Top 15 Small Business and Startup Accounting Tips

Top 15 Small Business and Startup Accounting Tips

One of the first crucial steps for any startup is selecting the right accounting software. Modern startups benefit immensely from cloud-based accounting solutions that offer accessibility, scalability, and real-time financial data. Accounting operations are indispensable for the successful operation of any business, and automating them can result in both cost savings and time efficiency. By leveraging cloud-based accounting software, you can streamline the entire process from data entry to reporting.

  1. When you’re setting up your business’ accounting, you should also research tax obligations to determine how your choices could impact you when taxes are due.
  2. You don’t get any more revenue from that client for the rest of the year.
  3. Beyond just completing your regular tax returns, you will want to look at available tax credits, like the research & development tax credit.
  4. As with many business resources, cloud-based accounting and bookkeeping services are the premier choice for many modern businesses.

Whether it’s your first business tax return or you’re a pro, having an organized system for your documents will save you a lot of stress. FreshBooks can help by keeping your accounting systems organized, allowing you and your tax professional to find all the information when you need to file. The bookkeeping process involves keeping track of business transactions and making specific entries. Accounting systems and bookkeeping software like FreshBooks have a chart that lists all your accounts payable and their categories. For example, you can post all sales to income accounts and cash outflows to expense accounts. The success of your startup is based on efficient budget management, balancing the books, and modifying financial strategies when needed.

Startup accounting is an incredibly valuable, but tedious, aspect of running a startup. While the value gained by effective startup accounting is indisputable, knowing where to start can be a roadblock. Crowdfunding entails raising small amounts of money from a large number of people, typically through online platforms. It can be an effective way to raise funds and build a community around your startup, but it can also be time-consuming and challenging to manage.


This standard is more commonly used than the cash method as it gives you a more realistic version of income and expenses during a specific time period. However, be sure to monitor your cash flow, as not accounting for future income and payables can hurt your business in the long term. Developing a robust cash flow forecasting model is essential for preemptive financial management. This involves projecting future cash inflows and outflows based on current contracts, expected sales, and planned expenses.

Effective accounting practices and sound financial management results in returns for the stakeholders and business owners. In the beginning, most of your transactions will likely be sales and expenses. Closely tracking these numbers is critical for keeping accurate financial records. As you can see, bookkeeping and accounting go hand in hand, but the two functions are usually divided up into two different roles—the bookkeeper and the accountant.

It allows you to track income and expenses, monitor cash flow, and make informed financial decisions. Effective bookkeeping process and financial accounting is the cornerstone of a successful startup. By making informed financial decisions and leveraging modern accounting tools, your startup can thrive in today’s competitive business landscape. Compared to cash basis accounting, the accrual method provides a more accurate view of the company’s financial position as well as income and expenses. Plus, there are some states that require businesses to use the accrual method for their accounting. Understanding the difference between forecasting and accounting is also essential for startups.

Using accounting software, running financial statements takes less than a minute, but the details in those reports can tell you a lot about your business. A bookkeeper reconciles bank statements regularly to ensure your bank account balance matches the cash balance in your ledger. If the amounts in the bank statement and internal records don’t match, you’ll need to find out where the discrepancies are and adjust the entries to ensure they match the bank statements correctly. To ensure that journal entries have been recorded and posted correctly, small businesses use the trial balance accounting method to double-check account balances for a given time period. A trial balance ensures that the debit and credit balances in the ledger accounts match.

It also tells you where you’re making money and helps you plan for business growth. As a startup, you can begin with manageable measures and gradually enhance the formality of the accounting processes as your venture matures. Also, accounting software will go a long way in managing your startup accounting. Moreover, there are several entry-level applications, such as Intuit QuickBooks and Xero, designed for startup owners with inept acumen in bookkeeping accounting basics.

How accounting software works

Even unprofitable technology companies can use this incentive to reduce their burn rate. Kruze has helped clients reduce their burn rates by over $40 million through our work on this government incentive program. Even unprofitable startups must file annual federal and state taxes every year. Yes, venture-backed high-growth businesses should have as close to GAAP financials as possible.

How To Do Accounting for Your Startup: Steps, Tips, and Tools

Also, if your business has complex finances, consider the price of a penalty if you make a mistake. We set startups up for fundrising success, and know how to work with the top VCs. Read our recent blog posts on all things startup, accounting and finance. The research and development, or R&D tax credit, is a US government-sponsored incentive that rewards companies for conducting research and development activities within the United States.

If you seek professional support and guidance in accounting and financial management, consider partnering with Mighty Startup. The cost of an accountant depends on many factors like the size of the business or experience of the accountant. However, based on US Labor Statistics, for an in-house US accountant, you’ll be paying an annual average of $70,000. Finally, below, we’ve answered some frequently asked accounting questions that business owners have.

Aim for a line of credit or payment terms like net-30 or net-60, to establish a positive business credit history. So, your best bet as a small startup owner would be borrowing from a close circle of friends and family or investing your own money. If you are running a Shopify store, you can use Shopify’s integrated payment provider called Shopify Payments. Through our inbuilt tax calculation functions and easy-to-use dashboard, you’ll be making employee payrolls with your eyes shut.

You can make journal entries, pay bills, schedule invoices, create financial statements, and so much more. And everything is in one place, only a click away, for you to easily manage and review. The best rule of thumb for startup accounting accounting tips for startups is to hire a professional accountant to help you manage your business’s finances. However, there are several accounting software options available to help you manage your startup finances whether or not you choose to hire an accountant.

Most accounting software has features to reconcile bank statements with the general ledger entries automatically. Most accounting software provides an online ledger and automatically creates a ledger entry when you create an invoice or pay a bill. Each transaction — like income, expenses, credits, and deductions — has a corresponding journal entry.

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