Accounting Tips for Startups: A Guide to Financial Success
Starting a new business venture is exciting; however, business owners also have to understand the responsibilities of managing the financial aspects of the business. When you are just getting started, you might not have the means to outsource backend tasks to a professional. As a result, many entrepreneurs have to maintain their bookkeeping and accounting on their own when they first get started and need to know the essential accounting tips for startups.
As a startup founder, you wear a lot of hats to properly run your business. If you aren’t a numbers’ person, it’s easy to push off accounting tasks until the last minute. However, business accounting is a crucial piece to understanding your business success and financial health. Especially for startups planning to seek funding from outside investors, clean accounting processes and financial statements are a must-have.

In this article, we will cover the top 10 accounting tips for startups. Additionally, you’ll learn the importance of accounting, how it contributes to the success of your startup and how to know when it’s time to hire a fractional accountant.
10 Accounting Tips for Startups: Managing Finances Without an Expert
#1. Consider a Cloud-Hosted Accounting Software
Automation software is the future, and making a small investment in a cloud accounting package is one of the first steps to managing your financial organization and workflow. There are many cloud-based accounting packages on the market, but our favorite is Quickbooks Online for its ease of use, integration and reporting capabilities. Monthly subscriptions start as low as $30 a month.
When you first start working with Quickbooks Online, you will soon come to love the ease of online bank feeds. This feature automatically populates your bank transactions into Quickbooks Online, queuing them up to be coded. If you stay on top of the bank feed coding, later preparation of bank reconciliations and financial reports is a snap.
Another key feature of cloud-accounting software is its capability to manage accounts payable. Instead of writing paper checks which then later have to be manually entered into the system, Quickbooks Online accounting software lets track and pay your bills online. Through a partnership with Melio, Quickbooks users can upload digital images of their bills, and pay them for free by ACH or Check. This feature will save you a ton of time keeping all of your outstanding bills organized.
And perhaps most importantly, Quickbooks has an integrated merchant service that allows you to receive payments for your services directly via a link that’s included on your invoice. This helps you get paid faster, and also matches the payment up to the invoice automatically, so you know what has been paid and when.
#2. Create a Separate Business Account
The biggest mistake new entrepreneurs make is not opening a business account and establishing clear boundaries between their personal finances and business finances. Make sure to separate your personal and business transactions, so you can manage cash flow properly and maintain the integrity of your business’s financial records . It’s also a great way to start establishing a banking relationship which will come in handy when you’re ready to start establishing business credit.
Once you have selected your bank, it’s easy to open a business bank account. The process is initiated online or at a local branch. These are the most common documents banks ask for when you open a business bank account. Some banks may ask for more.
- Employer Identification Number (EIN) (or a Social Security number, if you’re a sole proprietorship)
- Your business’s formation documents
- Ownership agreements
- Business license
#3. Keep Spending on a Business Credit Card
Similarly to how you should separate your personal and business accounts, make sure to open a business credit card. Use this card to make all purchases, including work lunches, new software, merchandise, company gifts, or marketing expenses. A business credit card will help you track your expenses and will help keep your financial reports in line. Accounting and bookkeeping will feel overwhelming if you try to track everything with physical receipts and reimbursements from multiple personal credit cards.
#4. Make Sure Your Invoices Get Paid On Time
If you are managing your own accounting as a startup, it’s your job to be your biggest advocate. Keep track of the payment status of each invoice, and send follow-ups to clients that haven’t completed their payment. Strive to send invoices ASAP so that clients can take care of it before too much time passes.
Another strategy is to require invoices to be automatically paid. This needs to be discussed up-front with your client, and it will require them to sign something that agrees to this arrangement. Typically, this would be part of a standard service agreement. Once the client has agreed, you collect their payment details up front, and automatically charge the payment on the invoice due date.
Whatever you do, don’t let late payments go unspoken for. This can seriously disrupt your cash flow and create issues such as not being able to meet payroll or purchase inventory. Create reliable professional boundaries and write contracts that hold clients accountable to deadlines. If you are working with large payments, consider offering a payment plan to better appeal to clients.
#5. Keep Track of Employee Hours for Payroll
When you hire your first part-time employee, it’s easy to overlook the logistics of how you will track their hours and pay them. Once you start running payroll in your business, we recommend getting set up with a payroll tool like Gusto. Gusto has a time-tracking module included which can be accessed from a browser or a mobile device. Employees can easily enter their time, which is then sent to a manager for approval. Once approved, it automatically integrates into the payroll system, so they can be paid with only a few clicks.
#6. Establish a Reliable Savings Strategy
According to a study from Insider, approximately 82% of businesses fail due to poor cash flow management. A key part of financial resilience is having the funds to adapt to emergency or unexpected situations. You don’t want to experience setbacks because you have outstanding charges, loan amounts and unpaid invoices.
Strive to have enough savings to support your company and employees for three months. If you don’t manage your money, you can end up losing investment opportunities, or even putting your business at risk. This isn’t something to lose sleep over; however, it is important that all business owners establish a savings strategy in their budget.
