A Guide to the Top 3 Overlooked and Underestimated Accounting and Compliance Topics for Start-ups
EKS&H Accounting Solutions
You’ve got a great idea, you’ve got capital, and you’ve got talented people on your team. You’re ready to launch, but there’s something nagging at you: how to keep track of everything and report to investors, lenders, and other key stakeholders. You might be overwhelmed by the basics of where to start (systems and processes, best practices, reporting requirements, and who has responsibility for what). Or maybe you’ve done this before and all you can think about is how much time it is going to take and the distractions from your actual business that come with it.
Whichever resonates with you, this simple guide will give you three commonly overlooked or underestimated subjects that all start-ups should focus on as they get going.
We are fortunate to have excellent technology at our fingertips that allows us minimize manual data entry, streamline processes, establish internal controls, and expedite financial reporting information. And what’s better is that if you know what to look for, many of these software and hardware solutions are actually quite cost-effective, easy to use, and integrate effortlessly with a wide variety of other tools. Take some time to talk to an expert, look at the different options, and understand what might be best for your business — both where it is at today and where it might be a few years down the road.
Starting with your accounting software, QuickBooks, Xero, and Intacct are great solutions. Each of these solutions offers an online platform accessible from anywhere, multiple user access, bank feeds to minimize data entry, and what you need to keep track of your basic financial information. Using a system such as one of these helps keep track of your customers, invoices, cash receipts, vendors, and bills, and they can produce your financial statements and reports.
Some of the other tools out there that can enhance your financial reporting system include, but are not limited to, Bill.com (for a streamlined workflow for your bill payment process) and Expensify (for your on-the-go expense tracking and reporting). In order for these systems and tools to be most beneficial to your company, it is wise to designate a single point person to be responsible for performing the bookkeeping and accounting tasks.
Once you select your system, you’ll likely find a robust selection of reports you can use to run your business and provide necessary information to key stakeholders; focus on a few key reports to start (you can always add from there as your business and needs get more complex). At a minimum, you should be preparing and reviewing a balance sheet and income statement on a monthly basis. Your balance sheet will give you a snapshot look at all of your assets and liabilities as of a certain point in time, whereas your income statement will give you a picture of your income and expenses for a set range of time.
Other useful reports may include customer summary, inventory valuation, vendor spend, and cash flow. Monitoring these reports on a regular basis, and understanding the information presented, will allow you to address issues as they arise and course correct where needed — a much better option than discovering an issue months or years down the road.
Wherever you decide to start your business, you will find that host city, county, and state will come with their own set of rules and regulations with which you must comply. These can include special licenses, employment regulations, industry certifications, data security, and tax laws.
It is a great idea to educate yourself early on the various compliance items to ensure you have the proper registrations, are tracking the information needed to comply, and know the due dates. A couple of key items that can be overlooked until it comes to the due date are sales/use tax reporting, personal property declarations, and 1099 reporting. Each of these requires that you keep track of specific information, including customers, sales, purchases, and contractors. If you know what information is needed ahead of time, you can incorporate that information into your systems and processes to ensure you are ready for the required reporting.
Giving ample consideration to these three areas early on is a great investment that helps minimize pain, frustration, and major issues as your business grows and becomes more complex. If you lack the time or expertise necessary to learn about these items (and what entrepreneur doesn’t?), consider partnering with a CPA or other advisor who can help you understand the options and requirements and to whom you may be able to outsource these functions as you get started.
To learn more about how the EKS&H Accounting Solutions team can help your business with system selection, reporting, and compliance, please contact Rebecca Kelley at email@example.com, or call us today at 303–740–9400.