Startup Accounting - Tips and Tricks

Caution - I'm no accounting expert, and certainly did not have enough experience with taxes, but taking these steps helped me begin my journey as HotPlate's CFO.

While accounting may seem both really boring and really daunting at the same time, it comes down to only about three different documents (potentially four).

  1. Income Statements  - Shows your revenue, expenses, and net profit or loss, and where it all came from in a given time period

  2. Balance Sheets - Shows all of the assets, capital, and liabilities that your company has at a given time

  3. Cash Flow Statements - An account of where all the money comes from when you get it, and where it goes when you spend it.

Although these are a massive pain to put together, they do prevent you from being audited and fined by the IRS, so it kind of balances out. If there are multiple owners of the company, it is also important to have an equity statement that breaks up the equity of the company.

Where do I really start? 

Ideally, before incorporating your company.

If you’re really early on and still haven’t formed your company yet, make sure you do your research. How you incorporate will affect how you pay taxes.

For example…

If you are an LLC, your company doesn’t pay taxes, rather you do. All income generated by the company will be split between the owners based on equity split, and then you will record that on your personal tax returns. However, a C-corp is different in that the corporation is taxed on profits and then you can potentially be taxed again on dividends. Your actual business may play a role in determining what you incorporate as, but whatever you choose, make sure you know the tax requirements specific to you.

How do I record my transactions?

Routinely and within the 3 most important statements.

Perhaps the most important thing that can be done to help reduce the hassle and confusion of keeping your finances together, is find a consistent method that works for you early, and then stick with it.

When I started off, knowing absolutely nothing, I kept a running list of purchases, expenses, and the like. Even while pulling in 0 income, within a month everything was a mess. Had we been making money it would have only added to my problems. After talking with a financial advisor, I completely changed my process. I still kept a running list, but every two weeks, all the new items on that list got thrown into a balance sheet, income statement, or cash flow statement. This way, I never had to keep track of anything past that time length. It cut down on confusion, kept things nice and neat, and has saved so much time in the long run.  In terms of software, there are a number of great programs that can help keep track of all of your finances. If you’re ready to spend some money, Intuit QuickBooks is my favorite. There are also some free options out there, most notably Wave, but they are more limiting with less intuitive platforms.

What’s the deal with filing my taxes?

With the books taken care of, now you need to know what, when, and where, you have to file. Filing requirements will differ by what kind of corporation you are, so know early on what you have to send. Additionally, these different documents have different due dates, and missing them means hefty fines, something startups need to afford. Lastly, know where you’re filing, because it might not always be where your company is incorporated. While we were an LLC in Texas, I was filing in Illinois, because is where we conducted all of our business. A single master sheet, with what, where, and when you’re filing to refer to can make things a lot easier. I've added an example of mine below! While not hard to do, putting it off could lead to some very unwelcome surprises.


For those of you that dread it, and even those who don’t, I strongly advise getting help to reduce the load on yourself. Try and get in contact with anyone who offers financial help to start ups. These conversations helped me streamline my process and gave me a chance to ask questions about our finances. If you're working on your startup, there's only so long you can go avoiding your accounts, so start counting! 

-Connor Hanley