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The Ultimate Guide To Accounting For Startups Tianlong Services .pdf



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Accounting for Startups is Different

The Ultimate Guide
to Accounting for
Startups
Don’t know
where to start?
We’ve got you
covered.

Tianlong Services - Accounting for SMEs

Accounting for Startups is Different
You experience much more trial and error when you’re doing
accounting for startup than for a business with established
accounting practices.

Startups are fast-paced. Your accounting solution needs to
be agile and forward-thinking to keep up with the pace and
growth of your business.

Startups are low on resources. You’re just starting out, so
you’re likely short on people and time. Your accounting, while
very important, can’t be the sole focus of your job.

Startups are always, and quickly, evolving. Starting a new
venture likely brings unexpected bumps in the road and an
evolving business model. Your accounting solution should be
able to adapt quickly.

When deciding the best method for accounting for your startup, it’s
important to ensure your solutions will support the instability and
uncertainty that often accompanies starting a new business.

Tianlong Services - Accounting for SMEs

Accounting for Startups is Crucial

87%
of startups fail because they run out of money

71%

also cite issues with pricing and cost

Money is the lifeline of your business.
Managing your accounting properly leads to positive cash flow and
prevents mistakes that are detrimental to your business.



Financials tell a story; as an entrepreneur, you are the author of that
story. It’s imperative to master the details of your finances and
business plan, including all interdependencies.
- Jantoon Reigersman, Straight Talk for Startups Co-Author

Tianlong Services - Accounting for SMEs

DIY vs. Hiring an Expert
Now that you know the importance of startup accounting, it’s
time to get into logistics. As an entrepreneur and self-starter, your
instincts may tell you to manage your own accounting.
However, some common issues startups face are actually why
you should hire an expert:

1

Cash Flow Issues

2

Poor Time & Quality Management

3

Company Growing Pains

4

Switching from Cash Accounting to Accrual

5

Trouble Establishing Financial Goals

Tianlong Services - Accounting for SMEs

Metrics to Track
Whether you decide to hire an expert or do it yourself, there are
some metrics that you should absolutely need to keep tabs on at
all times:
Outstanding Accounts Payable: Outstanding accounts
payable (A/P) shows the balance of cash you currently
owe to your suppliers.
Average Cash Burn: Average cash burn is the rate at
which your business’ cash balance is going down on
average each month over a specified time period. A
negative burn is a good sign because it indicates your
business is generating cash and growing its cash
reserves.
Cash Runaway: If your business is operating at a loss,
cash runway helps you estimate how many months you
can continue before your business exhausts its cash
reserves. Similar to your cash burn, a negative runway is
a good sign that your business is growing its cash
reserves.
Gross Margin: Gross margin is a percentage that
demonstrates the total revenue of your business after
subtracting the costs associated with creating and
selling your business’ products. It is a helpful metric to
identify how your revenue compares to your costs,
allowing you to make changes accordingly.
Tianlong Services - Accounting for SMEs

How Do I Know I am Successfully Taking Care
of My Accounting?
Knowing Profits vs. Costs: One of the reasons startups
fail is they don’t have an accurate grasp on the costs and
profitability of their business. Knowing your budget and
funding is key to your business’ success.
Paying Yourself: When starting out, knowing how or what
to pay yourself can be tricky. If you are paying yourself,
you’re asserting yourself as a productive leader and
creating a realistic view of your business.

Accurate Recording: Organized and accurate records
indicate that you are professional and on top of your
financials.

Positive Cash Flow: Generally, a positive cash flow is an
indicator that your business is doing well. When you’re
first starting out, however, this isn’t always the case. You
may not see positive cash flow for some time, but you
should have an idea of when you’ll start seeing it.
Interpreting Key Data: Interpreting key data is fairly
straightforward if you have an accounting background.
However, if you don’t have a strong understanding on
how your metrics translate into the success of your
business, you’re probably missing out on important
opportunities.
If you feel like your current system (or lack thereof) isn’t cutting
it, it’s time to reassess and seek out other solutions.
Tianlong Services - Accounting for SMEs

Finding Your Accounting Solution
When seeking an accounting solution, there are a few factors to
consider. Here are some tips to connect you with the
right solution and make the process painless:
Go in with an idea of what you need. Conduct an audit of
your current books and process to identify your
pain-points. An experienced accountant or team will have
feedback and insight on items you may not have
considered.
Know your budget. Find someone that will help you
manage your financials and help you grow your business
at a reasonable cost that fits your budget.
Ask the right questions. An accountant plays a key role
in your business, so you may want to find someone that
fits your company culture and is an expert in your
industry. Asking questions like “what experience do you
have in my industry?” will help you find your best fit.
Ask for referrals. How do you find the services you use
outside of work? You ask your friends & neighbors, get a
quote and make a decision. Finding an accountant is not
too different. Look to trusted resources and people
(especially those colleagues working in your industry) to
find what solutions worked best for them and what may
work best for you.

Tianlong Services - Accounting for SMEs

You Have Options
Now that you have an idea of what your accounting pain
points are, it’s time to weigh your solution options.

Hire an Accountant: A more traditional option, an
accountant can take care of all your bookkeeping,
invoicing and compliance needs. You get a personal
touch with accountants, but they also can be very
costly.
Use an Accounting Software: Accounting software
automates all your accounting processes and tasks,
so you don’t have to manually do them. Moreover, the
accessibility of software enables you to have a fresh
perspective into your accounts 24/7. Although you
don’t have an accountant on site, most software
provides technical accounting assistance when you
need it.
Both options will provide the basics that you need, it’s just a
matter of preference and cost.
Tianlong Services - Accounting for SMEs

Prioritize Your Startup’s Success
portal.scalefactor.com

Prioritizing your accounting is necessary for your
startup’s success.
Tianlong Services automates the tedious and time-consuming
tasks that you are currently facing with your startup
accounting.
As a startup ourselves, we know what it takes to manage and
maintain a business. Our team of dedicated experts and
powerful accounting software ensures the accuracy and health of
your accounts, giving you peace of mind and time to focus on what
you love about running your business.

Tianlong Services - Accounting for SMEs


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