fbpx
415.236.0017 info@aircfo.com

Of all the new businesses starting in the United States today, only one-third will survive for 10 years or more. This is a two-sided statistic. On one hand, it may discourage some potential business owners from taking their first steps into an industry they could thrive in. On the other hand, a 33 percent chance of success doesn’t automatically mean failure.

If a startup wants to survive past its 1-year mark, long before hitting the 10-year mark, its owner and stakeholders need to be financially-savvy. By avoiding the following accounting problems, your startup stands a much better chance of becoming more than just another statistic.

Building a Financial Foundation

Startups are the cradles of expansive dreams and ambitions. They also tend to be expensive endeavors. Many founding teams fail to fully brace themselves for the true cost of their goals upon starting out. As a result, the business is more likely to go under before the real work can begin.

To avoid this pre-game mishap, founders entering into the world of business for the first time should craft a complete financial portfolio. Although most founders tend to be very seat-of-the-pants about their financial position, when approaching angel investors or VCs, a detailed history of financial responsibility lets the proper channels know whether or not the business and its leadership team can survive the challenges ahead of it.

Tracking Financial Data

The sheer amount of financial data a growing startup takes on can get overwhelming. On the accounting and bookkeeping side of operations, starting a small business requires the monitoring of:

  • Payroll
  • Debts
  • Operating Expenses
  • Accounts Receivable

Instead of relying on memory or a journal to track their financial information, business owners absolutely must look to the world of technology for more reliable solutions. Whether your team is more comfortable with Excel or wants to work with a more in-depth, third-party tool, reaching out for assistance will ensure not only a business owner’s financial stability but her mental stability, too.

Looking to keep overhead down without dropping the books? Click the button above to learn why technology startups from coast to coast trust airCFO to run their accounting, finance, and operations.

Breaking Even

With a financial foundation set and data properly managed, new business owners can turn their attention to the next major challenge: breaking even. All accounting problems and solutions linchpin around this point.

While generous investors can help small businesses stay in the black during their first year of operation, business owners who don’t plan ahead may find themselves digging into their personal reserves.

Before diving into the first few months of operations, business owners concerned about breaking even need to sit down with their primary affiliates and create a business plan. Most startups take years to generate meaningful cash flow, so be prepared!

Managing Payroll

The title “small business” can be misleading, especially when it comes to startups. Some startups consist of a single person, while others keep upwards of a dozen full-time employees around. Regardless of employee headcount, business owners need to consider payroll costs when expanding their team.

No one can get away with shirking payroll. Handling payday in-house is doable, but it can bring about extra stress if an owner is also getting a business on its feet. That’s why there are so many third-party tools available to business owners that will help them pay their employees. Using a third-party payday aid like Gusto ensures that a startup’s employees are treated fairly, paid on time, and have an easier time accessing tax documents when they’re ready to file.

Collecting Sales Tax

Some startups operating in the United States are subject to collecting sales tax. Different states have different rules regarding what and how much sales tax should be applied, and it’s on you as the business owner to apply the appropriate sales tax to your goods. As a general rule of thumb, when your company sells tangible personal property (TPP) to consumers, you are required to collect and remit sales tax.

Running an ecommerce startup? Depending on how successful your business is, you may be required to pay sales tax in more than one state! This phenomenon is known as nexus, and it occurs when your business has a presence significant enough in a state to require the collection of that state’s sales tax.

Taxes are a complicated matter under the best of circumstances, and the tax laws surrounding small businesses can feel impassable. When debating whether to use a cash or accrual method, it’s best for business owners to sit down with their investors and an accountant to decide which method will ensure their greatest financial success.

Looking for easy ways to reduce your tax costs and boost your bottom line? Check out our startup tax guide: deductions to watch for in 2019!

Preparing for Growth

Most tragically, some small business owners fail to account – in more than one way – for the potential that their business may grow in the future. Sure, the dreams may persist, but without a financial foundation, that growth can’t ever take place.

There are some situations in which the use of third-party accounting software can help with a business’s financial growth planning. The best financial software scales with a business, offers owners greater access to consumer financial data, point of sale processing, and security features. With these sorts of tools in place, small businesses only need a firm hand at their financial wheel to expand alongside their consumer audience.

Alternatively, should your company choose to outsource your accounting strategy and operations, you’ll likely have access to advisors who can help guide your business as it grows. Make the most of this! Good financial advisors want you to succeed, as their success is directly tied to yours.

Startup accounting doesn’t have to be frightening. Click the button below to schedule a 30-minute call with our team today and learn how we can help configure your back office stack for success. From bookkeeping to financial modeling, we’ll help your back-office scale with the rest of your business.