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Blog post from June 9th, 2022

Accounting in startups – this is what founders need to know

accounting in startups

Founders would probably prefer to put all their time and energy into building their startup. But entrepreneurs also have to follow rules and laws. And accounting is part of this for startups. Our article will help you avoid pitfalls and stumbling blocks.

Table of contents:

  1. Do it yourself or do it with a tax advisor?
  2. Rules and regulations
  3. Is it all a question of the right software?
  4. Separate personal and professional life
  5. Digitalization avoids chaos
  6. Save a lot of time when retrieving documents!

The most important answers about accounting for startups at a glance:

Cloud or PC software? What is better?

The question cannot be answered in general. Of course, the argument in favor of a solution in the cloud is that the accounting can be accessed from any location. In addition, integration with other service offerings is easier via interfaces. Accounting in the cloud stores all data centrally in a data center and you don't have to worry about data backup. A pure PC solution does not have these advantages. The advantage here: All data is guaranteed to remain within your own four walls.

How do I find the right accounting solution?

It is advisable to find out in advance what the accounting software covers and what requirements the startup itself has. Should the invoices and offers be written directly in the same software? Are travel costs incurred and need to be accounted for? Should wages and salaries be recorded? Most providers allow a free trial phase, which you should then make extensive use of.

What is the GoBD exactly?

It is an administrative regulation with which the Ministry of Finance has informed the tax offices what requirements it has for proper accounting. The tax offices base their audits on these requirements. That’s why it’s not just startups that should stick to it.

Does every startup have to prepare a balance sheet?

Not automatically. Whether a balance sheet needs to be prepared depends on the legal form of the startup. Anyone who sets up a company as a member of a freelance profession does not have to do this. It is definitely helpful if the accounting software supports balancing. Especially since the balance sheet figures are also of great interest to venture capitalists.

How can I save money with a tax advisor?

By specifically selecting the services that the tax advisor provides. With complete support, startups can simply hand over all receipts to the tax advisor, who then books them, handles payroll accounting if desired and takes care of sales and trade taxes on an ongoing basis. As with building a house, you can save money by doing your own work: for example, if you do the bookings yourself and the tax advisor only takes over the taxes and any balance sheets at the end of the quarter and year.

 

Whether large or small: accounting plays an important role in every company. Finally, the numbers of all income and expenses add up. Startups can't take the issue seriously soon enough, otherwise they risk getting into trouble with the tax office. And that can be expensive.

Do it yourself or do it with a tax advisor?

It is typical for founders to want to keep the company's money together as much as possible. Savings and cost control are therefore the order of the day. Working with a tax advisor often falls prey to the hasty judgment that it is an unnecessary expense. There is money for expert advice from an IT specialist or SEO expert, but not for a tax advisor.

Regardless of whether the ongoing bookkeeping is later handled by a tax advisor, advice from a tax advisor in the initial start-up phase is highly recommended. The money for this is well spent. Because the tax advisor helps to avoid recurring and permanent errors.

That's how it is The subject of sales tax is quite complex. And at the latest when business relationships extend abroad, different VAT rates or the reverse charge procedure for foreign sales create real pitfalls that can cause a startup to stumble financially. The tax advisor puts the company on the right track in terms of tax law - from the legal form, to the accounting system, to the processes for sales taxes, trade taxes and other taxes. When choosing, founders should not rely too quickly on Google recommendations or the advice of friends. Startups with a primarily digital business model should also look for a tax advisor who has proven experience in this area.

Once the structures have been created, entrepreneurs can still consider whether the tax advisor should also take care of the ongoing accounting.

For the Do it Yourself This means that there are no additional costs and that the founders also receive a good overview of all finances and business operations. Thanks to current software solutions, booking is not particularly difficult. However, correct and regular accounting requires additional time. Time that is then missing for the actual core tasks.

Observe rules and regulations

“Ignorantia legis non excusat” – all first-year law students know the Latin formula. Ignorance does not protect against punishment; The principle from ancient Rome also applies to tax law.

The accounting of a startup must Requirements from the tax office and tax law are sufficient. The deadlines by which advance payments must be made or receipts must be submitted must be strictly adhered to. And all accounting must be designed in such a way that it can be tracked by an external third party. From the tax office's perspective, this can be achieved if companies adhere to the "principles for the proper management and storage of books, records and documents in electronic form as well as for data access". short GoBD, hold.

 

getmyinvoices_GOBD_requirements

But they are anything but light fare. Because this is about how receipts and documents have to be stored. This is the only way to prevent changes and manipulations from being possible. In this regard, founders can gain some breathing room by specifically looking for software or cloud solutions that have been tested according to GoBD.

Is it all a question of the right software?

Without software and digital tools, little works in a company's accounting. The tax office expects the advance VAT return to be submitted digitally. Anyone who chooses software that meets the GoBD criteria can rely on the fact that all necessary documents and bookings are recorded in such a way that they meet the requirements of the tax office.

The But software must also fit the startup. Anyone who trades should see whether they can connect inventory management to the software. The question also needs to be clarified as to where and by what means the invoices are issued to the (hopefully many) customers. Separate program or directly in accounting software? It's good if the software can grow with the needs of a company. Many cloud solutions offer numerous interfaces to external applications or can be supplemented with functions through extensions.

getmyinvoices_accountingsoftware_corefunctions

The programs often advertise one Datev interface. They should take a closer look at startup founders. It's good if the documents are also output during the export, not just the individual bookings. In order to check the bookkeeping or prepare tax returns, the tax advisor also needs the evidence. “No booking without receipts” is one of the unwritten principles in accounting.

Separate personal and professional life

Just as important as the legal form, selection of accounting software and reports to the tax office or trade regulator is the separation of private and professional finances. A Business account A bank is not a luxury, but a pure necessity.

This simply creates more overview and makes it easier to provide proof of expenses and income to the tax office. The private checking account is not suitable for this because private and professional bookings cannot be distinguished at a later point in time. There are now many cheap offers for business accounts from fintechs and neobanks that also accommodate startups in terms of price. And the account models often also have direct interfaces to well-known accounting solutions.

Digitalization avoids chaos

The accounting rules require that receipts should be recorded and posted as quickly as possible. The fewer manual steps required, the better. Because this not only saves time, but also avoids chaos. And this can quickly break out when paper receipts are first collected somewhere and no one knows exactly what they were actually for. Documents relevant to accounting arise in many systems and are received in different ways. The providers usually post internet and cell phone bills in a customer portal. Anyone who runs an online shop can find all booking-relevant data in the backend of the shop software or in the seller area of a marketplace. Other invoices may reach the startup by email. And of course there are also companies that simply send their invoices by post. Accounting software should Digitization of receipts make it as simple as possible. Many solutions recognize the content automatically.

Save a lot of time when retrieving documents!

You can save a lot of time with GetMyInvoices when retrieving and digitizing receipts. New receipts are simply collected from over 10,000 online portals and, if desired, automatically transferred to the cloud-based accounting. With the scanning app, receipts no longer end up in your wallet or on your desk, but can be digitized immediately. Of course compliant with GOBD.

getmyinvoices_save_much_time

Save a lot of time with GetMyInvoices!

 

No matter which accounting software you use: Thanks to the GetMyInvoices interface, you can collect new receipts from over 10,000 online portals and automatically transfer them to the cloud-based accounting if desired. Of course compliant with GOBD!

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