New BusinessMONEY

Accounting for Your Startup


Owners of emerging businesses aren’t naïve. However, with so many demands on your time, staying focused on accounting needs may be difficult. For example, your first step in building an accounting system may be to locate a manila envelope or a suitable cardboard box to store receipts. Then, within a week or two, you’re going to need a system for recording the information on those receipts. Maybe you’ll do it yourself with handwritten ledgers or off-the-shelf software. Or perhaps you’ll hire a bookkeeper or an accountant to enter the data and organize it.

And depending on how close you are to year-end, you’ll realize that it makes sense to plan ahead for filing your first tax return, rather than dealing with it after the fact… And, while you’re at it, maybe an accountant could also help you plan other aspects of your business?

Alternatively, you could plan an accounting strategy right from the beginning: hiring a bookkeeper or accountant to organize your records, choosing software that works best for your business, and retaining an accountant to help plan your tax and business strategy.

Bookkeeping Versus Accounting

Do you need a bookkeeper or an accountant? The answer depends on your familiarity with accounting principles and the amount of time you have available—apart from the other demands of getting your new business off the ground.

Someone has to record all of your business transactions and categorize them. That could be a bookkeeper…or you. Then someone will need to take the raw data and prepare tax returns and reports that can help you understand and manage your business more effectively. That could be you as well. But you would probably be wise to hire an accountant for tax preparation—at a minimum.

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Accounting Software

Over the past 20 years, accounting software has been a major boon to small business owners. Without any formal training, it’s now possible for business owners to create financial statements and reports similar to those used by the largest public companies. It’s a major time-saver and a powerful analytical tool.

That said, you may still want to hire a bookkeeper and an accountant. A bookkeeper may be better able to keep the required data entry up to date, than you. And an accountant’s advice on tax and business strategy still cannot be replicated by even the most sophisticated software package.

Which product should you buy? In most cases, your bookkeeper or accountant will tell you what they like to work with.

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Selecting the Right Accountant

The right accountant for your business will be someone who 1) understands your industry and has experience in it, 2) likes working with entrepreneurs, and 3) communicates at a level that makes you comfortable and increases your confidence.

How do you find this person? Start by networking with your friends, other business owners, and advisors (such as bankers or lawyers) with whom you’ve already developed a relationship. If possible, develop a short list of your requirements and interview several candidates to see how well their experience matches your needs. And keep an eye on the personal chemistry—or lack of it.

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