How do you handle your accounting?
Hi Indie Hackers,
I want to ask you for your help:
- do you actually use accounting in your business? ( if yes, what software do you use?)
- do you need help in learning and understanding accounting?
- are you doing it by yourself or getting help from a professional accountant?
- do you think accounting is important?
I appreciate your feedback!
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Accounting is important, I will probably be a bit biased as my background is accounting.
The one that impressed me most from all these packages is Wave. It is free, slick UI, tons of features and easy to use.
I see you mentioning Chart of Accounts. Is it easy for someone without an accounting background to understand.
Thanks for your reply, Patryk!
My background is also in accounting more than 10 years of experience. I think I used Wave a few years back, but haven't used since then but they do seem to be going forward with their free plan (which is good). I remember when I was searching for solutions I found Xero to be the best if you want cloud, but Quickbooks Enterprise if you wanted the full power of accounting (which from searching online found that there's no competition for unless you want to through in then big guys, such as, SAP, Oracle, and Dynamics then that's another debate).
For the chart of account (as I've mentioned to Jack's reply), I still haven't created it but most of the accounting apps have generic chart of accounts which means most of the replies mentioned that they are doing it by themselves in the beginning so I would expect they know what it is. So my idea was to create something specific to tech startups, instead of having the hassle of customizing the generic ones. Do you think this might be helpful to them?
I guess I would have to see it. The things off the top of my head that I would think is unique is the nature of the revenue (monthly recurring subscriptions) and then you probably have a number of software subscriptions on the expenses side.
If you would like to work in it with me, I would welcome it.
My idea is to try and create it publicly getting as much feedback as possible to create a finished accepted product for all to use, especially from the people that will use it.
Also, try to educate and make people aware that if the chart of accounts is implemented correctly, it can be used as a very helpful internal analytics tool and getting the information you need without going through louds of transactions each time you need to do analysis. From the feedback received here, most use accounting only to cover their legal aspects of the business, which is important but it's not the full potential of what accounting can provide.
Hey @AliAlHussain would definitely like to work on it with you. Thanks for the invite. I followed you on Twitter, lets connect and move on it.
Followed back! You're welcome and thanks for accepting.
Thanks for your reply, Hans!
It's a good thing you've been doing it all these years, and it's something that you get used the more you do it. And in general, accounting isn't difficult. And as you mentioned it is important because it shows how healthy your company is.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). The idea is, it can be applied into any country (but you might need to consult an accountant for more detailed requirements). Do you think this might be helpful?
Yes, I think a "lean" chart of accounts for tech startups would be helpful for people just starting out. From memory, I tweaked Xero's default chart of accounts when I started using it.
What might also be helpful is guidance on which account to put things in. For example, is that software library I bought expensed immediately? Or depreciated over time? What about software subscriptions? I remember spending quite a bit of time looking up where things were supposed to go. That might be a bit tricky, though, because rules can vary from country to country.
Yeah, it can be tricky that's why it's good to take advise from a local accountant.
As you have suggested, I also was thinking in putting a “guidance“ column on what can go into this account to make it easier to navigate through them. Plus, also giving suggestions on what sub-accounts can go under the parent account (which can be added later when).
We are a small digital design agency. we have 16+ team members.
Thanks for your reply, Shekh!
Yeah, most of the accounting apps have made it much easier to do it and simplifying many aspects of it.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). The idea is, it can be applied into any country (but you might need to consult an accountant for more detailed requirements). Do you think this might be helpful?
Yes, it mostly depends on the cost.
The early-stage start-ups really care about the regular expenses. Until they feel this is a must need thing they won't pay for it. That's what I understand.
Startups shouldn't pay for it in the beginning, only consulting with a local accountant to make sure that they are in the right direction. Because it makes things easier in the future when an accounting professional will handle it.
I'm a sole proprietor in the Czech Republic. I use an application to track invoices and help with filing a final tax report. So far I did everything myself without an accountant, but thinking of getting one and have "one less thing to worry about".
Thanks for your reply, Josef!
If you don't get one, you should at least take advice from one which might help you sort things out for you. But it's a good thing you did in the beginning to understand how accounting works which will help you in hiring someone in the future.
Any specific resources you used to learn accounting?
