In the first few weeks and months of a startup, many different things will likely take place, from hiring staff and launching new products, to raising money, and they’ll often happen fast. Amid the chaos, financial structure is often overlooked. However, there’s nothing quite as important to the success of a business than early financial choices, and if they’re rushed or not made at all, it rarely bodes well for the future.
By working with specialist accounting and bookkeeping services for startups, you can continue working at speed, but with a solid financial foundation upon which to build lasting success.
Why is regular accounting not suitable for startups?
Small businesses that are traditional in nature, typically have revenue that comes in consistently right from the outset. Startups, on the other hand, don’t usually have that luxury. With their focus more on investor funding and burn rates, monthly profits for startups tend to take a back seat in favor of hitting certain milestones.
But from creating financial statements investors will see as credible, to classifying R& D costs, shifting the focus can have a dramatic impact on how a startups finances are handled. Regular bookkeeping systems, however, simply aren’t able to satisfy those requirements.
The benefits of working with a tax accountant early on
Companies in their early stages usually have tax obligations that are far more complicated than anticipated by their founders; obligations that only an experienced startup tax accountant is equipped to take care of. Working with them can help you master the following:
- Putting a structure in place from the outset that establishes favorable tax treatment
- Eligibility and documentation for SR&ED tax credits that often gets neglected by startups due to the sheer volume and complexity of paperwork
- Correct classification of payroll and contractors
- Beneficial timing of HST/GST registration
- Financial statements ready for investors that stand up to scrutiny
Why it’s not just about tax compliance for startups
Tax filing is a great point to start from, but it’s by no means the end. Planning your taxes, being aware of your tax exposure well in advance of filing dates, and understanding how a change in revenue or new funding will affect your obligations, are all factors you should get to grips with if you want to move your startup forward.
Working throughout the year with your chosen startup tax partner doesn’t just help avoid stress at tax time, it gives you the power to answer investor questions with accuracy and foresight. If, as a founder, you can talk about your startup’s numbers with confidence during due diligence, you should be able to gain more trust from the people writing the checks, and show that you’re disciplined and reliable when it comes to your financials. What more can an investor ask for?
Partnering up with the right tax accountant in Langley, BC will give your startup support for all the things that make it different from a regular small business. One size-fits-all approaches aren’t designed for startups, and finding a professional who speaks the same language as your board and investors as well as the CRA, can help you steer your startup towards sustainable success.
