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Monday, June 27, 2022

Figuring Out Startup Accounting: Five Tips

Editor’s note: This is a sponsored post written together with our accounting firm.

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Before starting your own company an accountant is an abstract concept – just people in box whose name was on your salary receipt. Having found a good one, we spoke with our accountants, Nordic C-Management about how startups should go about selecting the right firm so they don’t make the same mistakes we did.

When starting a business, an accountant is similar to your first hire – except that you should have one before you file your founding documents.

This is one mistake we made with ArcticStartup – like good proactive people we went and opened up a bank account and registered the company so we could start doing company things, like hire an accountant. This turned out to be a mistake because we left money on the table by not realizing that we would have been eligible for starttiraha, a €600/month government benefit you need to apply for before starting a company. Our accountant was kind enough to let us know how much we missed out on, and additionally would have helped us navigate the confusing mix of necessary documents and processes needed to set up the organization.

When choosing an accounting firm you should shop around and find one that’s a pro at startup needs, like good knowledge of state startup support or money-valued benefits like the new entrepreneur discount in pension insurance. Additionally you should judge the firm on how well it can handle services you may want to outsource down the road, like full HR support or tax law consulting as your company raises money and hires like crazy. The accounting world has changed rapidly over the past 10 years, and your accounting firm can do a lot more than send VAT forms to the government – allowing you to outsource more and worry less.

When starting up Sami Koivuniemi, from Nordic C-Management, says the best practice is to meet multiple representatives of accounting firms to ask for offers. Here, it’s important that the firm identify your needs and feel out if their services and capability can meet them, as well as agree on the division of work that makes sense for a business your size.

The actual services and relationship you’ll build with the firm should be valued more than price, which isn’t always the best metric. “When choosing the accounting firm, cheapest may not be the worst or most expensive may not be the best,” says Koivuniemi.

The great thing about electronic invoicing these days is that it gives you an up-to-date look at your cash flow and removes double work – you don’t need to invoice someone and then have your accountant duplicate that information and use their time for reporting.

We’ve found that all online accounting platforms are not created equal, and coming from the startup world where everything is sleek and polished it’s not rare to find accounting tools that are the worst part of your day. When selecting a firm be sure to talk through how your accounting process will work, and if the tools match your needs or workflow. This includes everything from your billing tools to whether they have any apps for reporting receipts on the go.

A good proactive accountant will also keep you out of trouble by, for example, making sure you have entrepreneurs’ pension insurance so you’re eligible for Social Security if in the worst case you get sick. Or, if you mismanage the company’s funds as your own, you can cause big tax implications or get your board in trouble for your actions. A proactive accountant keeps your company running smoothly and reduces the risk for every shareholder.

When talking to Nordic C-Management, we also came up with a couple of tips for you to take away and apply to your accounting practices:

1.When filing the documents for starting the company – be flexible.

What this means is that you should try to file them in such a way, that if you pivot or need to do additional work outside you core business, it would not require you to do too much paperwork. For instance, when selecting your “area of business” – it pays to choose “everything that is legal” as opposed to “nanochip development.”

2. Pay your invoices on time.

This seems pretty basic, but many people get so swamped with other tasks that they delay paying an invoice for no other reason. Sure, the penalty might be very small or even none at all. However, it will definitely cost you in your accountants time. They would need to find the right invoice, the right payment, and if there is a collection agency involved – put the two together. That might take half an hour, which is half an hour of your hard earned cash for no reason.

3. Always look at your company equity and never let into the negative.

If your company has a negative equity balance, that is bad for a lot of reasons you might not have known about. First – forget any government funding. Second – anyone, and that means truly anyone, can file you for bankruptcy. Since that means that your board has not done it themselves, they can even demand the debt is paid out of your own personal pocket.

4. Consider outsourcing as much as possible to an accountant.

At ArcticStartup, we’ve been through this many times. At the very beginning, when it was just the two of us, we tried to do as much accounting ourselves as possible. It saved money. Yet, when we take a closer look at it – it did not. It took time away from our core business, so the hundred EUR that we saved was actually a huge cost compared to how much sales or business development we could do in that time. This is especially true if you do not have any education in accounting. Concentrate on your core business.

5. Set clear areas of responsibilities and communicate with your accountant.

It is super important to be very specific with your accounting firm about who is responsible for what. This will make the bookkeeping faster, save time and money. At the same time, if you have a good line of communication, and make them understand your business, it can only improve your bottom line.

A good relationship is often what you make of it – be in contact about your problems and needs, and often a good accountant will contact you as well. Your business relies on an accountant, so it pays to find a good one. Thanks to Sami from Nordic C-Management for sharing the tips with us.

About Nordic C-Management

Nordic C-Management is an accounting company that we use for ArcticStartup and have been very happy with their services throughout these two years. They offer all types of financial management services to companies of all sizes in Finland. They have a very personal approach, good electronic accounting, CFO & controller services, among others. They operate in Finland with offices in Helsinki, Lohja, Tampere, Vantaa, and Turku. Reach out to them over the phone +358 207 346 900 or visit their website.

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