Also, as I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). The idea is, it can be applied into any country (but you might need to consult an accountant for more detailed requirements). Do you think this might be helpful?
Originally I learned from a Czech book on accounting (it was part of my thesis at uni). The thing is accounting is very country specific. They are differences if you are VAT payer or not, by what conditions you are becoming one, what countries are you selling services to (EU vs USA), etc. etc.
I am personally not interested in "general" accounting advice. Only in the details on how to handle it specifically in my case and for my tax filling. Hope it helps.
I understand and thanks again for your helpful reply, Josef!
Hi @AliAlHussain!
Thanks for your reply, Tara!
What have you used to learn what you have learned so far in accounting?
And as you said:
It the health of the business and shows you how well you're doing and what you need to improve.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
If I didn't already have a fantastic accounting team (and tax planning team), I'd take you up on it.
That's encouragement to go ahead with it, and it's good that you have a fantastic accounting team makes things easier as your company grows.
Thanks again for your helpful reply, Tara!
When we started BeamJobs I did all bookkeeping myself with Xero. I have no accounting background so I do not think I was doing everything correctly. The problem was I didn't understand enough so even Googling for answers wasn't that useful because I didn't understand the answers.
Now we use a company called Xendoo for all our accounting and bookeeping and I'm never going back. It caused me a lot of anxiety and making sure your books are right is incredibly important. If you can afford it (we pay $200 a month) I'd highly recommend you offload it as soon as possible.
Thanks for your reply, Stephen!
Yeah, search can be unhelpful at time. Most answers you find are too generic and simple, or too complicated. Also true, having the accounting right is very important and missing one transaction can make you run around for a while until you find that difference to reconcile it.
But are you willing to understand accounting more, or since Xendoo is doing it you're not interested any more?
Also, as I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
My company's finances are very simple, so I keep track of financials in an Excel spreadsheet.
Only one bank account, so exporting data to Excel is straightforward.
Company is a single-member LLC so finances are passed through to my personal taxes which I do with TurboTax Home & Business.
I have a background in finance so I don't need much help with accounting, and when I do need help, the TurboTax community resources and/or Google have the answers.
I do my own taxes.
To me, accounting is important only for the legal requirement of filing taxes. I use other metrics/financials to keep track of the business.
Thanks for your reply, Steven!
That's good since you have a background so you understand how important accounting is to a business.
But as you mentioned:
Can also be classified as management accounting (which is internal reporting not related to public legal reporting), which is also very important in understanding your business more.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
I don't think accounting is a high priority for early-stage businesses – too many other things to worry about. I don't keep a general ledger and therefore don't have a need for a chart of accounts.
From the replies it suggests otherwise, and I agree with you it shouldn't be a top priority because there so much other things to be done in a startup.
Thanks again your reply, Steven!
I now manage 4 LLC's and all the biz/taxes for each.
For the first 2 years of each one: I handle the books myself and use a tax professional in town to prepare the filings each year. In December, I start paying for Xero ($30 per month) and import all of my transactions. I hammer through getting all the transactions coded properly during Christmas when nothing else is going on. It's usually the only thing on my to-do list while visiting family. When March comes around, I take a GL report & balance sheet report to my accountant and we start working on filing.
When the biz is more active and making good money: I use https://bench.co and I could not be happier! We get a bookkeeper assigned to each company and they provide updates/reports at the end of each month. Referral code for $250 in credit: http://refer.bench.co/WTVML
Thanks for your reply, Baird!
That's good that you're doing the accounting in the beginning saving money on hiring an accountant, and also making you understand your business more. Also, accounting is doable just need the right resource to understand it from.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
We filed on our own for the first year and probably will for the next 1 or 2 years. Need to disclaim though that we got a lot of help from a relative who is an accountant.
With his help I assembled a tax workbook that we can use to fill out the forms we need to submit. We use Wave Accounting (free) to record everything, so this step was pretty straightforward. The best part is that we can use this in the future without hiring a CPA, at least until our incomes stay below $250k (lol).
It turned out to be "relatively simple" for the first year, but this still entailed 4 unique forms as an LLC, some of which were required because we have 3 members with an equal 33.3% share of the company.
Ultimately, I am happy we tried this route. It certainly took longer than handing over files and money to hire an accountant, but I learned a considerable amount about taxes and accounting. Will also be more than happy to hire a CPA eventually if it becomes too much work around tax time.
