For startup founders, accounting and taxes can feel overwhelming, especially when you’re focused on building a product, hiring a team, and raising capital. But understanding a few core financial reports can make tax season significantly smoother.
Recently, our CEO and Founder, Akshay Shrimanker, partnered with the Pace University Small Business Development Center (SBDC) to deliver a webinar on accounting and tax fundamentals for tech startups. We’re grateful to the Pace SBDC team for the opportunity to connect with founders and share practical guidance drawn from working with early-stage companies every day.
Start With Reconciliations
The first step founders should take before tax season is confirming that bank and credit-card reconciliations are complete. Reconciliations ensure the numbers in your accounting system match real-world transactions. Without this step, financial reports can quickly become unreliable.
Understanding Accounts Receivable
Next, founders should review their Accounts Receivable (AR) aging report to understand who owes the company money, how much is outstanding, and how long invoices have been unpaid. This report provides visibility into cash flow and highlights invoices that may require follow-up or need to be written off at year-end.
Reviewing Accounts Payable
On the other side, the Accounts Payable (AP) aging report helps confirm what the business owes vendors. Reviewing AP regularly can help catch duplicate bills, incorrect entries, or missed payments.
The Financial Statements That Drive Your Taxes
After validating operational reports, founders should review the two core financial statements: the balance sheet and the income statement.
The balance sheet confirms that bank balances, SAFE investments, shareholder loans, and common stock activity are recorded correctly. The income statement shows revenue, expenses, and net income, the number that ultimately drives your tax position.
For most early-stage tech companies, expenses are often concentrated in payroll, research and development, legal and accounting support, software subscriptions, and cloud computing costs.
Questions From Founders
One of the most valuable parts of the session was the live Q&A, where founders asked practical questions about real-world accounting scenarios…
Q&A #1: Funding Your Startup With Personal Money
Question: “I’m bootstrapping my venture using my personal capital. I send money from personal to business accounts to fund the business. How should I approach the founder value you spoke about?”
If you’re bootstrapping your startup with personal funds, make sure those transfers are clearly recorded in your books. Depending on the situation, they may be categorized as shareholder loans, equity contributions, or a shorter-term expense reimbursement that you expect the company to pay back to you in the short-term future – typically less than 12 months.
Keeping these transactions organized ensures your balance sheet accurately reflects how the business is funded, which becomes especially important when preparing for fundraising or investor due diligence.
Q&A #2: When Do Startups Need to Issue 1099s?
Question: “What do you do if you pay a service provider… do you need to send 1099s to every service provider you work with?”
If your company works with independent contractors or service providers, you may need to issue Form 1099-NEC depending on who you paid and how payments were made. A best practice is to collect W-9 forms at the start of a working relationship, rather than trying to track them down at year-end.
Also, remember that payments made through certain third-party payment platforms may shift reporting responsibility away from your business (i.e., PayPal, or using credit cards), so it’s important to understand how those payments are processed.
The Founder Takeaway
Founders don’t need to become accountants, but reviewing a few key reports regularly can prevent surprises at tax time and provide clearer visibility into business performance.
We want to thank the Pace SBDC team for inviting Akshay to share his expertise with their community.
Whether you’re building a startup or running a growing company, Shay CPA is here to help. If you’d like guidance on your accounting, tax readiness, or financial processes, reach out to our team. We’d love to support you.
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