Looking to the future - start-up businesses
Don't forget the accounting!
Starting a new business is both exciting and challenging. Don’t derail your progress by negotiating contracts without considering the accounting outcomes which can be unexpected and in some cases unwelcome!
Consideration of the accounting outcomes in negotiating contracts can save a lot of angst in future years.
Start-ups face interesting challenges, not least of which is getting enough cash and other resources to get the business off the ground with the appropriate infrastructure, further investment to develop the company’s products and to market the company’s products to potential customers and offshore markets. Startup companies often find themselves entering into arrangements with investors, employees and suppliers that are unusual and give rise to some unexpected accounting outcomes.
Key areas to be aware of for start-ups include:
- Selecting the appropriate financial reporting framework
- Debt/equity raising
- Employee share schemes
- Paying contractors and other suppliers using shares
- Business acquisitions with earn out clauses where the vendors are subsequently employed in the business
- Revenue recognition
- Development of intellectual property
- Going concern.