Startup accounting

Startup accounting that's ready
before the term sheet.

Most startups don't have an accounting problem until diligence finds one: cash-basis books, a SAFE recorded as income, deferred revenue nobody tracked. We set the books up the way an investor, an auditor and the IRS will read them, then close them every month so the numbers are current whenever someone asks.

Book a scope call

What a startup needs, stage by stage

The accounting work changes as the company does. This is the order it usually arrives in.

Formation and the first raise: A Delaware C corporation, 83(b) elections filed within 30 days of a restricted stock grant, SAFEs and notes booked as their terms require, and a clean cap table.
First revenue: Accrual books instead of cash, a chart of accounts built for a subscription business, billing-platform payouts reconciled to invoices, and deferred revenue tracked from the first annual contract.
Building the team: Payroll registered in each state you hire in, contractor 1099s, stock-based compensation under ASC 718, and budget vs actuals that shows what each hire does to runway.
The priced round and after: GAAP financials a diligence team can tie out, a data room, audit readiness and a board pack every month.

Delaware franchise tax and annual report every March
Sales tax nexus checked as revenue spreads across states
Income tax returns prepared from the closed books
409A support when the board grants options

What the month-end close covers

Bank, card, payroll and billing-platform reconciliations, tied to statements
Revenue recognized under ASC 606, with a deferred revenue roll-forward
Accruals and prepaids posted, so expenses land in the month they belong to
Payroll, benefits and stock-based compensation entries
Every balance sheet account reconciled, with support
A flux review: what moved against last month and budget, and why
GAAP accrual financial statements: P&L, balance sheet and cash flow
ARR, burn and runway reported next to the GAAP numbers

The close runs on a set calendar with a checklist and a reviewer, so the numbers come out the same way every time.

Questions founders ask

Does a startup need accrual accounting?

If you sell subscriptions, raise venture money or expect an audit, yes. Cash-basis books overstate revenue in the month an annual contract is paid and hide what you owe. GAAP requires accrual, and investors and auditors work from it.

When should a startup switch from cash to accrual?

Before the first annual contract or the first priced round, whichever comes first. Converting later means restating prior months, which takes longer than starting on accrual.

How is a SAFE recorded?

Never as revenue. Depending on its terms, a SAFE is classified as a liability under ASC 480 or as equity. We read the instrument, book it the way its terms require and carry it through conversion at the priced round.

What does a month-end close include?

Reconciling every cash, card and billing account, recognizing revenue and deferred revenue, posting accruals, prepaids and payroll, reconciling the balance sheet, reviewing variances and issuing financial statements. A month is closed when every balance has support and a reviewer has signed off.

From the library

More for SaaS and AI founders

Fractional CFO: Forecast, burn and runway, board and investor reporting, unit economics and funding readiness.
SaaS bookkeeping: GAAP books on accrual, automated reconciliations, deferred revenue right, closed every month.
Tax preparation: Federal and state returns, Delaware franchise tax, the R&D credit and sales tax nexus.
Accounting for AI companies: Inference and compute in COGS, cloud and GPU credits tracked, usage- and credit-based pricing under ASC 606, and the R&D credit on model work.
R&D tax credit: The §41 credit studied, documented and claimed, the payroll tax election for young companies, and §174A on the return.