As a startup founder, you must’ve heard about technical debt. Generally, technical that signifies that you have written a code while emphasizing the speed and not the quality of the code means that you might have to rewrite or restructure the code after some time.
Technical debt usually accumulates in fast-growing startups where engineers are working at a breakneck pace. A future obligation is incurred where the engineers might have to revisit the code and fix it later. This means that the start-up might have to invest time and money into setting that code at a later stage. This concept is known as technical debt.
Accounting Debt vs. Technical Debt
You might be wondering why we are talking about technical debt if you are not associated with the technology startup. But I’m using this concept to explain accounting debt, which is almost identical to technical debt.
Your startup moves extremely fast with your product and the technical aspects while completely ignoring your accounting infrastructure in accounting debt.
At Intellistack, we encountered this problem a lot. A lot of startups come to us when they have gathered an abundance of accounting debt. They have a great product, and their startup is growing at a pretty fast speed, but because of their neglect towards accounting infrastructure, they have piled up a ton of accounting tasks, which will cost them more time and money.
How to Avoid Accounting Debt
Avoiding accounting debt is more accessible than preventing technical debt. Avoiding accounting debt will not only help you save a ton of money, but it will also help you save a lot of time. Since time is everything for founders, you need to follow these steps to protect yourself from accumulating accounting debt.
- Corporate Bank Account
Getting a corporate bank account is a primary step to avoid accountant debt. Since all your transactions would be done via corporate account, this will make documenting the transactions a lot easier.
- Corporate Credit Card
During our consultations with startup founders, many complain that they are unable to get a corporate account. We recommend that if they don’t have the resources to get a corporate bank account, they should opt for a corporate credit card. The motive behind opening a corporate bank account or corporate credit card is to keep track of all the transactions that are happening in the startup. Because if you don’t keep track of them, if you don’t document them properly, it takes a lot of time to get hold of all the personal transactions that accumulate into accounting debt.
- Personal Expense Documentation
Somehow, if both of the options don’t seem practical for your startup at this stage, you can start documenting the transactions from your credit card and put them into a spreadsheet or third party apps like Expensify.
- Tracking Payroll Taxes via Payroll System
If you want to stay away from accounting debt, you have to start paying your employees via a proper payroll system. Payroll systems like Rippling, Gusto, etc. can help you pay your employees because they would help you pay your employees while taking out the payroll taxes and even submitting them, which will reduce your bookkeeper’s burden.
- Filing Taxes with the help of an experienced CPA & CFO
This one is a no-brainer. You shouldn’t delay filing your taxes. An experienced CPA or fractional CFO can help you file taxes on time, giving you access to many different kinds of tax credits like the R&D tax credit. However, usually, people miss out on such rebates and credits without even realizing that this kind of mistake can easily cost them $20,000-$40,000.
- Integrate Quickbooks Online
The last tip is straightforward; all you have to do is integrate your bank account with the QBO. This helps avoid accounting debt and helps in the automation process to figure out patterns and vendors whenever you hire a professional accountant to manage your finances.
If you want to avoid accumulating accounting debt or want to fix your startup’s accounting debt issues, you can have a free consultation with an Intellistack Expert. We have an experienced team of financial experts that can help you solve, prevent accounting debt, and automate your financial infrastructure.