In response to this question on Quora: ”Our startup just got a $100,000 check from an angel investor and it is in the bank account. How do I keep track of expenses, pay employees, keep my books for tax purposes, etc.? I’m totally lost here. We know how to code and how to sell but we have never kept books before. How do I pay the payroll and Medicare tax? How do I do tax withholding? Where do I withhold it to? I’m totally confused and terrified.”
Focus on your product, not on finances.
Here is a full minimum solution that will take you through until the next round of financing or until your startup goes to a dead pool. I have personally used all of the services below.
Setup and use the following services:
1. Use credit or debit cards (NOT cash) for most, if not all, transactions. Your bank (and credit card) records will be downloadable into Quickbooks and no data entry will be needed.
2. Create one Email box for all digital receipts and email all receipts there, also tie your payroll service to that email (see below for payroll service) e.g. firstname.lastname@example.org (use gmail to handle your emails). Have your team members forward all receipts to that email address.
3. Mail all of your paper receipts and upload all digital receipts to Shoeboxed
- put paper receipts in a box at the office and/or
- email digital receipts to the email address in #2
Once a month mail the receipts from the box to Shoeboxed.
I have been using Paycycle (now owned by Intuit) for 7 years — the service is excellent, all is fully automated, pay stubs and tax filings are all online.
Or, let Intuit Full Service Payroll do it all for you – they will file all necessary taxes and forms.
4.a. Consider hiring your first developers/team as contractors and once you have a POC (proof of concept) within $100k, then make them employees. This will free you from the potential payroll headaches.
5. Use getharvest.com if you need time log from your employees and/or if you need to bill your customers for the time spent on their project.
Later on, you can hire an accountant for a week, and she/he can setup Quickbooks for you based on input from:
1) Your bank records — fully downloadable into Quickbooks
2) PayCycle — fully downloadable and does not duplicate the transactions from the bank
3) Shoeboxed — to substantiate the transactions in the bank
$100k is a small enough amount that a decent accountant should be able to to handle setting up Quickbooks based on input from the services above within $1-2k if not less.
Watch the founder of Mint.com, Aaron Patzer, talk about how he handled operations while building his startup — he virtually didn’t handle any of the finances/taxes until he had a finished product and took care of it all after the fact. He is an exception, but worth keeping in mind.
Good luck with the product development!
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