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As you can see, bookkeeping and accounting go hand in hand, but the two functions are usually divided up into two different roles—the bookkeeper and the accountant. Most very-early stage startups do not need a third party, nor a full-time, bookkeeper. Assuming that the startup has a bookkeeping software like QuickBooks Online set up, we recommend one of the founders DIY the books until the company has raised a reasonable amount of funding. The typical point where it starts to make sense to hire a startup bookkeeper is when a company has raised over $250,000 in funding and has 6+ months of runway. At that point, it makes more sense for the founders to be 100% focused on growing the business, and let an experienced startup bookkeeper handle the books. Managing your bookkeeping and accounting right from the start will allow you to keep better control of your finances.

• It’s a good idea to check in with it regularly to ensure that your records are accurate.
• When this is done in the accounting software, the invoice is created, and a journal entry is made, debiting the cash or accounts receivable account while crediting the sales account.
• In practice, this neat separation between contractor and employer might not always exist.
• As a business owner, it is important to understand your company’s financial health.
• One of the most important aspects of bookkeeping is the day-to-day recording, tracking, and reconciling of all of your business transactions.
• So, here are the basics of bookkeeping for startups – in particular, early-stage companies that have or are going to raise outside venture capital or seed funding.

Make sure that payments received from your customers are adequately tracked, whether they pay by check, cash, credit card, PayPal, or via ACH transfer. Whenever a customer pays, a record of that payment should be attached to their invoice and filed. If you’re ahead of the curve and using a paperless office, just save a record of the payment to their file.

Business Tax Calendar

While cash accounting (calculating the money you have on hand and the money you owe) is relatively straightforward, it isn’t the method of accounting preferred by investors and banks. The most obvious role of an accountant is developing  the right chart of accounts (COA). The COA lays out all of your assets and liabilities and provides a comprehensive picture of the financial health of your business. Unlike small businesses, startups are built with rapid growth in mind.

Again, the impetus for these funding rounds differs for every business. The common thread among all funding rounds is that the business needs money to reach its next stage of growth. An accountant can help you prepare your books to put your best foot forward for investors. Startups are also more likely than other small bookkeeping for startups businesses to have distributed teams. Unlike a small business, startups rarely focus marketing efforts on a specific geographic area and will not be bound to a single location. Thus, many startups are finding that maintaining a headquarters is overhead they don’t need, opening them up to employees from anywhere.

What Types of Financial Records Should Your Startup Keep?

You can read more about our ratings for various business accounting software here. You should be familiar with more than one software as some of your clients may have https://www.apzomedia.com/bookkeeping-startups-perfect-way-boost-financial-planning/ a preference in terms of the accounting software that they’d like you to use. Some of the best accounting advice for startups is to know your basic accounting terms.

Yet with hundreds of different business expenses, you’re not sure which qualify as tax deductions to reduce what you send to the IRS. You’ll also want to keep track of those smaller expenses such as parking fees, postage, printing, and mileage. Tracking business expenses properly will make sure that your year-end deductions are accurate and that you have the documentation to prove it. If the demands of startup life mean you don’t have time to learn QuickBooks, or if you’d rather leave bookkeeping to a pro, try Bench (that’s us). When your startup is in its early stage, chances are your budget will be tight. In this case, you may want to consider managing your business’s books yourself.