The various financial statements every business must file are sometimes perceived as a burden, but in practice, they are an asset. The documents that pass through the hands of a skilled accountant, especially one with experience in start-ups, form an accurate and up-to-date financial snapshot that helps managers and owners make good decisions, identify financial pitfalls ahead of time, and take the right path at every juncture. Though the choice of hiring a start-up accountant may seem like a technical one, and even if the service itself is seen as a chore, in practice it’s a choice that can significantly impact a company’s future.
What does an accountant service for start-ups include? What metrics does an accountant track, and for what decisions are they important? How does the service help raise capital? Which qualities of an accountant should a start-up never compromise on? The guide on this page will help you better understand the nature of the service and the ways it can enhance your company.
A start-up accountant’s most important qualities
An in-depth knowledge of all accounting issues and professional sub-fields is, of course, a must. Experience working with start-ups is also a significant advantage: start-ups have unique characteristics, and a hands-on familiarity with them ensures that these characteristics receive their full attention.
But the most important qualities of an accountant are availability and agility. Start-ups operate in a highly dynamic world, and they encounter quite a few situations requiring quick decisions based on up-to-date and detailed data. The information provided by a start-up’s accountant provides an excellent foundation for informed, accurate, and efficient conduct. Much like a CT or MRI exam should be performed at once and then rapidly decoded, an accountant should always be on hand to provide immediate financial answers.
Day-to-day services and dealing with tax authorities
The day-to-day work of an accountant is indeed technical in nature: responsibility for the entire field of accounting, payrolls, tax-report submission, and so on.
While this may be the least interesting part of start-up management, certainly compared to the job of transforming an innovative idea into a working product, it’s also extremely valuable. For one thing, it’s the basis for the rest of an accountant’s services. For another thing, good bookkeeping which meets all relevant standards offers peace of mind and ensures there’s no unnecessary friction with the tax authorities.
Budget preparation and monitoring of vital metrics
Other significant accountant services include the preparation of a budget and, no less important, the monitoring of indices that reflect a company’s true financial situation.
Building a budget based on accurate data and sophisticated models allows a start-up to plan its future operations in all fields: product development, marketing, manpower, location, and more. A budget that’s built professionally and realistically by a skilled accountant prevents mistakes that can cost the start-up dearly, as well as scenarios in which the company’s cash quickly runs out.
After the preparation and approval of an annual budget, its implementation must be closely monitored. Assessing execution on a regular basis ensures the best utilization of existing funds and the maximum financial resilience in the long term. What’s more, a responsible accountant with experience in start-ups can examine those metrics that are uniquely important to companies in the early stages of development.
One such metric is the cash-burn rate. Only start-up owners who know exactly how much cash is needed each month can foresee how soon accounts will dry up. They can plan their next round of fundraising accordingly or take the necessary steps to lower their burn rate, in order to never get caught with insufficient resources, or, alternatively, to know precisely when the rate can be accelerated in favor of important goals like hiring staff.
Other measures the accountant tracks are deferred income, accounts payable, and accounts receivable — commitments of customers to the company or of the company to suppliers and other entities that should be repaid within a year. All of these, of course, affect future cash flow, and valuable insights can be derived from them about the start-up’s credit policy and about the proper timing of the next fundraising round.
Assistance raising capital
Raising capital is a significant challenge for a start-up at any developmental stage but is also a critical juncture in the life of the company. Whether the start-up turns to venture capital funds, angel or other types of investors, detailed reports according to standard accounting principles (IFRS / GAAP) will be required.
Thus, the value that a talented and skilled accountant brings to the fundraising process becomes exponentially higher. The necessary reports are submitted, and potential investors are left with a positive impression. For serious investors who weigh every detail before deciding to invest, the accountant’s work will demonstrate the start-up’s professionalism and commitment.
Furthermore, after receiving the reports investors may ask for additional information to help make their valuation. Here’s where the accountant’s availability comes into play: there’s always someone on the line to pass along the necessary information and answer questions. The upshot is that the chances of successfully raising capital are maximized.
Taking advantage of tax benefits in Israel and around the world
Of course, every accountant comes with a price tag – but at the same time a talented professional may save the company considerable sums. Apart from the early detection of financial pitfalls like a high cash-burn rate, an accountant can be trusted to help the company realize all its potential tax benefits.
When the start-up’s operations include activities abroad, working with an accountant who’s well versed in global tax systems is highly recommended. Taxation issues can come up in the context of numerous expenses, like when distributing employee stock options.
Start-up accounting services tailored to you
External accountants offer start-ups the unique possibility of adjusting the scope of their service to fit the company’s needs at every point in time. There are major differences between the stages of a start-up’s development, and since an accountant’s benefit comes at a cost, it’s best to choose a service that’s as flexible as possible.
The-Founders works exclusively with start-ups and has acquired vast experience in all their unique business characteristics. We’re absolutely committed to each customer, a commitment reflected in our unmatched availability, rapid response, and service that adapts itself to you.