Accounting for startups is simpler than the word suggests and less optional than founders hope: a ledger that every dollar in and out lands in, payroll booked as the loaded cost rather than the salary line, the month closed while the bank statement still means something, and one figure read at the end of each close, the months of runway left. The firm, if there is one, signs the filings; the founder or the first finance hire keeps the record the firm signs from. The free payroll for startups calculator on this site is the runway half of that record.
The ledger starts at the bank feed, not the spreadsheet
Connect the bank and the corporate card to accounting software on the day the company account opens, and every transaction has a home before anyone forgets what it was. Categorise weekly, not at year end; a founder who reconciles three hundred transactions in December categorises half of them wrong. The chart of accounts can be short: revenue, payroll, contractors, software, rent, marketing, professional fees, and a line for whatever the company actually spends on.
Payroll is the biggest line and the easiest to book wrong
The salary is not the cost. The employer's share of Social Security and Medicare, the federal and state unemployment taxes, the benefits and the payroll provider's fee all belong on the payroll line, and the payroll provider's journal should land in the ledger with those parts separated. A startup that books salaries alone under-reads its burn by the whole employer load and over-reads its runway by the same margin.
Close the month and read the runway
A month is closed when the bank balance agrees with the ledger, the payroll journal is in, the invoices sent and received are recorded, and the profit and loss for the month is a number rather than an estimate. Then read the runway: cash over net burn. The calculator on this site works it from the headcount, the salaries, the other spend, the revenue and the cash; Pro keeps each month's figure as the record the board asks for.
Questions people ask about accounting for startups
Does a startup need an accountant from day one?
It needs a ledger from day one and a firm by the first tax filing. Software keeps the ledger from the bank feed; the firm signs the return and the judgement calls, and reads the record the founder kept.
What is the most common accounting mistake startups make?
Booking payroll as salaries alone, without the employer taxes and benefits on top, so the burn is under-read and the runway over-read until the bank statement corrects it.
How often should a startup close its books?
Monthly. A monthly close is what makes the burn and the runway a number the board can trust; a quarterly or annual close is a reconstruction.