8 accounting tips every startup needs to know

Launching a startup in Australia is exciting, but navigating the accounting side of things can be tricky. Don't worry, we've got you covered! In this blog, we'll break down everything you need to know, from choosing the best business structure to why you need an accountant for your startup from the get-go.​

Choosing the right business structure for your startup is a crucial first step. It impacts your tax obligations such as how much tax you’ll pay and when to pay them, as well as your ability to raise funding. ​

There are 4 common types of business structures in AU: sole trader, company, partnership, and trust. 
Operating as a sole trader might be the easiest and simplest, but leaves you personally liable for business debts. This means if your business incurs debt, you’ll have to use your personal assets to pay off the debt. If you run your business as a company, it offers some personal liability protection, however, it comes with more complex regulations and tax requirements. ​

The ‘best’ structure depends on your specific circumstances, risk tolerance, and long-term goals. Don't hesitate to consult with an accountant to determine which business structure suits you best. It’s important to note your needs may change as your business grows and evolves, so it's crucial to re-evaluate your structure periodically (maybe at the beginning of the new financial year).​

Read more: Business structures - what’s best for you?​

Having a good accounting system is the sturdy backbone that supports your startup's growth. While spreadsheets might seem sufficient in the early days, investing in a proper accounting system from the start can save you countless headaches down the line. Accounting systems such as Xero can effortlessly track your income and expenses, generate insightful reports with a click of a button, and even help you manage your cash flow like a pro. This isn't just about crunching numbers; it's about gaining valuable financial insights that empower you to make informed decisions.​

Having a separate business bank account is more than a good practice; it’s building a solid foundation for your startup’s financial house. A separate business bank account draws a clear distinction between your personal and business finances. You don’t need to do any more scrambling to figure out if that coffee was a business expense or just a Monday morning necessity. This makes tracking your income and expenses a breeze when the tax season comes around. ​

Moreover, a separate bank account provides a clearer picture of your startup’s financial health. You can see exactly how much money is coming in, where it's going, and spot any spending trends. This is super helpful for making smart decisions about your business, like whether to hire that extra hand or invest in that shiny new equipment. Plus, it shows investors and clients that you're on top of your game and taking things seriously.​

For companies, having a separate bank account is essential as a company is a separate legal entity.​

Now, you might not have to register right away, especially if you're starting small. But if you're ambitious and expect to hit that $75,000 turnover mark within your first year, registering for GST from the get-go can save you a lot of hassle later on. ​

Think of it this way: registering early means you're already set up to handle GST, no scrambling to catch up when you hit that magic number. Plus, you can claim back GST on those early expenses. Every dollar counts when you're just starting out!​

However, registering for GST also means taking on extra responsibilities, like filing those returns on time. If you're feeling a bit overwhelmed, have a chat with your accountant. They can help you figure out if early registration is the right move for your unique situation.​

A well-defined business plan and a meticulously crafted budget are essential for startups to navigate to the path of success. ​

A business plan articulates the startup's vision, value proposition, target market, and competitive landscape. It outlines the strategies that will be employed to achieve short-term and long-term goals, providing a roadmap for growth and sustainability. A budget, on the other hand, provides a financial framework for the startup's operations. It forecasts revenue streams, anticipates expenses, and facilitates informed decision-making regarding investments, resource allocation, and financial management.​

A strong business plan and a realistic budget are essential for any startup - they act as a roadmap and financial compass, guiding your journey towards success. If you’re not working with one, book a call with one of the team members or sign up for Beany. ​

Read more: What is a budget?​

Most of the time, even the most groundbreaking ideas need a little financial boost to truly take flight. That's where startup business grants come in - helping startups to turn their dreams into realities. They can provide the crucial funding needed to overcome those initial hurdles, whether it's developing a prototype, securing essential equipment, or launching a marketing campaign. ​

Don't be shy about seeking out these opportunities. Research various grant programs, tailor your applications to highlight your unique strengths, and craft a compelling narrative that showcases your vision. Treat each application as a chance to refine your business plan and articulate your goals with clarity and passion. Even if you face a few rejections along the way, remember that persistence is key. Business.gov.au has a grants and programs finder you can use.​

Both operating costs and capital R&D are essential when you're just starting up, but there are several differences. ​

Operating costs are the day-to-day expenses that keep your startup running smoothly. For example, rent for your office, electricity bills, marketing campaigns, internet expenses and more. These costs are typically short-term and recurring, showing up on your income statement and directly affecting your profitability.​

Capital R&D, on the other hand, is an investment in your startup's future. It's about developing new products, enhancing existing ones, or creating innovative processes that give you a competitive edge. For example, developing a groundbreaking app, researching new sustainable materials, or designing a cutting-edge manufacturing process. These are investments with long-term benefits, often resulting in assets that appreciate over time.​

While operating costs are expensed immediately, capital R&D costs are typically spread out over the useful life of the asset created. This affects your financial statements and tax liabilities, so it's crucial to classify them correctly. If you’re not sure how to categorise your expenses, talk to your accountant.​

While you might be tempted to wear all the hats yourself, especially in the early days, seeking professional help from an accountant can be a game-changer. They can help you set up a robust accounting system, ensure you're compliant with all tax obligations, and provide valuable insights into your financial performance. Imagine having a trusted startup accountant who can help you make sense of the numbers, identify potential pitfalls, and unlock opportunities for growth.​

Beyond technical expertise, a good accountant can be a valuable sounding board for your business decisions. They can offer objective advice on everything from managing cash flow to securing funding. It's like having a financial mentor in your corner, cheering you on while keeping you on track. Working with an accountant is an investment in your startup's long-term success. ​

If you’d like to know more about how Beany works with your startup, book a call with one of our team members.​

Read more: 6 areas a small business accountant can help to grow your business​

As a business owner, we know you value your time. That’s why we designed the simplest and most pain-free online accounting service around. Our team of experts handle the number crunching, so you can focus on what you do best - starting and growing your startup. From filing year-end tax returns to bookkeeping, we're here to support you every step of the way.  Ready to simplify and unlock your startup's potential? Visit our website, sign up, or give us a call today!​