One of the reasons why proper accounting is important for your tech startup company is so that you are able to keep up with your accounts receivable billing and get paid for the work you perform. Of the many challenges you face as a tech startup, the proper management of your business’s accounting processes is one that is crucial to your success. A properly managed accounting system allows you to determine where your money flows, how efficient your processes are for generating revenues, and the percentage of expenses to revenues to produce a profit.
Whether you intend to be a small, medium ,or large tech giant, the basic principles of company accounting apply equally and cannot be overlooked. Even if your expertise is in JAVA, html, robotics or everything technical and not so much financial, you must understand the benefits of properly maintaining good books and records, and how to establish good accounting practices.
The Benefits of Good Accounting Practices
Maintaining good accounting practices for your tech startup is much more than just a set of ledger books or Excel spreadsheets. It involves understanding the relationship between the amounts paid and accounts owed and how this relationship helps you grow your business and achieve the level of success you desire. For example, your balance sheet (also referred to as the statement of financial position), is a snap shot of your tech company’s worth at a point in time. Your income statement (often referred to as the statement of financial activity) represents a running or ongoing measure of the movement of cash in and out of your business, allowing you to measure revenues earned, the cost of making money and those expenses that reduce your revenue before taxes are paid.
The use of proper accounting methods allows you to use these two important records to determine different things about your tech startup. This includes measuring the availability of capital for your tech startup, determining your company’s solvency, profitability, and creditworthiness, which may be important if you seek debt financing as a way to expand your business, add employees, or move into a new area of opportunity.
How to Maintain Proper Accounting for Your Tech Startup
As a startup business owner you should not expect to be a master of accounting principles, unless of course you were trained as such or have taken the Certified Public Accountant examination. Because you probably are not as proficient in accounting as you are in tech principles and practices, it is a good idea to take advantage of programs and offerings within your community from organizations such as SCORE or a local U.S. Small Business Administration office. These organizations offer programs and training that can help you understand basic accounting principles and how they apply to your business.
Additionally, it cannot be stressed enough that you should consider acquiring the services of professionals in the field of accounting to assist you in properly setting up your financial books and records. Such a service should be knowledgeable in those practices and procedures that are common for tech companies and startups in particular and help you establish easy to understand and easy to maintain systems that ensure your continuing compliance with applicable record keeping rules and regulations. Relying on the expertise of those in the field to assist you in properly maintaining your accounting system removes this burden from your mind and allows you to focus on becoming successful.
This article was contributed on behalf of New Century Financial, your number one choice when looking for help with your business finances. Check out their website at www.newcenturyfinancial.com