the start is a huge plus. The accountant can provide input on the most suitable accounting software to use. You can even use a software that lets you do most of the accounting yourself, which means you can save on accounting services and make do without having a full-time accountant should you choose to go down this route.
Stick with a Method
There are two accounting methods to choose from and they are cash accounting and accrual accounting. Before you choose between the two, make sure you understand the regulations that apply to your industry. You may be obliged to use one method to comply with industry standards.
Accrual accounting is the more commonly used of the two since a lot of accounting software and solutions are basing their systems on this method. Cash accounting, on the other hand, is considered the simpler method, especially for cash-based, low-revenue businesses.
What’s important is that you stick with the method you select. Some systems do allow you to move between cash and accrual accounting approaches, but there are still complications to worry about if you decide to change methods in the middle of a fiscal year.
With these simple tips in mind, getting your startup accounting figured out from the start should be relatively easy. As long as you follow the correct accounting standards and have a professional accountant by your side, you will have no trouble laying down the right foundations for your startup.