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Accounting Crucial For start-ups

Why is accounting crucial for start-ups


Anyone can start an online or offline business but running it successfully is not an easy task. Various multiplicities are involved in this. The entrepreneurs are required to plan for the location of the office, products and services, business structuring, investment avenues, target customers, and many more. However, one crucial aspect that does not get the attention it deserves is accounting.  

Entrepreneurs plan for recruiting new employees for different functions, but forget to plan about the payroll; entrepreneurs strategize about customers to target and products to sell, but fail to prepare for the recording of income; entrepreneurs think about the procurement process and vendors, but forget to plan about recording those expenses.  

Accounting is a necessary evil that every business has to face – whether small or big, start-up, or well-established. The entrepreneurs must understand the importance and relevance of accounting to build a solid foundation for a continued habit in the future.  

It enables the start-ups to remain organized, control expenditure, escalate productivity, identify and respond to opportunities and threats, and obtain the required financing. Start-ups may hire an in-house accountant or outsource it to an accounting firm. The choice is theirs to make; however, they need to understand the basics of accounting. 


Here, in this article, let’s explore answers to the question, “Why is Accounting crucial for start-ups?”

Knowing your expenses 

Start-ups must have a defined, well-built system to keep the bills and record those transactions. It helps them to track the expenses of every business function and activity. Entrepreneurs can get an idea of the functions that cost higher but are not so important and hence can be removed or functions that should be allocated more funds as they are generating revenues. 

Budgeting and forecasting 

Why is accounting crucial for start-ups

Since start-ups can know all the past expenses of the business through accounting, it also helps prepare budgets for the future for any period. Start-ups can forecast and develop financial models based on past expenses and cash flows by reducing expenditure on some unimportant items and increasing the spending on valuable activities.  

Recording the revenue-generating activities  

Start-ups must keep track of how the business can generate income. Specifically, this includes maintaining a database of all the customers that give higher sales, the products that generate more profits, and other ways through which the business is earning money.  

Start-ups must segment customers based on the product sale, volume, channel, sale amount, and other factors since this information allows strategizing for marketing and promotional campaigns. Hence, information about sources of revenue is essential from the growth perspective of the start-up.  

Tracking the taxes   

Businesses need to comply with the regulations laid by the government and the industry authorities. These regulations and compliances mainly relate to the taxation part.  

Every start-up firm must be aware of taxes, liabilities under each, frequency, and payment deadlines. Accounting helps start-ups to remain abreast of their liabilities under VAT. Furthermore, compliance with tax payments is also crucial for start-ups; otherwise, it may lead to high penalties or legal actions from the concerned authorities or the government.  

Recording employees and related aspects 

Why is accounting crucial for start-ups

One of the key expenses for any firm is the salaries to employees and other benefits that the company has to bear. Accounting enables the entrepreneurs to keep a record of all parts of an employee’s compensation, such as salaries, bonuses, commissions, holidays, social security benefits, and taxes.  

Assessing your financial standing and profitability 

Banks, investors, lenders, and other stakeholders require information regarding income and expenditure for past years, current cash flows, profit & loss, balance sheet, and other reports.  

Accounting assists the entrepreneur in generating such insightful reports to be used to showcase the financial standing of the business and lure them to invest in their idea. Furthermore, accounting facilitates monitoring of the progress and determination of the profitability of a start-up firm to understand whether the business is prospering or failing.     


Why is accounting crucial for start-ups

Whatever your business type be, it is crucial to establish accounting best practices for your business from the beginning. Such best practices and effective accounting structures enable entities to focus on their core activities to scale up and boost productivity.

Accounting, if done accurately and timely, can lead to time saved for core business functions.


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Accounting Services

N R Doshi & Partners


NR Doshi & Partners provides accounting services to start-ups and big companies from any industry. We do financial planning based on your business model so that you can achieve your goals. Our accounting practices are compliant with domestic and international laws and policies. Our accounting services enable you to prepare budgets and forecasts, make better decisions, eliminate any legal issues, and hence, take the business forward. 



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