how to set up your startup accounting
DESCRIPTION
If your company is in the early stages, you may not be giving too much thought to formalizing your accounting systems and processes. But these earliest stages are exactly when you need to establish the structure that will support your company finances, and help define your financial strategy as you grow. Check out this deck to find out how to establish an accounting function that will keep your company in compliance—and that will scale with you as you grow.TRANSCRIPT
How to Set Up Your Startup Accounting#startupaccounting
“Startups face a huge burden in today’s economy, often having to choose between funneling resources toward creating their goods and services or managing the often complex accounting, tax and financial strategy planning necessary to run a successful business.”
~ David Ehrenberg, Founder and CEO Early Growth Financial Services
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• Set up a system early• Establish structure• Keep it simple• Build it to grow
Presentation Overview
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Accounting: Pre-FundingSet up a low-cost, accrual-based accounting structure that can grow with you
• Open business banking account
• Separate personal and business expenses
• Keep records of receipts and invoices
• Be mindful of tax obligations• Collect payments• Select payroll provider• Stay on top of stock records
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• Set foundation for future growth• Build financial infrastructure• Clarify funding objectives• Manage cash-flow• Create clean financials for investors• Hire professionals to help company become GAAP
compliant (Generally Accepted Accounting Principals)
Accounting: Post-FundingYour financial strategy deepens and you’ll gain better understanding of your business
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Finance and Accounting SupportWhen should you engage with a financial services support firm?
• Raised seed or convertible note round over $500K• Start to have over $20K month in revenue• Have professional or institutional investors
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Accounts PayableFormalize your system for keeping track of business expenses
• Set up system early to help maximize cash flow and create essential financial reports
• Choose best tracking system for company needs
• Enter every expense: receipts, bills, etc.• Establish invoice AP schedule• Place vendors on net 30 payment terms• Build reputation of financial stability
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Accounts ReceivableImprove cash collections by creating a clear payment collection process
• List all open invoices and balances
• Create “friendly” invoices (and print hard copies)
• Put payment terms in writing for new clients
• Establish credit guidelines• Create collection timeline
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TaxesEven in the early stages, you’ll want to be mindful of tax considerations
• Select correct legal entity for company
• Understand federal, state, and city tax obligations; regional fees; and registrations
• Separate business and personal finances
• Deduct business expenses• Pay quarterly taxes• Stay on top of payroll taxes and
1099sWWW.EARLYGROWTHFINANCIALSERVICES.COM
Financial ProjectionsForecast for potential revenue and market capture
1. Start with market size
2. Identify particular segment
3. Extrapolate to calculate total
potential revenue
3. Headcount /
milestone funding
2. Calculate spending
necessary to achieve revenue/development
1. Project revenue growth
over next 1-3 years
Top-Down Projection
Bottom-Up ProjectionWWW.EARLYGROWTHFINANCIALSERVICES.COM
Financial ReportingFinancial statements reveal important insights
• Financial statements– Profit and loss– Cash flow statements – Balance sheet
• Cash burn reporting• Budget vs actual reporting• Other financial reporting
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Thank You and Q&A
Sirk Roh
www.earlygrowthfinancialservices.com
Follow us @EarlyGrowthFS
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