The Startup Checklist

12Select an Accountant and an Accounting System

Keeping track of the money coming in and out of your startup is simultaneously a boring, painful chore most entrepreneurs would rather avoid . . . and a scary, reality-forcing discipline that most entrepreneurs would rather ignore. Which are, of course, two of the chief reasons that it has to be done right from the beginning. More startups fail because they run out of capital than for almost any other reason; unless you manage your money correctly, you are setting yourself up to go over the proverbial cliff.

In this chapter, I'll give you the basics you need to know about business finance, advice on how to find the right accountant, and pointers to cost-effective online accounting systems that will make your life easier.

Business Finance 101

Let's start with some fundamental terms and concepts.

Profit and How It Is Measured

Regardless of how big or small a company is or how it is structured, it has one or more owners who own the company's stock.

Some, all, or none of those owners may work for the company. But it is crucial to understand that ownership of a company is a completely separate thing from working for a company.

The sum of all the money received from sales of products or services (known as gross revenues) minus the sum of all money spent on earning that revenue (total expenses) = net income . . . another way of saying profit.

Your business's net income can also be expressed as a percentage of gross revenues. The resulting ...