Becoming a Real Business: Accounting, Taxes, and Automation

25 June 2022 · Updated 12 August 2022

Founders often get so overwhelmed finding funding sources and attracting the first few customers that they neglect actually running their business. Becoming a real business opens a whole new set of challenges, from understanding the power of automation to tackling the accounting function and tax time. 

Over the past decade, I’ve seen founders fall short not because they don’t have a great business idea, but due to shortcomings in business basics. Whether you are a new entrepreneur or a seasoned vet, taking on the next steps once your business exits the startup face is critical to ensure success for years to come. 

Is your business even real?

So, what really determines if you are a real business? There are numerous ways to tell if you have a business that can succeed long-term; however, navigating the “imposter syndrome” is often difficult for many founders. You may find yourself saying:

  • Real businesses have a business plan and I’m just winging it.
  • Real businesses have set procedures that are monitored, but my business is focusing on other things.
  • Investors don’t care about another startup. I’m sure my idea has already been taken.

These phrases are common for new entrepreneurs, minority groups and underrepresented backgrounds. Nevertheless, all entrepreneurs face imposter syndrome at some point. There are no pre-defined criteria that you must meet to become a real business. 

If you're earning money with your SaaS — congratulations you're a real business! Now we just need to make sure it stays like that and doesn't get crushed by the boring accounting stuff.

Long-term Thinking

Founders often go through the startup process a few different times before they land on their “aha.” The gut feeling you get should not be overlooked as qualitative information gives key insight into business viability. Ask yourself the following questions:

  • Is my business satisfying a market need?
  • Is there consumer demand for my product or service?
  • Am I dedicated to the long-term success of my business?

Although these questions don’t rely on cold hard statistics, they still shed light on the outlook of your business. Dedication and persistence can carry more weight compared to data on a spreadsheet when it comes to developing a real business. Odds are you know your business best, so trust your gut!

The data doesn’t lie

When qualitative factors aren’t enough to determine the viability of your business, turn to the quantitative data. Ratios and other financial metrics give an avenue of comparison to other companies in the same industry. How does your business compare? Industry guidelines I recommend include IBISWorld and RMAU

Gauging the financial metrics of businesses in your industry can serve as a roadmap as your business enters the “real” phase. Of course, it will be difficult for founders who operate in a new industry to find accurate comparisons. If it’s never been done before, who’s to stay your business isn’t real?

Boring stuff is learnable

Once you've kicked off your SaaS product, it's time to learn the boring stuff. The good news is that the fundamentals of running a real business aren’t gatekept. There is an abundance of resources on the internet, including consultants, that are ready to help you tackle the next step on your journey. 

The founder industry as a whole can benefit from access to the basics of running a successful business, which is why I’m passionate about sharing my firsthand insight on the topics you are likely to see when your business begins the transition from the startup phase to the "real business" phase. 

Tackling the accounting function

Enter the not so fun part of running a business: accounting. Accounting is an acquired taste to say the least, which is supported by the fact that 37% of businesses outsource their accounting function while another 62% have a dedicated in-house team. 

Despite the growing number of founders passing the baton off to an expert, running your own accounting function is not unmanageable. Understanding the main concepts and investing in a software are great first steps when looking to tackle the accounting function yourself. 

My personal opinion — the more you delegate this kind of stuff to others the better, but if you're tight on the budget, you can do it yourself during the weekends.

What it feels like when you're trying to balance active and passive assets

The difference between bookkeeping and accounting

Bookkeeping is the process of recording transactions in your company while accounting focuses on the bigger picture of business financial health. These two areas used to have clear distinctions; however, technology has begun comingling the two functions. 

You don’t need to be an accountant to do your business’s bookkeeping. In fact, understanding how to use technology is more important these days with software programs taking on a brunt of the workload. Most software programs integrate with your bank and credit card accounts, automatically downloading all transactions. This saves you hours of data entry.

On the other hand, the actual accounting for your business is more subjective, calling on you to interpret the data and financial reports. How does your gross profit compare to prior periods? Do you need to write off accounts receivable balances? These questions rely on your understanding of the business to make the right decision. 

Bookkeeping best practices

Bookkeeping focuses on maintaining the general ledger, which hosts all your income statement and balance sheet accounts. The income statement is all the money you generate and spend while the balance sheet is the money you own and owe. 

Every transaction your business has will be run through at least of the accounts on your general ledger. The amount should always hit your checking account. As a result, have a separate bank account solely for the purpose of business transactions. I’ve seen too many founders comingle business and personal expenses, landing them in a tricky situation. 

