Accounting for Startups — Starting Off on the Right Foot
Author’s Note: This blog post was updated on February 22, 2022, to include new information, resources, and links. Accounting for startups means more than just keeping up-to-date financial statements and records. Startup founders wear many hats, from sales to accounting. Accounting may not be on the top of the list, but it is critical to business health and growth. A business that sets appropriate accounting policies from the beginning will have a better chance of success than one that doesn’t. Does a Startup Need an Accountant? When opening a new business, there are many decisions to be made. Startups may not need to have an accountant on staff if the business is simple and hasn’t generated a lot of revenue yet. As a startup grows, it will become more important to have the right accounting tools and expert advice. Business owners gain a competitive advantage by having a strong accounting system set up from day one. An accountant helps startups plan for the future. They can assist with services like payroll, catch up bookkeeping, tax planning, and more. Why Is Accounting Important for Startups? When first launching a business on a tight budget, it’s tempting to choose a cheaper accounting solution such as Excel spreadsheets. However, that “cheap” solution can turn out to be more expensive. It can’t prevent human error, can cost many unnecessary man-hours, and in the end, not meet your needs. Instead, it’s wise to have an accounting strategy planned out in advance. Working with xendoo’s accounting system you can accurately account for all of your company’s financial needs. For example, accurate accounting records can assist startups in obtaining a business loan or investment. Both investors and commercial lenders will look at your books during the funding process. They will be more likely to supply you with funds when you show a clean set of accounting books. However, accounting services can help startups with many more aspects of their business. What Are the Benefits of Startup Accounting? Not having proper accounting records from the inception of your business can result in problems down the line. xendoo uses a cloud-based accounting system for the many ways it saves startups time and money. There are several benefits of using a cloud-based accounting system. Here are a few ways that xendoo helps startups with their accounting. Startup Accounting Expertise That Scales If you are unsure about how to handle accounting tasks (or simply don’t have the time to do so), it’s worth the cost to use a service like xendoo that specializes in accounting for startups. Your accounting should scale with your business needs. As your business grows, its accounting gets more complicated. If you choose to handle accounting tasks on your own, you may find yourself stretched for time. Instead of focusing on scaling the business, you may spend too much time on administrative work. Time-Saving Accounting Automation xendoo can sync with your bank, so every transaction is automatically entered into the bookkeeping system. It saves many hours of work and avoids the risk of error when a human operator transcribes the numbers. Instead of spending lots of time at month-end trying to reconcile financial transactions in the general ledger, cash transactions have already been booked accurately. You no longer need to wait for bank statements or credit card statements. You can know your cash position by having your cash transactions automatically posted in real-time. You’ll be able to make better decisions on upcoming expenses and have better insight into the financial health of your business. Other entries may also be recorded automatically, such as depreciation on equipment or other fixed assets. Cost Savings xendoo can save you serious money on your office staff. You may be employing multiple staff members to handle your accounting tasks, but it may not be necessary. Our trained accountants can handle the accounting transactions for multiple industries, including ecommerce, professional services, and retail. Our expertise allows us to easily accommodate the needs of your business. The cloud-based accounting system ensures that your financial records are up-to-date and accurate. Plus, you can message your xendoo CPA team anytime for a fast response. Offering more remote and part-time work options enables you to reduce your full-time office staff, as well as the overhead costs of accommodating them. Because data is stored in the cloud and not your servers, IT expenses can be trimmed. Employee Tax Forms and Payroll If your startup hires employees or independent contractors, accurate