Thanks for your reply, Christian!
Yes, it's good to learn the basics and handle by yourself in the beginning because it's doable and you can use an accountant only for advise instead of doing the bookkeeping and handling of the transactions (because there might be some good advice that can benefit your startup). Additionally, you's save this money to spend on core business operations.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
Oh awesome, that would be quite useful. I feel like I'm doing enough to not get in any issues with the IRS but setting it up in a smarter, more organized way would help. A chart of accounts outline seems like a nice starting place.
Yes, that's what I'm thinking about.
Also, I'm thinking of including the community here in IHs to get feedback on how to improve it and what to include or exclude (hopefully creating some kind of standard that can be used by most tech startups).
Great, sounds good. Let me know if there's a signup/email list for this and I'll follow/give feedback :)
Yes, will keep you updated!
Again thanks for your helpful reply, Christian!
Bookkeeping: When I started my business, I only had a handful of transactions per month. A simple markdown file, while being far from perfect (i.e. single-entry bookkeeping), worked well for me.
These days, I use Xero to pull transactions from Stripe and my bank account.Every week I reconcile transactions. I'm not sure I'm doing everything correctly, though.
When the tax time cometh, I send a balance sheet and income (P&L) statement to my accountant.
Accounting: it is almost always better to outsource tax preparation to a professional. Your time is better spent elsewhere. Unless you know what you're doing, you are most likely to screw it up, and fines for doing so can be huge (at least in the US).
With that said, it helps to understand the ropes of accounting/bookkeeping to know what's going on in your business.
Couple tips:
Keep your personal and business expenses separate. It makes bookkeeping easier, among other things.
If you want to incorporate late in the year (Oct-Dec), wait until early next year (Jan). That way, you will skip one tax season, which helps tremendously early on.
Store invoices/receipts for all transactions.
Stripe Atlas has multiple guides on this topic. Ctrl/Cmd + F for "tax" or "accounting".
Thanks Jama for your reply!
What other resources have you used to learn accounting other than Stripe?
As you said:
Actually, it's nice to get advice from an accountant on general matters too, but accounting in general is doable and difficult to pick up and start using in your business. The earlier you start the better (because having transactions piling up might create hard differences in your accounting to reconcile), and keeping full documentation of your transactions is very important.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
I have a business degree and read a couple of accounting/CPA blogs on the Internets.
For sure, but considering that a lot of folks here are on shoestring budgets, most of us can't afford routine consultations with lawyers/accountants.
I think a lot of founders who want to DIY bookkeeping won't even know that they need a chart of accounts or what to make of it.
The more useful approach would be to write or record a short guide on how to approach bookkeeping (think bookkeeping 101). As an add-on to the guide/book, you can offer a sample chart of accounts for SaaS companies (hopefully, at that point, they will know how to use it).
FWIW, I personally use Xero's default chart of accounts (with some tweaks), and it's working ok-ish for me.
Thanks again for your helpful feedback and suggestions, Jama!
Hi Ali,
I use Quickbooks (Desktop only, not the cloud version) and enter and balance all transactions manually every two weeks. I am a sole proprietor (who sometimes contracts/subcontracts others on a 1099 basis). My income streams include product sales and contract work revenue. I also file my own taxes using TurboTax (but I sometimes redo them on paper to make sure everything lines up). I believe that as a founder it is important to do my own accounting and maintain a strong understanding of where my money comes from and goes. My background in finance and accounting is self-taught over the years from a variety of courses.
Thanks for your reply, Philip!
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
And can you mention the courses that helped you learn accounting and finance?
The quickbooks default chart of accounts did take some substantial modification before it fit my needs. Seeing different charts of accounts could be helpful, especially if they were segmented by use case (solo bootstrapper, small agency, seed-round product-based team, YC startup, etc.)
It has been long enough that I don't remember the exact titles of the courses I took but they were intro financial accounting lectures from some professor.
Yeah, my idea was to create a few of them, for example, a Saas specific chart of accounts, junior stage startup, and senior stage startup, additional to what you have mentioned.
Hey Ali,
For my first business, I ran it for 3 years as a "sole trader" in the UK. I did all my accounting myself as it was relatively simple. Even before the great tools existed, I would keep a spreadsheet and used Freshbooks for invoices & expenses.
