As a startup founder, your mind is split between a million different things, as you develop both your product and your company culture. If your start-up is in the technology sector, chances are you’re also faced with nuances that are specific to your industry. It can get overwhelming. Now, add accounting for your start-up to your list.
Accounting tasks are often at the bottom of start-up owners’ to-do list, but this is a mistake. You can have a great idea, an innovative product, provide amazing services…but none of this matters if your business is not profitable and you incur more losses than sales. Especially in the technology industry, you’re also faced with huge financing obstacles. You wear many hats as a business owner, but “financial expert” may not be one of them. Good news: as experts in accounting for start-up technology firms, we’re here to help!
The following are some of the most important accounting start-up tips we offer our technology clients:
Invest in scalable systems
We don’t have to tell you how technology has disrupted just about every industry, but we do want to tell you that the disruption has carried over into the accounting world. By using cloud-based solutions such as Quickbooks, your business will have the software it needs to grow along with it.
As your business grows, so does your team, which means adding new accounts to your payroll system. With the right software, this will be a lot easier to do. In the long run, this investment into cloud-based systems will help with scalability and save you time and effort.
Cloud-based accounting solutions can also cut costs. Start-ups often don’t have a lot of budget to work with. By using cloud-based technology, your data can be accessed by your team anywhere, anytime. If you have to hire employees who work remotely to lower labour costs, they’ll be able to refer to your financial documents without having to come into the office and dig through filing cabinets.
Research government funding programs and tax incentives
As we said earlier, financing is often the main challenge start-ups face. There are many ways you can fund your venture, from personal investment to incubators, but often, many start-ups overlook government programs. Sit down with your accountant and find out if your start-up qualifies for the Canada Small Business Financing Program, which “makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders.” If your SME has a gross annual revenue of $10 million or less, you may be eligible for this program. Like any other loan, you’ll have to put together a business proposal and apply for it – a financial officer will review it and make a decision accordingly.
Spend some time looking over the stipulations attached to this (and other programs) and see if it makes sense for your company. For example, the Canada Small Business Financing Program allows loans to be used on purchasing buildings or new equipment, but not on working capital or inventory.
As the Canadian government wants to encourage more innovation in our country, there are also tax incentives you may look into. If you’re a tech start-up in Ontario, you may qualify for the Ontario Innovation Tax Credit. Do you have a permanent establishment in Ontario? Does your corporation carry out scientific research and experimental development in Ontario? You may be eligible! Ask your accountant for more information and they can help you claim the tax credit on Schedule 566 and file it with your T2 corporation income tax return.
You can also find more financing programs here.
Prepare a technology start-up business plan
You can’t plan for sustainable business growth if you don’t, well, plan. Trust us, you’re not the only tech start-up around with a great idea. In such a competitive space, you’ll need to be prepared. As we mentioned earlier, you’ll need to present your business proposal if you’re hoping for investors to give you money.
Your business plan is a roadmap that describes your mission and how you intend to execute that mission. This will offer clarity to your potential investors on your goals and how you’ll reach targets like website traffic or profit margins. Investors want to put their cents into ventures that have a high likelihood of earning a positive return on investment. Having a business plan helps create strategic focus which will make it easier for you to raise capital.
Don’t leave accounting and financial considerations until it’s too late. You can accelerate your start-up’s growth by following the tips above and hiring an experienced accounting team to manage your finances. At Qmulus, we can be your outsourced finance department. By providing user-friendly technology solutions and expert tax and accounting advice, we can take those accounting tasks off your list and allow you to focus on what you do best. Schedule an appointment or give us a call at 647-476-2145 to get started.