Starting a business is a daunting task. As a founder, time is limited and handling invoices and bookkeeping would probably be the last thing you want to worry about. A solid understanding of basic accounting can ensure your startup's success. Let's take a look at how accounting can help startups succeed.

Accounting or Bookkeeping – What is the difference?

As your startup grows, you will need to become more proficient in accounting in order to create budgets and maintain financial statements. Accounting for startups involves tracking cash flows and summarizing this data into financial statements that later can be used to analyze the business' performance. Bookkeeping should not be confused with accounting. Your business transactions are recorded through bookkeeping. Unlike accounting, which is more concerned with in-depth financial analysis, it does not involve a lot of analytical work.

Why is accounting important for startups? 

In the long run, stakeholders and business owners reap the benefits of sound accounting practices and financial management. Startups can benefit from accounting in the following ways:

• Provides business owners with an overview of their company's financial position and performance
• Ensures businesses have a clear understanding of their past activity and where they stand today.
• Keeps track of startup businesses' debts and receivables
• Small-business owners and startup companies use financial accounting to communicate information to outside users of their financial information, such as the IRS, the banks, creditors and suppliers, probable investors, etc.
• Employees can also learn about the company's strengths and weaknesses through accounting.
• Small businesses and startups can make use of accounting information to analyze competitors and evaluate investment opportunities.

Startup Accounting: Why You Need It 

• 1. Support your growth plan
  You're likely going to require funding to expand and scale up your business. Cash flow estimates and expertly crafted financial statements can play a positive role in persuading lenders and investors by demonstrating that your company will be profitable. Running a firm requires you to keep track of important data like cash-out dates, burn rates, and budgets. With the help of an accountant, you can get a broader perspective on understanding how the financials are connected and will impact your business.
• 2. Staying organized and compliant
  Hiring an accountant will take away the pain of monitoring company finances and adhering to compliance rules. Furthermore, they can help identify and resolve issues before they get out of hand. CPAs can help M&A teams gain confidence in a startup's bookkeeping and finances during accounting diligence.
• 3. Setting up accounting systems
  Creating a successful startup requires a lot of work. Scaling the financial backend systems shouldn't be too challenging. Start-up accountants with experience in high-growth companies are familiar with the systems and software needed for hyper-growth.
• 4. Collecting dues
  Essentially, accounts receivable (A/R) is the payment due for the goods or services your business provided to customers.
• 5. Paying taxes on time
  With the help of an expert accounting system, tax return preparation will become much easier and more accurate. Taking advantage of tax credits will ensure you maximize your tax deductions. The startup tax benefit will likely be lost if your accounts are not in order.

This accounting checklist can help business owners get started.

• Establish a business-specific bank account
• Make sure your financial statements and tax returns reflect your expenses, including bills, receipts, invoices, and other payment proofs.
• Set up your bookkeeping system, outsource it, or hire an in-house bookkeeper depending on your business structure and accounting needs.
• Become familiar with your tax obligations; adhere to filing deadlines and be aware of any penalties.
• Regularly evaluate your business's financial health using balance sheets, cash flow statements, and other documents.

You will need to maintain a more sophisticated recordkeeping system as your startup grows and makes more revenue. Therefore, organizing your business from the start is crucial. With simple and intuitive accounting software such as Integra Balance, startups can automate their accounting processes and keep an eye on their cash flow.

Take the right steps when starting up

The choice is yours whether to handle accounting yourself or hire a professional. Being an owner can make it easy for you to become so engrossed in your business's day-to-day operations that you overlook that growing pile of paperwork. However, ignoring that stack can make things more complicated for you in the future. The Integra Balance finance solution helps startups stay on top of their finances several times faster than other accounting solutions. Schedule a demo today!