How Important Is Accounting for an Entrepreneur?
And what do I need to know more than the runway and burn rate?
5 comments
Very important to take care of. You’re responsible to government, investors, your team, and your customers when it fails.
Not so important that the entrepreneur must do the accounting. It’s a skill that can be hired out better than other skills. I wouldn’t hire a financially illiterate person to run a startup, but I wouldn’t normally look for an accountant to run a startup.
Not so important that the entrepreneur must do the accounting. It’s a skill that can be hired out better than other skills. I wouldn’t hire a financially illiterate person to run a startup, but I wouldn’t normally look for an accountant to run a startup.
Very. Assuming you’re in the US, I’d recommend reading the IRS literature related to your type of business (C-Corp, S-Corp, Partnership LLC, Sole Proprietor LLC).
If you’re business structure is “pass through” (ie. S-Corp, Partnership, Sole Proprietor), then you should also read the IRS 1040 instructions and do your taxes (mostly by hand) and file here (for free): https://www.irs.gov/filing/free-file-fillable-forms/
The IRS guide will tell you how you should handle your accounting, what you’re allowed to claim as business expenses for tax purposes, how to handle employees vs contractors, and more. Also tax deductions are crucial for businesses as they’ll help offset expenses to make your business more viable. Good luck!
If you’re business structure is “pass through” (ie. S-Corp, Partnership, Sole Proprietor), then you should also read the IRS 1040 instructions and do your taxes (mostly by hand) and file here (for free): https://www.irs.gov/filing/free-file-fillable-forms/
The IRS guide will tell you how you should handle your accounting, what you’re allowed to claim as business expenses for tax purposes, how to handle employees vs contractors, and more. Also tax deductions are crucial for businesses as they’ll help offset expenses to make your business more viable. Good luck!
Financial statements are a must — knowing what each means, tricks used, how to present them, understanding what each financial statement exposes, and so on.
Then, understanding the various reasons accounting exists: taxes, official records, but also for your own eyes and brain — they represent the health of your business!
Then, understanding the various reasons accounting exists: taxes, official records, but also for your own eyes and brain — they represent the health of your business!
cant overstate the importance of accounting knowledge for founders. its how you will communicate results to investors, and how you will effectively plan for the future.
if you have never managed your own P&L, i would definitely recommend taking some Khan Academy courses or something. understanding depreciation, cash flow, AP & AR are all absolutely necessary when starting a business.
if you have never managed your own P&L, i would definitely recommend taking some Khan Academy courses or something. understanding depreciation, cash flow, AP & AR are all absolutely necessary when starting a business.
It is less important than product market fit at the start. Forget accounting here.
If you are already generating revenue and there is month on month increase, then accounting is more important than product development. At this stage just hire an accountant.
If you are already generating revenue and there is month on month increase, then accounting is more important than product development. At this stage just hire an accountant.