accounting for tech startups webinar

Accounting for Tech Startups Simplifying and Getting It Right

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Sirk Roh, COO

Early Growth Financial Services

#StartupAccounting

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“Startups face a huge burden in

today’s economy, often having to

choose between funneling resources

toward creating their goods and

services or managing the often complex

accounting, tax and financial strategy

planning necessary to run a successful

business.”

~ David Ehrenberg,

Founder and CEO

Early Growth Financial Services

What do you need to be thinking about?

• What are your costs? (money out)

• What are your revenue streams? (money in)

• How’s your cash burn?

• What are your short-term financial goals?

• What are your long-term financial goals?

www.earlygrowthfinancialservices.com

Why do you need to worry about your accounting?

• Good accounting gives you valuable insight into your business

• Helps you with long-term planning

• Saves you money over the long-term

• Potential investors require it

www.earlygrowthfinancialservices.com

Accounting basics

• Accounting pre- and post-funding

• Accounting systems

• Taxes

• Accounts payable / Accounts receivable

• Financial projections

• Financial reporting

www.earlygrowthfinancialservices.com

Accounting: Pre-FundingSet up a low-cost, accrual-based accounting structure that can grow with you

• Open business banking account

• Separate personal and business expenses

• Keep records of receipts and invoices

• Be mindful of tax obligations

• Collect payments

• Select payroll provider

• Stay on top of stock records

www.earlygrowthfinancialservices.com

Accounting: Post-FundingYour financial strategy deepens and you’ll gain better understanding of your business

• Set foundation for future growth

• Build financial infrastructure

• Clarify funding objectives

• Manage cash-flow

• Create clean financials for investors

• Hire professionals to help company become GAAP compliant (Generally Accepted Accounting Principals)

www.earlygrowthfinancialservices.com3

Accounts PayableFormalize your system for keeping track of business expenses

• Set up system early to help maximize cash flow and create essential financial reports

• Choose best tracking system for company needs

• Enter every expense: receipts, bills, etc.

• Establish invoice AP schedule

• Place vendors on net 30 payment terms

• Build reputation of financial stability

www.earlygrowthfinancialservices.com

Accounts ReceivableImprove cash collections by creating a clear payment collection process

• List all open invoices and balances

• Create “friendly” invoices (and print hard copies)

• Put payment terms in writing for new clients

• Establish credit guidelines

• Create collection timeline

www.earlygrowthfinancialservices.com

TaxesEven in the early stages, you’ll want to be mindful of tax considerations

• Select correct legal entity for company

• Understand federal, state, and city tax obligations; regional fees; and registrations

• Separate business and personal finances

• Deduct business expenses

• Pay quarterly taxes

• Stay on top of payroll taxes and 1099s

www.earlygrowthfinancialservices.com

Financial ProjectionsForecast for potential revenue and market capture

www.earlygrowthfinancialservices.com

1.

Start with market size

2.

Identify particular segment

3.

Extrapolate to

calculate total

potential revenue

3.

Headcount /

milestone

funding

2.

Calculate spending

necessary to achieve

revenue/development

1.

Project revenue growth

over next 1-3 years

Top-Down Projection

Bottom-Up Projection

Financial ReportingFinancial statements reveal important insights

• Financial statements– Profit and loss

– Cash flow statements

– Balance sheet

• Cash burn reporting

• Budget vs actual reporting

• Other financial reporting

www.earlygrowthfinancialservices.com

Finance and Accounting SupportWhen should you engage with a financial services support firm?

www.earlygrowthfinancialservices.com

• Raised seed or convertible note round over $500K

• Start to have over $20K month in revenue

• Have professional or institutional investors

Accounting Checklist – how to set up for success

• Monitor cash flow

• Maintain accurate records

• Make payments on time

• Stay on top of tax obligations

• Setting milestones…and hitting them?

www.earlygrowthfinancialservices.com

Thank You and Q&A

www.earlygrowthfinancialservices.com

Sirk Roh

contact@earlygrowthfinancialservices.com

www.earlygrowthfinancialservices.com

415.234.3437

Follow us @EarlyGrowthFS