The Founder’s Guide to Startup Accounting


Bookkeeping and accounting are not as urgent as finding a perfect cofounder or calculating your cash runway. But that doesn’t mean it isn’t essential to your company’s success. How would you calculate a cash runway or plan for another salary without accounting? If you’re a startup founder, this article will help you with everything you need to know about accounting and bookkeeping.

Table of contents

The founder’s guide to startup accounting

Bookkeeping vs accounting

If you’re a brand new startup

  • Choose a business entity
  • Select an accounting method
    • Cash basis accounting
    • Accrual basis accounting

Checklist for startups’ accounting

  • Managing emails and post
  • Examine your bank account.
  • Reconcile bank account
  • File or digitise receipts
  • Prepare and send sales invoices

Final thoughts

Bookkeeping vs accounting

Consider an accountant as a financial translator and consultant and a bookkeeper as a financial compiling tool. A bookkeeper assists you in keeping financial records; an accountant both analyses and records and helps you understand the effects of your financial decisions.

Both responsibilities may merge depending on the size of your company. These responsibilities are usually clearly defined in larger companies and have separate tasks and roles. However, in smaller firms, especially startups, a bookkeeper may carry on some accounting tasks and vice versa.

This is why you must understand and define your requirements before you begin your search so that you can employ somebody capable of doing the required tasks.

If you’re a brand new startup

You need to decide your business structure before you start accounting.

Choose a business entity.

Your business entity determines how you can pay yourself, your potential business liability, how you are taxed and more.

There are five primary categories of business entities:

  • Sole proprietorship
  • Partnership
  • Limited liability company
  • C corporation
  • S corporation

Startup accountants can help you select the best business structure for your firm.

Select an accounting method.

Before filing your first tax return, you must choose one of two possible accounting approaches.

Cash basis accounting

It is the method of recording revenue when the amount is received and recording expenses when cash is paid out. Since it involves the simplest form of accounting, the cash basis is usually employed by individuals and small enterprises (especially those without inventory).

Accrual basis accounting

This method identifies business revenue and corresponding expenses when incurred—rather than when money is transferred. It also implies identifying expenses when the business incurs the liability for them, not when it pays them.

Checklist for startups’ accounting

One thing you want to avoid is only looking into your company’s records when you are forced to, such as during tax season or while pursuing a potential investor. Here is a checklist that bookkeepers recommend using to maintain accurate records:

Managing emails and post

Regular checking of your mail and posts will help you stay on top of queries and invoices. You can also distribute the work of checking and replying to the mails among other employees.

Examine your bank account.

As a business owner or bookkeeper, it is crucial to understand how much money is in the firm’s bank account. It helps in budgeting to understand possible payments and determine whether clients have paid their invoices.

Reconcile bank account

The process of bank reconciliation guarantees that all transactions are correctly recorded in the accounts. Reconciliation of the savings, credit card and bank account should be conducted regularly.

File or digitise receipts

You should file (or digitise) your receipts and old invoices weekly. Otherwise, you risk losing them and might be unable to prove certain expense deductions in the event of an audit.

Prepare and send sales invoices

Send sales invoices to the client after the completion of work or on the planned date; these invoices might be one-time or recurring. The sooner the invoices are sent to the clients, the faster you will get paid.

Final thoughts

Any company owner should be familiar with accounting because it is often referred to as the “language of business.” Accounting procedures are essential for a business’s immediate financial stability and are crucial strategic tools to analyse and predict the outcome of business decisions.

Startups can even consider outsourcing their bookkeeping and accounting to lower costs, gain expertise and improve business finances.


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