All startups are bootstrapped in some way in order to be successful, and no doubt the year of COVID-19 has put stress on your financial performance. Between cash crunching, operating expenses, layoffs or furloughs, and the transition to an all-digital workforce, the challenges have been many.
As we enter 2021 and you’re looking to get your books aligned and financial strategy defined, we’ve compiled several key bookkeeping and accounting tasks that a startup’s accountant should handle in the new year.
1. Balance The Books
Ah yes, no new year should begin without validating the books. Without a clear picture of your current finances, it is impossible to properly budget for the future and create meaningful financial forecasts or income statements. You want to ensure your profit and loss statement, cash flow statement, and other financial statements are accurate.
If you’re not already, you should be balancing the books at the end of every month or quarter – but now is a prime time to make sure all the line items are aligned. If there are any imbalances between liabilities and assets, take the time to check whether any entries were missed or duplicated in your ledger.
A healthy business will have higher assets than liabilities. A strong gross profit paves new avenues for financing and assessing the opportunity for growth.
2. Review Performance From The Previous Year and Rejig Goals
Once your figures are aligned, the year-end is when you should be taking the time to review the past year’s performance and reassess goals and KPIs. When you look at the year’s data as a whole, unrecognized trends may make themselves apparent from your peaks and valleys that you previously weren’t aware of.
Conducting this exercise needs to involve the entire leadership team, but all of the key strategic decisions for the upcoming year must be informed by solid financial data. Key questions to ask when putting together a year in review include:
Did the company meet or exceed its KPIs?
Were the company’s KPIs / benchmarks realistic? Do they need to be adjusted?
What strategies or initiatives provided the most growth?
What strategies or initiatives did not perform up to expectations?
What was the biggest accomplishment?
What was the biggest disappointment?
What should the company’s goals be in the new year?
3. Make Sure Payroll is Aligned
A well-running payroll saves both time and money in the long run and ensures you don’t run into any hiccups when filing your payroll taxes. Along with checking that employee information is correct and all pay, commissions, bonus pay, and benefits are properly recorded, now is also the time to review payroll processes.
Update your payroll with any updates from your employees and the new 2021 tax rates. Your accounting software will likely update Federal and State tax rates automatically, but you may need to manually update industry-specific tax rates.
Be sure to read our Payroll Tax Checklist to ensure you tick all your boxes when preparing your filing.
4. Audit Your Processes and Procedures
The new year is a great time to take a look through your bookkeeping and accounting processes and procedures to seek new avenues for efficiency and automation.
Across the organization, you need to create deadline and cutoff policies for employees to submit invoices and adjustments and ensure they are adhered to. In general, bookkeeping software that automates mundane processes such as accounts receivable and accounts payable will ensure recording financial transactions is completed in a timely manner with fewer errors than human input.
5. Prepare to File Taxes
If you don’t currently have a tax strategy for your startup, it’s best not to delay. Even the smallest startup can benefit on their tax return from having a robust tax strategy in place. For example, if you haven’t applied for the R&D Tax Credit yet, this lucrative tax credit is available to startups conducting research into the improvement of products, processes, software, or development.
Other priorities include:
Properly Document All Income and Deductible Expenses
Cut Down on Payroll Tax With Benefits
Carry Forward Net Operating Losses
Be sure to read our Tax Filing Checklist to make sure you don’t miss a thing when filing your 2020 return.
Need Expert Help With Your Startup Tax Planning?
It is always preferable to have an expert in your corner when you aren’t able to give your full attention to finances.
In terms of your growth cycle, you should look to bring in an accountant when your business model and revenue model are more complex and require more than merely classifying your credit card transactions and banking transactions.
Greenough Group’s startup accounting services are highly sought by both small businesses and rapid-growth tech startups alike. Their involvement in your business is scaleable to remain cost-effective, and their hourly commitment can grow alongside your business.
GCG is the preferred accounting services for startups firm of executive Tom Rowley, who has utilized GCG’s services in several of his ventures: “I’ve brought GCG into my last four startups. Getting finance running smoothly, as quickly as possible, allows me to focus on building the business. Hiring GCG is one of the first things I do.”
Our reputation for accuracy, senior attention, and exceptional client service has made us one of the financial community’s most highly recommended back-office services firms. Contact us today for a free consultation and learn how we can help you focus on growing your business.