Most business owners come up against a difficult accounting question at some point in their early days. Tech businesses are no different than those found in other industries, but their need for a specific type of accounting is significantly different. They will need the assistance of accountants who are experienced in this industry.
What must be different about their accounting that requires such specialized care? Find out more about how your tech business could benefit from specialized accounting here.
What Makes Tech Businesses Different?
Many business owners have likely already come to the conclusion that their tech business boasts some large differences when compared to retail outlets and other industries. The question that many are led to ask is why their company feels so different from those in other industries. Every aspect of the tech industry sets it apart from other business models.
Technology is all about disruption of the status quo. Tech businesses are more focused on how they can implement new technology to improve their overall business. As a result, there’s no set standard for how they do things. In a tech business, systems and processes change rapidly as they devise new and improved ways of doing things.
At the heart of innovation is the need for change, and this is why tech businesses require different account services than other industries.
Different Financial Management Needs
When you’re searching for accounting for tech companies in Winnipeg, you might be wondering exactly what to look for and why. The answer lies in the business model that most tech companies adhere to. Tech businesses are always making small changes that they feel will benefit the bottom line, such as trying out a new website, developing a mobile app, or organizing a new pricing structure.
For most other industries, the business model is quite straightforward: A company will assess the resources it has in comparison to the demand for a solution to a problem from the market. The cause and effect are easy to see, and it’s easier for your accountant to plan for.
Developing a Balance Sheet
One of the most important documents that your accountant may come up with is a balance sheet. This financial document reports physical assets that are owned by the company within company confines. This can be extremely difficult to calculate for tech companies that feature more intangible assets.
Tech companies might have a harder time coming up with this type of document due to the way they invest in new product development. On the front-end, they must invest a lot of money into the development of new software, products, and more.
At the same time, they are not making much money on the sale of this product, if they are making any at all. This reflects in the balance sheet, showing that the company is spending more than it is currently making. You need an accountant who understands this differentiation in the market for your tech business.
Accounting for Intangible Assets
A tech business that is creating software and other intangible products will need a special type of accountant to keep tabs on its intangible assets. Your accountant must have expert-level knowledge of how intangible assets play out to make the biggest impact on financial statements.
They will need to know how a tech company focuses on key areas such as R&D, branding, peer and supplier networks, customer relationships, and more.
Research and development of new products are essential for the balance sheet. As these new items are being developed, an accountant must factor them into the balance sheet as an expense or a loss. There’s no way to incorporate the potential for future revenue until the product launches and finds its footing in the marketplace.
An experienced accountant will know how to capitalize on the costs as development expenditure. At the same time, they can also create an asset that will be amortized over its life. This can improve the reported figures for a growing tech company, making your business more appealing to prospective investors.
It likely comes as no surprise that running a tech company can be costly, especially as the business is trying to get off the ground. It’s essential to have an accountant who knows the ins and outs of the industry and how to manage your financial reports to have the maximum impact. After all, it’s these documents that investors will be studying when determining whether they want to invest in your business or not.
Business owners and leaders may not have lots of time to sit and ponder their books or know how to rearrange their financial statements accordingly. This is where it becomes important to bring on an accountant who has the company’s needs in mind.
There are lots of options for how financial documents can be organized. If you don’t have an experienced accountant on your team, then you may need to hire an outside company to take a look at your books and explain your options to you. This can have a huge impact on the bottom line of your business and how much money you are able to collect from investors.
Ultimately, collecting money from investors is how many tech companies stay operational in the early days before their product goes live. You can’t underestimate the importance of keeping financial documents organized for investors to explore before they make an investment decision.
Hiring a Professional Accounting Firm
If you know that accounting for a new startup tech company isn’t something you’re knowledgeable about, then it may be time to look at hiring an accounting firm in Winnipeg. Look for accounting firms that have significant experience with helping tech companies develop their financial documents.
Compass Accounting has the skill and experience you need to manage your tech business more effectively. Give us a call to see how we can help your tech business starting today!