The recommended time frame for completing bookkeeping procedures will depend on your transaction level. A business that only incurs ten transactions a month won’t need to perform procedures at the same rate as a business that generates hundreds each month. At a minimum, you should be reconciling all bank and credit card accounts. This provides safeguards that reduce the risk of fraud and asset misappropriation in your business. 

However, founders whose business is rapidly generating sales and expenses should consider reviewing transactions on a weekly basis. Take a look at your business and see what makes the most sense for you. Then, as you begin going through bookkeeping procedures, start making a list of general practices you and future employees should abide by. 

Accounting best practices

Proper accounting controls rely on regular and accurate bookkeeping. Accounting takes the information derived from bookkeeping and builds off it, providing valuable insight on profitability and financial health. Bad data in equals bad data out. Worst case scenario for founders is making a business decision based on inaccurate data.

Similar to bookkeeping, accounting needs to be completed on a regular basis. For founders, accounting may need to be completed more regularly when first entering the real business phase as new challenges and opportunities pop up. You need to be sure that you're in the green, before you decide to invest into some new marketing venture.

Each month, after the reconciliations are complete, pull financial reports to gauge where your business stands. At a minimum, review the income statement, balance sheet, accounts receivable aging, and accounts payable aging. Check over each of these statements for obvious errors or misclassifications before you begin a detailed analysis. 

Using the information found on these reports, calculate key financial metrics including:

  • Breakeven point = fixed costs / (unit selling price – variable costs)
  • Gross profit percentage = (revenue - cost of goods sold) / revenue
  • Net profit percentage = (revenue – expenses) / revenue

Other indicators, such as churn rate and cash flow, should be analyzed as well. When you notice something off, you can easily implement policies to change the trajectory of the next month. Without regular accounting policies, errors and areas of improvement could go undetected for months. 

Every indie founder should always have three numbers inside his head — the revenue they're making per month, the margin that they have and the churn rate.

Some considerations

The basic elements of bookkeeping and accounting provide a baseline of policies founders should follow; however, there are other considerations as well. 

Cash vs accrual

One of the perks of being a founder is the ability to select your accounting method. Yes, there are different methods to choose from. Cash accounting records transactions based on when money is received or paid while accrual accounting works based on obligations being fulfilled. Of course, there are other methods, but your business most likely won’t need to learn about those unless you are in the construction industry. 

Cash basis accounting is simpler since no adjustments are needed to accrue for anything. Despite the ease, many founders find that cash accounting does not show potential investors and lenders the true picture of financial health, which is where accrual accounting comes in. The extra few hours it takes each month to track accruals gives founders transparency, leading to added ease in growing. 

Separating business and personal transactions

Who likes being sued? None of you should have your hands raised. Lawsuits are inevitable, especially for founders who are selling new products. Finding the special formula takes time with trial and error. 

Proper bookkeeping and accounting aim to separate business and personal transactions, safeguarding your personal assets when you get served. Founders often neglect to implement the proper safeguards when they make the transition from the startup phase into a real business, creating added liability risk. 

Receipt retention

Do businesses still keep receipts? Simply put, yes. Whether receipts are retained as an electronic copy or stored away in a box, they should be kept for the time period that regulatory agencies can audit your financial and tax returns, which is generally 3-4 years. 

As pesky as this may seem, digging through files to find that one receipt substantiating your expense can save you a hefty tax bill with fines and penalties. Implement good receipt retention now to avoid issues down the road. 

Don’t dread tax time

The new year usually brings on new goals and a positive outlook, but can founders agree? Established business owners and founders all face a similar lurking beast: tax time. Why is this the case? Simply put, inexperience and poor planning throughout the year. 

Tax time shouldn’t be a scary time. In fact, it should just be another part of running your business. Proper accounting and bookkeeping controls in place throughout the year should make tax time a breeze; however, you do need to know some basic information, especially if this is your first filing season as a founder. 

Taxpayer ID numbers

When you start a business as a founder, you need an identification number. This is the number regulatory agencies will use to identify you and will be found on your tax return. There are three main types of numbers:

Social Security Number (SSN) – This number is reserved for U.S. Citizens and those who are authorized to work in the United States. All citizens will be issued a number, generally at birth, that the government uses to identify them. When your business is set up as a sole proprietorship or single-member LLC, you will use your SSN to file your business information on your individual return. Companies are excluded from obtaining this number. 

Individual Taxpayer Identification Number (ITIN) – This number is used for individuals who need to file a return in the United States, but can’t receive an SSN. Obtaining a number is not hard, but you do need to fill out Form W-7 and wait around 6 weeks. 