When I incorporated in 2016/2017, I started using an accountant, as the price was worth the piece of mind. Initially, I started off with an "okay" accountant, but later moved to a more tech-focused accounting solution.
With Fathom, we incorporated it as soon as I came on board. We hired the same accountants I was already using, and we had a lawyer incorporate the company.
Accounting is incredibly important. Personally, I would never run a product / business without incorporating anymore. Sure, there are typically tax advantages, but the biggest win is the separation of personal / business. When I was a sole trader, things always felt a bit "blurred". Now we have company assets and personal assets.
Does that help?
Thanks Jack for your thorough reply!
I'm actually an accounting and finance insider with more than 10 years of experience. I wanted to start this thread because at my current company (non-tech sector) I was responsible to create the accounting and finance function from scratch and had a hard time finding an industry specific chart if accounts (other industries also either were too general or not specific enough). So it came to my mind to see if there's a free standard uniform accounting for tech startups, I found a few but there's no uniform accounts being used (excluding the country specific regulations).
My idea was to try and create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). So do think this is helpful?
And as you said:
And as its said "accounting is the language of business" showing you how healthy your startup is and is it actually making money or not. And additionally, as you have mentioned, for reasons as tax advantages and having clear separation between personal and business expenses.
Also, can mention what resources you used to do the accounting by yourself in the beginning?
Check out our review for Sage Business Cloud Accounting software: https://www.startupjohn.com/blog/sage-business-cloud-accounting-review-for-startup-founders
Thanks for your reply, John!
Sure, let me know if you have any questions.
Happy to help
1- yes, i have
2- no, there is a tonne of tutorials and help online
3- accounting software like quickbooks and zero and an accountant
4- accounting is very important once you are up and running
Thanks for your reply, James!
Do you use a specific chart of accounts or just a generic one?
And what are your resources for learning about accounting?
Generic and i usually google questions, look on youtube or contact zero for support
So do you find accounting easy to grasp?
I didn’t need to do much, so yes it wasn’t difficult
That's great, and thanks again for your reply, James!
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Hi @AliAlHussain,
Hmmm ... Are you trying to evaluate whether this is a business opportunity/idea? If you are ...
A) I'm already doing something which is potentially very similar. See www.gigobooks.com
B) You're gonna have to think of a way to compete against Wave which is free.
i do! i have a per-hour accountant (virtual). just does books and has connection to quickbooks ($25/mo for that i think).
yes. accounting. yes. do it. as soon as you start making serious ( > $10k-ish in revenue).
Thanks for your reply, John!
In my biased opinion, it should be done from the first transaction to keep everything organized instead of piling up and trying to reconcile later. But I do think the founder/(s) should be doing it in the beginning until as you said you reach a good amount of revenue.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). Do you think this might be helpful?
sweet! you're ahead of the curve!
I'm a sole proprietor and so far I've been working mainly as a contractor. I'm not required by law to do bookkeeping. I only file my taxes once a year for which I don't use any special software. I use an online service to keep track of the invoices.
I would like some help with accounting as I plan to switch to digital nomading and I'm not really sure how will I do the accounting then, but that's probably very country specific... Is your product idea mainly targeted to US based companies/entrepreneurs?
Thanks for your reply, @catico.
And about learning accounting, its not difficult, you just need to find the best resource to learn from. Most resources either are too general and simple or very complicated. But learning the basics of accounting is doable and every business owner should learn how to do it (unless you can afford to hire an accountant)or at least understand what it means.
As I've mentioned to Jack's reply, I'm actually an accounting and finance insider with more than 10 years of experience. And started the thread with an idea to create a FREE "Lean" chart of accounts for tech startups to help them in their early stages (instead of using a generic one and needing to work on customizing it fully to fit their needs). The idea is, it can be applied into any country (but you might need to consult an accountant for more detailed requirements). Do you think this might be helpful?
I'm expecting to struggle the most with the country specific regulations, so that would be something that I would be be mainly interested in. I'm not required by law to keep chart of accounts.
I see, well one solution to your problem might be to use one specific countries's laws (makes your company official in one country) without needing to search or learn laws of different countries as you're traveling.
And thanks again for you reply, @catico!