Why Is Accounting Important for a Startup?

Why Is Accounting Important

4 min read

Accounting errors are expensive mistakes to make. If you’ve ever been penalized by the IRS, you understand just how costly these slipups can be.

Can your startup afford these mistakes? We’re guessing the answer is probably no. After all, most entrepreneurs are on a tight budget, working tirelessly to get by and make a name for themselves.

We get it, as we were once a startup ourselves. There are a million and one jobs to do every day, and proper accounting may not be high on your list of priorities. But it should!

Keep reading to get a better idea of how an accountant can help your startup head toward success.

4 Reasons Why Startup Businesses Should Hire an Accountant

  1. Avoid mishaps.

Mistakes happen with accounts, and unfortunately, they don’t come cheap.

Being diligent with your accounts may seem boring and utterly unimportant when compared to the high-level thinking and planning you are doing for your business, but keeping up with your accounts anyway is essential. Accounting is like doing the dishes. No one enjoys it, but it has to be done.

If you really don’t have time for it, pay a professional to do it for you. Allow them to do the low-level work so you can focus on the high-level things involved in running your business. Hiring a professional is an excellent way to avoid errors.

  1. Figure out profitability.

Let’s say your new startup is generating thousands in revenue every week. No problem there, right? Not necessarily. It’s what you take home that matters.

If you’re spending all that revenue as soon as it hits your account, then you’ll never be profitable. Accounting is the only way to track the reality of a situation effectively.

  1. Earn outside investment.

No investor worth their salt will just give your business money. You can be the most charismatic and persuasive person in the world, but it means nothing if you can’t back your claims up with cold, hard figures.

With your accounts in order, you have a much better chance of getting investment. You're one step closer to making your business plan successful.

  1. Budget effectively.

If you don’t have a budget, you need to get one. Every business has expenses, and it’s crucial to know in advance what those are and how much money you can devote to them. It also provides monetary targets to meet each month.

Sticking to the budget should keep you profitable and keep you from spending money unnecessarily. Remember, in the early days you can’t afford to be careless.

How do you do a budget effectively? You look at your accounts to see what’s coming in and what’s going out. But for the data to be reliable, you must stay on top of your accounting.

Is It Time to Hire an Accountant?

It’s easy to get caught up in the whirlwind of activity required in starting up a business. Proper accounting can fall by the wayside. However, if you fail to stay on top of things, you risk your new business going up in smoke before it ever gets going.

More than understanding entrepreneurs’ specific problems and situations, MGA recognizes how creative people think allowing us to work proactively together toward a common goal — success.

You might find this case study of interest to you. It is all about successful restaurateurs building Lasco Enterprises. Or you might like to read about Roy Marsh who has been a successful entrepreneur for more than 20 years. These are real life individuals building companies with real life challenges and opportunities — like yours. Read their stories to see how we've helped them grow.

Read More About How We Work With Like-Minded Entrepreneurs

Regardless of what type of business you are creating, we can work with you to take your complex problems and find simpler solutions.

If you need business or accounting advice for your startup, let's talk!

July 11, 2019
Posted in Entrepreneurs