#7. Keep Track of Inventory
If you are a product-based business, set up an inventory tracking system. Keep track of total inventory, purchases, selling dates, and stock numbers. Theft or lost inventory can significantly deplete your financial health, so be mindful of this if you have a large storefront. It’s also important to have accurate inventory, so you can monitor your business performance, understand margins, and make informed decisions about which inventory items perform best. Tools like Quickbooks Online have basic inventory modules built in, but if you need more advanced capabilities, there are several options in the Quickbooks App Marketplace that you can add-on to your Quickbooks subscription.
Service-based companies don’t have to track inventory as closely, but they do need to manage what services they provide and how they are individually performing. This gives you insight into where you should allocate time and marketing efforts moving forward. You can do this by setting up separate revenue accounts for each service item, or tracking different services by Quickbooks classes.
#8. Practice Financial Forecasting
Companies that don’t set goals are flying blind when it comes to improvement and strategic planning. If you aspire to grow your company, you have to create actionable steps on a weekly, monthly, and yearly basis. Meet with your team to determine your short-term and long-term goals. Create a list of what you want, what you need to do to get there, and how you are going to get the resources to make it happen.
It’s true that Rome wasn’t built in a day, so don’t expect things to transform overnight. However, small actionable steps every day are what lead to drastic changes in your business. Hold your team accountable by setting goals, tracking progress, and monitoring financial performance.
#9. Regularly Review Your Financial Data
Whether you have a founding team or are a sole business owner, make sure to set time aside every month to review financial material. Stay on top of new bills, what expenses have been incurred, and how much revenue is being generated. Verify that all this data is up-to-date in your accounting system and that nothing has gotten overlooked.
While accounting software tools have helpful automation, they don’t run entirely on their own. You need to put the time in to ensure that transactions are coded correctly, don’t have duplicates, and accurately represent your business. If you monitor this on a regular basis – at least monthly – you should have a good understanding of your financial health OR have the insight on what you need to do to fix it.
#10. Master Business Laws and Financial Requirements
One of the easiest areas for entrepreneurs to overlook (intentional or not) are compliance and tax filing requirements. Three of the major tax requirements you need to monitor are:
- Quarterly Estimated Taxes
- Payroll Taxes
- Sales Tax
Take time to learn about the requirements that apply to your unique business model. The timing and requirements for each will depend on a variety of factors such as the legal structure of your business, your gross payroll, how frequently you process payroll, what products and services you sell, and what states you operate in.
In order to prepare Estimated Taxes you will need to be able to estimate your annual income. This is much easier if you stay on top of your accounting (see Tip #9) and understand how your business is expected to perform. If you don’t pay the proper quarterly taxes there can be fines & penalties, so its wise to have up-to-date forecasts and estimates when making your payments. Estimated taxes are due on both the federal and state level. Here is a link to the IRS quarterly payment schedule, your state will will also have a schedule which you can usually find by visiting your state’s Department of Revenue website.
Managing payroll taxes can be painless if you process payroll through a payroll provider such as Gusto. They handle all of the payroll tax deposits with every payroll and manage all of the quarterly and annual filings such as the 941s, unemployment, quarterly state filings, and annual W2s. You will need to register your business in each state where you have employees and simply provide your registration details to Gusto. They take over managing the deposits and filing from there.
Sales Tax can be a bit more complicated, in light of the South Dakota v. Wayfair legislation that was passed in 2018. Now, businesses need to understand their sales tax exposure as it relates to economic nexus (how much they sell into a state) in addition to physical nexus (being located or having employees in a state). Again, having up to date financial information can help you keep track of your obligations since economic nexus will be determined based on both the dollar value and volume of transactions on a state by state basis. Avalara, a leader in sales tax management, provides this useful reference on the sales tax nexus triggers by state.
Before you can focus on cultivating new innovative ideas, you’ll need to sharpen your financial literacy as a business owner. For some people, this knowledge comes easy if you have a background in financial management. However, it’s an important point to include for any newcomers who don’t know where to start.
How to Know When to Invest in a Professional Accounting Firm
Finances are the bread and butter of your business. They build the solid foundation for your success and expansion as a startup. While it’s true that not everyone can afford an accounting firm, be mindful of when your business is getting too large for DIY accounting. Partnering with a professional could be the secret component for taking your business to the next level. When you’re looking for investors, having a firm that is knowledgeable on proper startup accounting can make a world of difference in your ability to provide the necessary information to get funded.
Here are some questions to ask yourself to know if it’s time to hire an accounting firm:
- Am I too busy to allocate time to financial planning?
- Did I make a recent bookkeeping mistake that created setbacks?
- Is my company growing too rapidly for me to keep up?
- Could I increase profits by not doing my own books?
- Am I taking on too many business tasks to succeed as a business leader?
- Am I hiring more employees to maintain workflow?
- Am I being audited or dealing with dense government requirements?
- Am I planning a large purchase?
If you answered yes to one or more of these questions, it may be time to onboard the help of a professional accountant. Here at Resolve Works, we offer advisory-level accounting for fast-growing businesses. We are here to be your financial partners and advisors, providing you insight into your financial health and future planning.
Our team manages accounting and bookkeeping tasks, as well as controllership, financial analysis and Fractional CFO services as you scale so you can maximize your time and business results. We strive to empower entrepreneurs to develop a deeper understanding of their business and industry best practices.