records become even more important. A startup accountant can ensure that payroll is handled properly and the requisite taxes are withheld and paid to state and local governments. There are other tax issues that a startup accountant may assist you with, such as sales taxes, local taxes, and accounting for any fixed assets. Accurate records will help you prepare for your business tax returns at year-end. From a tax perspective, startup founders can save a lot of time and effort with books that are ready to go for tax season. There’s no need to scramble for records related to business expenses — they’ll already be recorded in the xendoo cloud-based accounting system. Financial Reporting One huge advantage of working with xendoo is that you’ll have an accounting system in place that provides you with the reports when you need them. You don’t have to read paper receipts or sit at your office computer to see financial reports or bank transactions. This enables you to respond to changing conditions as they happen, minimizing the risk of losses or missed opportunities. xendoo provides accurate financial reporting, including a balance sheet and income statement. The accounts payable and receivable reports include an overview of outstanding accounts, so you can make quick business decisions based on current information. Startup accounting with xendoo can also help you reach out to customers who are overdue on their invoices. Complete, accurate, and up-to-date financial reports are available at any time. Every entry is tax-coded, so no extra work is needed to prepare for filing
8 Ways DIY Accounting Costs More Than It Saves
No matter how much they hate it, small business owners tend to do their own accounting. They’ll tell you they’d love to hire a bookkeeper, but they just can’t justify the expense. What they don’t take into consideration is all the ways a professional CPA can cut business expenses, take advantage of savings opportunities, and avoid costly mistakes. Here’s what having a good accountant can do for you: 1. Find more tax breaks. A good business accountant will claim expenses you may not have known were deductible. They can also advise on the timing of major purchases to take full advantage of tax credits and depreciation. 2. File taxes on time. Late returns and other compliance paperwork will incur penalties and interest. 3. File accurate taxes. Under-reporting how much you owe could lead to big trouble with the IRS, as well as state and local authorities if you collect sales tax. 4. Send invoices out on time. An accountant will help you avoid a cash flow crisis by keeping up to speed with invoicing. 5. Track late payments. Well-kept books should show you at a glance what you’re owed and when it’s due. No more need to spend time and money on collections efforts. 6. Eliminate data entry errors. For the DIY bookkeeper, figuring out and fixing the mistake could take hours — which the small business owner could spend more profitably elsewhere. 7. Provide information for smart business decisions. You should be able to spot right away when there’s an issue with cash flow, inventory, or profit margin, and take early corrective action. On the flip side, your accountant can point out opportunities for growth or reducing unnecessary costs. 8. Free you up to add value to your business. Is it a smart use of your time to be doing data entry, tracking invoices/payments, reconciling bank accounts and control accounts, processing payroll, managing inventory, preparing tax documents, and so on? “But I still can’t afford an accountant” The benefits may be clear, but most owner-managers just don’t have the budget to add a full-time professional accountant. As small business specialists, we understand your position. That’s why we offer affordable monthly plans that cost less than half of what a traditional accountant typically charges (in a couple of hours!). How to make the best use of your accountant When you hire a professional consultant, you want to take advantage of the team’s expertise in showing you how to save money and make your business more profitable. You’d rather not have them spend all their time on routine tasks. That’s why xendoo uses state-of-the-art software that automates many such tasks, from entering sales transactions directly from your bank into your books to coding each entry as it happens so there’s no last-minute rush at tax time. Your accounting team is free to provide you with valuable advice, and you’re free to focus on your core business. Not to mention getting a good night’s sleep. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
What Do Accountants Charge for Small Businesses?
