Startup founders typically focus on thousands of things, with sales, product or service development, marketing, HR tasks, and finding potential investors taking up most of their attention. If you are planning to start a business, be aware that while the above tasks may seem more important, accounting also requires a lot of attention and discipline. Outsourcing is an option worth considering, but you will still need to complete several important tasks.
Choosing the right fitting business entity
Your primary target market not only determines which distribution channels you use but also has a major impact on how you set up your business. To choose the right form of business, you need to weigh the pros and cons of the business forms currently available. The IOOGO team will help you with this.
What entity you choose for your business will affect your tax implications, how you are paid, and your potential financial liability. Business entities fall into five main categories:
● Sole proprietorship
● Partnership
● C corporation
● S corporation
● Limited liability company
Depending on the nature of the business, startups usually incorporate an S corporation, a limited liability company, or a sole proprietorship.
Choosing the right accounting method
You’ll have to choose one of two possible accounting methods before filing your first business tax return.
● Cash basis: Startups are most likely to begin there. Cash basis accounting records income and expenses according to when they are received and paid.
● Accrual basis: This is the industrial standard for GAAP accounting (USA) and IFRS accounting (EU) and is used by the majority of accountants around the globe. Recognizing revenues and expenses is done when they occur, and not when the cash is received or paid.
Finding the right accounting method for your business requires complex knowledge and experience. Don’t hesitate to get in touch with us at IOOGO for support.
Your tasks as a founder
Your accounting software or spreadsheet needs to be updated every week with all transactions. To keep your receipts organized, you should also physically file or digitally store them.
Your monthly tasks will include paying your vendors, reviews of any outstanding payments from clients, and an overall review of finances. This overview can be obtained from a monthly financial statement. In addition, you’ll need to reconcile your business bank accounts — ensuring that your records match your business bank account credits and debits. Every month, you should review your budget and see how your projections compare with your financial reality.
As you can see from the above, before launching, you’ll need to make decisions on a number of key issues that will directly impact the way your business operates. The IOOGO team will be happy to assist you in setting up the right business structure, as well as the financial and accounting tasks required for your startup.
If you’d like to learn more about the basics of startup financing before launching your business, visit our website and watch our webinars on this topic.
