Wed, 11 August 2021
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Startup founders need some accounting skills.
Here’s a list of skills to bring to your startup:
Accounting vs. bookkeeping - bookkeeping is entering revenues and expenses into the proper accounts. Accounting is generating the income statements and balance sheets, along with filing tax returns.
Accounting methods - know the difference between cash vs. accrual accounting.
Cash-based accounting recognizes revenues when it is received, while accrual accounting recognizes it when it is earned.
Recurring revenue businesses need to watch for this as annual subscriptions should be recognized over each month the service is provided.
Record keeping - you should be able to enter transactions, reconcile accounts, pay vendors, and review outstanding invoices.
Have an accountant set up the system with the chart of accounts, but know how to run the system and read the reports.
You should be able to calculate your runway, cash burn, and cash balance at all times.
Payroll taxes - you should know how payroll taxes work and how they impact your cash flow.
Income taxes - you should know the taxes you’re required to pay and when and how that impacts your cash flow as well.
Workforce commission - you should know how the workforce commission works for your area and the laws around it.
Basic accounting is important in understanding how to generate and read the documents that show the health of your business.
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