Let’s be honest, accounting isn’t exactly glamorous. As an entrepreneur, you want to pour your energy into your brilliant product and delighting customers. But skimping on financial management can sink promising young companies.
Partnering with an expert accounting firm can help startups build a foundation for success. Experienced CPAs handle the necessities like taxes, cash flow projections, and exit planning, so you can focus elsewhere. Read on to see why startup bookkeeping services are such an invaluable asset.
Validate your business model
One of the first steps when starting a business is testing the viability of your idea. Will it attract customers? What pricing is needed to be profitable?
An accountant can analyze your business model to determine if it’s financially sound. They can create projections for revenue, expenses, and profit to give you a realistic preview of what’s achievable. This allows you to refine your model as needed before sinking extensive time and money into a concept that may not pencil out.
Accountants can also compare your projections to industry benchmarks so you know if your targets are reasonable. Validating your business model upfront can prevent wasted effort and provide confidence as you move forward.
Navigate financing options
Very few startups are fully self-funded. Whether you seek loans, investors, or other sources, an accountant is invaluable for guiding financing decisions. For debt financing, they can help you understand options like bank loans, SBA loans, and credit cards to select the best fit.
Accountants are also skilled at putting together investor pitch decks that demonstrate your business’ potential and ability to provide returns. They can give perspective on how much capital you realistically need and what type of equity you should be willing to give up. If you do secure outside funding, an accountant helps ensure it’s utilized effectively and that financial reporting requirements are met.
Minimize tax liability
Startups face complex tax scenarios given their evolving nature. An accountant who specializes in small businesses stays up-to-date on the latest regulations to minimize your tax liability. For example, they’ll factor tax implications into decisions like choosing a business structure and accounting methods. They’ll also help you take applicable deductions and credits, track depreciation, understand sales tax collection and remittance rules, and comply with payroll taxes.
Come tax season, they’ll ensure filing and payment deadlines are met, extensions are secured as needed, and audits go smoothly. Ongoing tax planning and guidance from an accountant keep more money where it should be, ultimately fueling your startup’s growth.
If your startup enjoys rapid growth, financial management gets more complicated. Accounting needs often outpace capabilities thereby leading to chaos. An experienced accountant guides your expanding company through the turbulence smoothly. As revenue increases, they’ll scale up record-keeping processes and ensure additional transactions are handled accurately.
For example, they’ll project cash needs based on growth plans to prevent shortfalls. Also, as you hire more staff, an accountant sets up payroll processing and ensures compliance. Finally, when production or inventory rises, they implement cycle counting and other controls.
Focus on your strengths
As a startup founder, your time is best spent developing your product, building customer relationships, handling production, and guiding your team. Accounting is likely not your strength or passion. Outsourcing those functions to an accountant allows you to focus your energy where it belongs. You get financial guidance without needing to become a finance expert yourself. Rather than getting bogged down running payroll or reconciling bank accounts, you can have confidence the finances are under control while you do what you do best. It’s a smart trade-off that sets your startup up for success.
All business owners should plan for their eventual exit. An accountant can lay the groundwork in a startup’s early days. They’ll choose entity structures beneficial for exiting, like S-corps or LLCs. What’s more, they can help guide the establishment of shareholder agreements defining the exit process. Then, when the time comes to sell or go public, an accountant provides sales price and deal guidance.
Good accountants will also prepare extensive financial records for due diligence. For management buyouts, stock redemptions, or transferring to heirs, these experts ensure the transaction follows protocol so that your exit is smoother and more lucrative.
Find the right accountant
Realizing the full benefits of accounting services for your startup requires the right accountant. Seek a CPA firm with extensive experience working with small businesses in your industry. Talk to prospective accountants about the services they provide and how they’ll meet your company’s specific needs.
Inquire about their communication style and availability for ongoing questions. Also, make sure they stay up-to-date on the latest regulations and technologies. Finally, don’t hesitate to ask for client referrals, and most importantly, check reviews. Take all the time you need to find the ideal accounting partner for your startup’s needs and budget. Good luck!