A Founder’s Guide to Startup Accounting

Check out our rundown of the nine pillars of essential accounting software every growing startup needs to have.

Updated for 2022

When you’re a founder or operator of an early-stage startup, you’re expected to know absolutely everything. What tool to use for this, how to integrate that, tax implications of these. It turns out you’re human, and you can’t have an answer for everything!

That’s why we wrote this Founders guide about the essential accounting softwares every growing startup needs to have.

We work with hundreds of the best venture-backed startups in the world and the first question we get from founders and operators is almost always: What should our base financial tech stack be?

While every company is different, we have compiled a list of tools and resources that can benefit any early-stage startup looking to plan, prep and facilitate scale and growth.

Note – If you need help getting your tech stack implemented, or you need bookkeeping, accounting, or CFO support, reach out to hello@graphitefinancial.com anytime and we’ll be happy to learn more about your company!


The Ideal Startup Tech Stack

Here are the different pillars that make up a startup’s scalable financial tech stack:

  1. Accounting Software
  2. Bank & Credit Card
  3. Payroll
  4. Accounts Payable
  5. Accounts Receivable
  6. Expense reimbursement
  7. SaaS Tools
  8. Sales Tax
  9. eCommerce Tools

Now, let’s unpack each of our tech stack pillars.

 

Accounting Software

Your Accounting Software is the heart of your accounting infrastructure – think of it like the house that stores, organizes, and helps manage the different financial pieces of your company. It’s where transactions are stored and basic financial reports (like a P&L, cash flow or a balance sheet) can be produced.

There are several good options out there, but a few stand out:

  • Quickbooks Online – Our #1 pick. Works best for most early-stage and growing startups.
  • Xero – Also solid for early-stage startups.
  • NetSuite – Better for more complex operations.

If you don’t have accounting software set up, we highly recommend doing so—and we can help you do it. Get a taste of what efficient accounting software can do for your startup by downloading our Month-End Close Process Template

 

Credit Card & Bank

Finding the right credit card and bank for your startup can feel like a simple choice, until you realize how many options there are. This is one of the biggest partnerships your startup will make, so you’ll want to find solid credit and banking stacks from the get-go.

Credit Card

Bank


Accounts Payable

Having software for paying your vendors is crucial, so much so that it is one of the first things we tackle with all our clients. It helps you track and manage your vendor payments, and helps you stay compliant with the IRS.

  • Bill.com – Our #1 pick for streamlining the AP approval process.
  • Settle – They pay your vendors upfront, allowing you to pay them back up to 120 days later.
  • Airbase – Allows for virtual credit cards, but pricier. Better for larger companies.
  • Ramp – Allows for an all-in-one system if you’re already using them for banking + credit cards.

     


Accounts Receivable

In today’s world, clients expect to have the option to pay their invoices online. It creates a poor customer experience if they can’t, even when you are small and scrappy. We highly recommend having a software or tool that allows you to streamline the client payment process and produce solid records of your collections.


Payroll

There are so many nuances within payroll and benefits, as well as a lot of things you’ll need to do to stay in compliance – you don’t want the department of labor knocking at your door!

 We highly recommend working with a PEO (Professional Employer Organization), such as JustWorks or Gusto, who will handle all the nitty gritty compliance details for you. Your accounting team (like us!) will help manage your PEO.

  • Gusto (not a PEO, but an outsourced provider) – Really great for earlier-stage companies.
  • JustWorks – Really solid customer support.
  • TriNet – They are a full PEO, and a solid solution if looking for a full-service option.
  • Rippling – Onboarding is easy & awesome, and they also handle IT integrations.


Expense Reimbursement

Employee expenses can easily get out of hand. Tracking them manually is extremely time consuming and as a startup, you need to maximize every minute you have. We highly recommend using an employee expensing software to track expenses, automate approvals, and keep the time you spend on this minimal.

  • Expensify – What we recommend for most startups. Very intuitive and user friendly.
  • TriNet – Allows for an all-in-one system if you’re using them for payroll.
  • Concur
  • Ramp – Allows for an all-in-one system if you’re using them for banking + credit card.
     

Cap Table

It’s important to keep track of ownership at your startup, especially as you raise future capital over time. If you’re trying to raise money and you don’t have this documented or under control, fundraising will be challenging. It is also important to understand your option pool for retaining talent. We highly recommend using a cap table management software.

  • Carta – Our #1 pick for most startups
  • CapTable.io (LTSE Equity) – A new option to compare to Carta.

 

SaaS Tools (and Revenue Recognition)

If you don’t track deferred revenue diligently, you could be overstating your revenue, as it should be recognized only when the service is provided. You may also be booking all your revenue up front. For example, as a SaaS company, if a client pays you $120,000 up front for an annual software contract, you should be recognizing $10,000 of revenue per month. Failing to track deferred revenue means you won’t have the most accurate financial reporting. It is better to start tracking this early as it’s very hard to unwind.

For a founder-friendly breakdown on accrual versus cash accounting and revenue recognition, read our tutorial. For tools, we recommend:


Sales Tax

It is extremely important to stay on top of sales tax. If you don’t, you could receive hefty fines down the road. Merchants (whether brick and mortar or online sellers) are only required to collect sales tax in states where they have “sales tax nexus.” Sales tax nexus is just a fancy, legalese way of saying “a significant connection” in a state. If you have nexus in a state, then that state considers you on the hook for charging sales tax to buyers in the state.

 You’ll always have sales tax nexus in your home state, but you may find that certain business activities create nexus in other states, too. If you are unsure in which states you have nexus, Graphite can help you figure it out.

  • TaxJar – We’ve experienced solid support, and we find it more intuitive.
  • Avalara – A more robust sales tax platform.

 

eCommerce Tools

An automated sync between an eCommerce platform (such as Shopify) and accounting software (such as QBO) results in greater efficiency by minimizing errors and redundancies. It also allows for more accurate revenue recognition, reconciliation, and record keeping. After the initial setup of this sync, you’ll begin to save money due to streamlining of processes and reduced manual work.

 eCommerce Platforms

Inventory management can be extremely difficult, especially when you begin to scale your business. Inventory management software can help you minimize risk and streamline your costs, which ultimately means a healthier bottom line for your business. Inventory management software can also help you effectively forecast inventory and identify the most cost-efficient method for ordering new products by weighing the costs of storing your products versus the cost of ordering.

If you are an eCommerce company, we highly recommend using an inventory management software plus a tool design to deliver eCommerce analytics—for a more complete overview of your sales transactions.

Inventory Management

  • Skubana – Integrates all your products, fulfillment centers, and sales channels in one platform.
  • Cogsy
  • Fishbowl – Great for companies manufacturing their own product.

eComm Analytics

  • Blue Onion – Provides a complete view of sales transactions, from point of sale to payment processor to bank account.
  • Fathom – Great for analytics, KPIs and financial reporting.

 

NEED HELP SETTING UP YOUR FINANCIAL TECH STACK?

If you need any help setting up any part of your startup’s base tech stack, or if you need accounting, bookkeeping or CFO support, ping us now! We’re always ready to share best practices to get you up and running.

Need Accounting Help?

Born out of a VC fund, Graphite fully understands the strategic and financial needs of high growth companies. If you need accounting support or simply have a question about accounting at your company, feel free to connect with us!

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