If you run a business, you’ve likely wondered–how much does it cost to hire a tax accountant? Do I need accounting services, and will they save me more money than they cost? While doing accounting and business taxes, you may worry about making mistakes or missing opportunities that a pro would spot right away. Furthermore, taxes can feel like chores—no one enjoys doing them. The cost of hiring a tax accountant for your business may more than make up for the time and energy you’ll save doing them. Small business accountant fees vary depending on a number of factors, including expertise levels, types of services offered, technology integration, and industries or niches served. For example, a bookkeeper that does routine data entry charges less than a CPA (Certified Public Accountant). A CPA is an accounting expert that is highly qualified to advise you on business strategy or tax planning. If you’re fed up with trying to do your own books, you’re not alone. For many small business owners, accounting is definitely not an area of expertise. To help you decide, we’ve put together an accounting cost guide. It covers how much it costs to hire a tax accountant and other typical accounting costs. Accountant Hourly Rate How much does an accountant cost per hour? Traditionally, bookkeepers have charged an hourly rate. The more time they spend on your books, the more you have to pay. Note, that bookkeepers tend to manage the day-to-day recording of financial data. Accountants or CPAs do that and many other functions. CPAs are able to manage your books, identify big-picture financial insights, conduct audits, prepare taxes, financial statements, and more. For this reason, you pay a little more for CPA and accounting services. Typical hourly rates for bookkeepers and CPAs are: Bookkeeper hourly rate — $30 to $90 per hour CPA hourly rate — $150 to $450 per hour Accounting Fees Per Engagement Some accounting services don’t make sense to bill hourly. For instance, businesses must file taxes every year, but you don’t need an accountant every day of the year. With that in mind, you may be asking—how much do accountants charge to do taxes? If you only need an accountant for an occasional project such as tax preparation, the typical cost to hire a tax accountant is: Tax return (unincorporated) — $200 to $500 Tax return (incorporated) — $800 to $1,800 The National Society of Accountants (NSA) reports that the average fee to file individual taxes with no itemized deductions is $176. The average cost for business tax preparation is much higher. Businesses have more tax requirements, complicated forms, and accounting needs. Cost varies based on the type of business and forms you are filing, but the tax return costs above are a good estimate. Now, let’s say you need other accounting services besides tax preparation. Again, the cost depends on the complexity of your business and your specific need. In general terms, the cost of hiring an accountant for special business services like financial statements and audits is below. Financial statement — $1,000 to $2,500 Audit — $2,000 to $5,000 Flat Monthly Accounting Fees A common question that we hear is–what is an affordable accounting fee for small businesses? Small businesses often choose accounting services that charge a fixed amount every month. Flat rate accounting services are easier to budget. Plus, it can cost half what you would pay an hourly accountant for the same amount of service. That’s why xendoo offers flat rate pricing plans to our clients. It is also important to consider the area where you live and the cost of living. You may want a local accountant, but if you live in a high-cost area, expect to pay a higher than average rate. Alternatively, you can hire a tax accountant online. It is common for CPAs, bookkeepers, and accountants to work remotely. As long as they are familiar with your state and local requirements, you can work with an online accounting service like xendoo without issue. Before You Hire an Online Accountant Research the firms you’re considering to make sure they meet your needs and quality standards. Some things to consider: Credentials. Unlike professions such as law or medicine, anyone can call themselves an accountant. Don’t just trust in a CPA certificate. Check certifications, education, training, and years in practice. Service level. How often and how easy will it be to communicate with your accountant? Do you prefer to be contacted by telephone, email, an app, or all of the above? How fast do you want a response—within 24 hours or sometime next week? Processor vs. advisor. A processor type of accounting firm mainly provides data entry and reconciliation services. An advisor can help you analyze your financials to spot trends, challenges, and opportunities for improvement. Specialization. Ideally, the firm you choose will have experience in your industry and the size of your business. In-depth knowledge of the challenges you face adds value and insight to their services. Are Accountants Worth the Money? You know how much it costs to hire a tax accountant, but is it worth it? With so many business accounting software choices now available, you may assume that letting your computer do everything will be cheaper than the cost of accounting services. And you may be right. However, there are some things that still need an expert accountant who can save you significant money, time, and hassle. For example, an experienced accountant can help with: Tax savings advice, such as when to make capital purchases, what you can deduct, and how to reduce taxes on capital gains Answering your questions about financial reports, cash flow, depreciation, and other accounting processes Identifying opportunities to improve profit margin and business growth Setting up systems for business accounting and teach you best practices Preventing costly missed tax deadlines and noncompliance penalties xendoo specializes in providing expert accounting and bookkeeping services to small businesses. Because this is our niche, we can deliver tried-and-true expertise. Because we know
