Startup Accountant or Suburban Accountant?


It’s a fact of life that many founders simply reach out for someone in their limited network or “down the road” when it comes to their finances.

It’s a fact of life that many founders simply reach out for someone in their limited network or “down the road” when it comes to their finances.

The “suburban accountant” may be fine as far a plain personal tax return goes but when addressing the complexities of scaling an innovative business – a specialist startup accounting firm already in the space is likely to be the better route.

There are numerous areas in which a startup-savvy accountant can be a game changer in taking your venture to a new level.

Better access to government grants.

Ever been told ‘no’ to a government grant because you missed something along the way?

Too many times, startups have come us without the right corporate setup or having spent their funds incorrectly. Unfortunately, retrospective work is not often possible.

Government grants, whilst being a lifesaver for many tech ventures, have strict guidelines in place to ensure that funds are issued in a very direct manner.

Most accountants, lawyers and low-cost company setup websites, are not aware of the detail behind how these grants work. They can therefore often overlook critical pieces of the puzzle along the way, which can subsequently affect your eligibility for grants or limit the maximum amount you may be entitled to claim under a grant scheme. Examples of key requirements that are often overlooked include the corporate structure, maintaining the right documentation, the timing and recipients of expenditure, IP and share ownership, as well as compliance aspects for future claims.

A firm that can help prepare R&D Tax Incentive claims, as well as other great State and Federal grants is a good bet to help optimize your access to government grants across the board.

Better management around cash flow

After setting up the company & accounting file for a client and recouping a fee along the way, many accountants leave the business owner to their own devices.

The next few touchpoints are generally about requesting information for the tax return or BAS, when the damage has been already been done and unexpected bills like income tax, GST, CGT, super (and even missed government grants) are locked in. What happened in between?

Understanding cash flow forecasts and financial modelling to provide foresight for the tax outgoings are critical to growing a business effectively. Yet these skills are rarely taught at university or as part of the post graduate courses that most good accountants sign up for.

In startup world, having financial models and projected financial performance can also be the difference between a funded startup and one that goes without.

Future stakeholders (investors or business partners) want to know the projected cash flow incomings or outgoings of the business so they can see whether their investment will get diluted further down the track, whether the current model is profitable and much more.

Because of the importance behind a cash flow forecast – particularly for innovative businesses with a few months runway in the bank, getting regular reports and being able to plot out the cash flow effects of different business avenues is crucial.

Better access to the startup tax concessions

    Startups are potentially able to access a select range of unique tax concessions, such as those below, which are often not well understood (or known of) by more traditional firms.

  • ESIC – this makes the investment case in startups much more attractive to a discerning investor, including 20% tax offsets and potentially nil CGT for the first ten years. However, there are complex red tape requirements for both the startup and investor to access these, including a very unforgiving annual deadline and it’s important that you have an experienced tax navigator assisting you with this process, particularly with the private rulings.
  • ESS for Startups – Startups are always changing up their shareholdings and cap table, particularly with early employees who often get shares or options as part of their packages. No founder wants to give out tax liabilities to their employees so it’s important that founders seek the correct expertise here.
  • SBCGT rules & Restructure Rollovers – when exiting or shuffling around a corporate structure, you want to ensure that your structure takes into account your long term objectives, protects your IP and mitigates business risk. Rather than triggering and paying for CGT, an experienced startup tax advisor may be able to help you structure your entity’s movements in the best tax effective manner in line with legislation.

Financial modelling expertise

This is not usually the domain of accountants, usually requiring some background in actuarial studies, M&A or investment banking.

However to confidently pass most due diligence checks with savvy investors, you will have to present a fairly sensible financial model. This will help illustrate your financial nous as well as the profitability and growth aspects of your venture.

Look to partner with financial modelling experts whom have produced robust financial models for ventures that have raised millions. Their perspective in terms of producing what your stakeholders want to see can be invaluable.

Better network of talent & expertise

The startup community is one of the best communities around, where talent is found at its prime and most agile. But the wide diversity of people available can be daunting for those new rookies to the scene.

What about hiring the best UX/UI talents or freelancers for your project. Or where is the right investor for your venture? Or best people to assist with your pitch deck?

Sometimes it’s not what you know, but who you know that matters. Advisors connected with the startup scene can be well placed to suggest which connections you should pursue.

Better management of the capital raising process

Most accountants go cross-eyed when you mention that your potential investors want a ‘data room’ ready for review.

The capital raising process is often a detailed, drawn-out process and can leave the uninitiated with a whole raft of new terms & concepts to master.

Complex investment instruments like SAFE notes or redeemable preference shares require expertise to analyse & employ effectively. Sometimes your investors or VC will propose a structure that you may not have encountered before but require expertise to negotiate through effectively & quickly.

Seasoned players in the field, are often called to view term papers from a financial perspective and usually construct detailed cap tables to help founders & investors alike to analyse the effects of future investment.

Corporate secretarial experts can liaise with ASIC and prepare associated documentation such as share certificates or director’s resolutions to have the administrative side of the deal organised in confidence.

If you’re the founder of an innovative startup then its key to align yourself with advisors who understand the unique flow & landscape of the industry to optimize your financial outcomes.

Accounting systems / processes

    The accounting system is at the core of business operations and will likely be integrated with numerous other functions such as front-end sales capture, invoicing and revenue collection, payments, business intelligence, cash flow management and so on. It’s an essential feature of business infrastructure which cannot be overlooked. A few things to think about;

  • Is your accounting system cloud-based?
  • Does your accounting system address any unusual or complicated aspects of the business – for example multi-currency accounting, stock management, leases etc?
  • Does your accounting system attract a strong ecosystem of complementary add–ons? eg business intelligence, point of sale, inventory, CRM.
  • Will your accounting system support growth in volumes and users?

The role of the CFO, particularly in startups and high growth businesses, is broad ranging, challenging and complex. We hope this short guide helps. Contact us for more information.

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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech & online companies.

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