The document provides guidance on setting up accounting for startups, emphasizing the importance of establishing an early, simple, and scalable accounting system. It covers pre-funding and post-funding financial strategies, highlighting aspects like expense tracking, cash flow management, and tax obligations. The document also discusses the significance of financial projections and reporting to aid in business growth and investor relations.

1. How to Set Up
Your Startup
Accounting
#startupaccounting

2. “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
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3. • Set up a system early
• Establish structure
• Keep it simple
• Build it to grow
Presentation Overview
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4. Accounting: Pre-Funding
Set 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
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5. • 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)
Accounting: Post-Funding
Your financial strategy deepens and you’ll gain better
understanding of your business
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6. Finance and Accounting Support
When should you engage with a financial services support
firm?
• Raised seed or convertible note round over
$500K
• Start to have over $20K month in revenue
• Have professional or institutional investors
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7. Accounts Payable
Formalize 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
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8. Accounts Receivable
Improve 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
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9. Taxes
Even 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
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10. Financial Projections
Forecast for potential revenue and market capture
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
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11. Financial Reporting
Financial statements reveal important insights
• Financial statements
– Profit and loss
– Cash flow statements
– Balance sheet
• Cash burn reporting
• Budget vs actual reporting
• Other financial reporting
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12. Thank You and Q&A
Sirk Roh
contact@earlygrowthfinancialservices.com
www.earlygrowthfinancialservices.com
Follow us @EarlyGrowthFS
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