
Ask HN: How should my startup handle accounting? - computerlab
Specifically for our case, we&#x27;re a devshop &#x2F; consultantcy founded in early 2016, planning to file taxes as an LLC in New York. We&#x27;re keeping records in Xero, and don&#x27;t have payroll, but we do have a few 1099 subcontractors. We&#x27;re also interested in general financial advice going forward.
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patio11
None of the following is accounting advice, but:

Start moving all of your non-1099/etc expenses on to one or a small set of
corporate cards. (They can be in your own name or that of the LLC; the main
requirement is that they not have personal expenses on them. This is to
simplify bookkeeping.) If your contractors routinely need reimbursements for
e.g. purchasing SaaS to do their jobs, start using Expensify. Your goals here
are a) collecting a receipt for everything in a fashion organized well enough
to find any receipt the IRS queries you about and b) not failing to record any
business expense. The impact of failing to record a business expense is you,
personally, pay your marginal income tax rate on that expense -- that can be a
painful hit. (Your marginal rate will plausibly be 50%+ when you add self-
employment tax, NY income tax, and US income tax, so missing a $2k hotel stay
is a $1k error for want of a minute worth of data entry.)

Get an accountant, preferably one who works with other services firms (working
with other devshops or design firms is a bonus but I'd not consider it a
requirement). The first thing you'll ask the accountant to review is whether
your 1099s will pass muster as 1099s. Major recurring questions to ask
accountants include "Does our cash flow support adding a new team member right
now?" and "How much should we have sitting in the bank ready for next April
when taxes are due?"

Some of the financial advice I'd give sounds less like financing and more like
proper business management of a consultancy, like "charge more", "make sure
you're charging clients at least 3X what you're paying your contractors",
"aggressively solicit referrals and follow-on work", "offer clients a monthly
retainer agreement to maintain their projects at a slight discount to your day
rate on a use-it-or-lose-it-basis; this will give your shop some recurring
revenue to smooth out consulting cashflow swings", and "build pipeline, build
pipeline, build pipeline."

See also this comment, which I think might be the most instrumentally useful
one on HN:
[https://news.ycombinator.com/item?id=4247615](https://news.ycombinator.com/item?id=4247615)

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computerlab
Thank you, this post and the linked post are very helpful, and confirm a lot
of thoughts. I didn't think about the 1099s passing muster, will definitely
look into that. One challenge I've had is that there doesn't seem to be a good
way to search for accountants. Is there something like Zocdoc for accountants?

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brudgers
Hiring an accountant would be the reasonable step.

Good luck.

