Why Startup Companies Need Proper Accounting
Startups are notorious for blowing through their initial funding in a short amount of time. They have to find office space, hire talent, and purchase equipment, office supplies, and anything else they need to get going.
It’s normal for a new business to have these expenses, but startups have a tendency to spend large on things they don’t need while cutting corners when they shouldn’t. It comes about as a lack of oversight, and it’s why a new business needs to have an accountant on board from the beginning.
Preventing Tax Evasion.
Taxes have to be paid no matter what. The government is not lenient on those who try to avoid paying their taxes. Companies who fail to file the proper forms and pay their taxes are subject to penalties and fines from the IRS. When money is running low, business owners may be tempted to put off paying taxes, which is understandable. But it’s never a good idea, and an accountant helps ensure that the government gets its funds on time.
The accountant keeps a close eye on expenditures, income, and profits and acts as a neutral third party to keep the company out of trouble by setting aside funds for specific uses. Another duty is making sure taxes get paid and the company stays out of hot water with the IRS.
Getting All the Legal Paperwork in Order.
An accountant has duties that overlap with a lawyer, allowing the company to save on some professional fees. They include things like licensing, incorporation, and registering with the state and local taxing bodies. Operating within the law means having all of these things in place. Sure, anyone can put together a business and start operating as a sole proprietor, but they don’t get the tax benefits and protections that come with incorporation and licensing. It’s simply good practice to make sure the paperwork is completed and filed. This is something an accountant can do and keep track of to make sure the business won’t run into trouble.
Everyone Does Their Own Job.
One person wearing many hats in a startup is less likely to get any of the duties completed in a timely manner. And chances are good that their main job suffers as a result, slowing down production. It’s not easy to be the head of a project while trying to manage the books at the same time. Streamlining things by making each person do their own job translates into increased efficiency and improved income. That means having an accountant take over the financial duties and provide advice as the startup moves out of the first phase into a stable business.
These are some of the reasons that a startup needs to have an accountant on board as soon as possible. An accountant has the best interests of the operation in mind when it comes to taking care of the financial side of things. Taking on an accountant is akin to gaining a partner who wants everyone to succeed.
Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.