Employer Identification Number (EIN) – This number is issued for businesses legally registered in the United States. Only businesses can apply for and receive this number. Retaining an EIN for your business allows you to file corporate taxes and other necessary forms with the IRS and state agencies, such as sales tax remittances. Additionally, having an EIN for your business adds to liability protection when your business and personal assets aren’t completely separate. 

Corporate taxes

All businesses will need to report income or loss on the tax return, whether that be on the individual or corporate return. Let’s go into different filing requirements based on your entity selection. 

  • Sole Proprietorships – Form 1040, Schedule C
  • Single-Member Limited Liability Company – Form 1040, Schedule C
  • Multi-Member Limited Liability Company – Form 1065
  • Limited Liability Partnership – Form 1065
  • Partnership – Form 1065
  • S-Corporation – Form 1120S
  • C-Corporation – Form 1120
  • Trust – Form 1041
  • Nonprofit – Form 990

Form 1040 has an April 15th tax deadline each year while most of the business returns are due March 15th. A six-month extension can be requested for each return type by filling out and submitting an extension request; however, all tax expected to be owed is still due by the original filing deadline. 

Sales tax

There are a plethora of other taxes your business may be subject to besides regular income tax. One of the more common items is sales tax. Businesses are required to collect taxes based on guidelines imposed by state and local jurisdictions. Tax needs to be collected in every jurisdiction your business has a transaction or a nexus connection. Nexus is a fancy word for connections, which happens between your business and the state agency.  

For online based businesses, such as an e-commerce store, nexus is generally the location the goods are stored. Due to the rapid increase in online businesses, state agencies have ramped up collection efforts in an attempt to trigger nexus in more businesses. As a result, it is important to stay informed on the latest changes to ensure compliance with state agencies. 

Sales tax forms are different for each state government, which can be found on their website. Additionally, these forms are required to be submitted on a schedule determined by your sales amount. Businesses commonly need to file these returns monthly; however, some states may impose a quarterly or annual filing requirement. 

The importance of tax planning

Tax planning is a vital component of preparing your business for the upcoming tax season. Tax planning involves finding legal ways to reduce or defer your tax obligations. Remember that tax avoidance is a legal strategy while tax evasion is illegal and punishable with fines and even jail time. 

The tax strategies you are able to implement will vary based on your business structure. Nevertheless, common strategies to consider include:

  • Section 179/Bonus Depreciation – Allows for immediate expensing of qualifying fixed assets placed in service during the year. 
  • Switching accounting methods – The switch from accrual to cash or visa versa can result in lower taxable income.
  • Credits – Credits for increasing research activities or manufacturing expenses should be considered. 
  • Deductions – Offering employee benefits, travel, meals, and paying employees are valid business deductions. 

Startups will have various other strategies to consider, such as buying a building vs renting, paying employees, and taking a salary vs distribution, making it important to contact a qualified consultant who is well versed on tax law. 

The more automation the better?

It’s no secret that technology is intertwined into our daily lives from the minute we wake up to the moment we fall asleep. Founders should leverage technology to improve efficiency and productivity not only in physical operations, but also in their accounting and tax functions. 


The first area founders can automate is their marketing. The switch from marketing to investors to marketing to consumers can be drastic, calling on the need to rework your entire advertising strategy. Automation in marketing includes every detail, from quickly responding to customer requests to regular postings on social media. The more interactive you are with potential customers, the more likely you will convert them into sales. I believe the following tasks can easily be automated in your business:

  • Lead generation – Email follow ups can nudge an individual to set up a demo or consultation with a real person. 
  • Social media posting – Most social media platforms, such as Facebook offer personalized ad solutions that target customers with a higher potential of purchasing your product or service. 
  • Customer service – Robots have the ability to answer basic customer questions on products, services, and policies, allowing you to save on wages, but still meet customer demand. 
  • Social media monitoring – Tools, like Tweetdeck and Nuvi, track your social media presence, giving you insight on where changes may be needed. 


I highly suggest automating your accounting function as well. We touched on seamless integration from your bank accounts to your accounting software. This is a key automation for reducing the time needed on data entry. 

Additionally, consider automating your invoice function. When a customer places an order, they should receive an email confirmation outlining key details without any work on your end. This gives your customers added peace of mind and critical information about their order. 

Next Steps

We’ve covered a lot in this segment of the Founder’s Guide. Reflect on your business. How can you apply the information covered to your operations?

If you just want a tl;dr — don't ignore the boring parts of the business, otherwise they will come and bite you in the ass.

Consult Tax Experts, Law Experts, Accounting Pros — do what they say and plan ahead, that's what real businesses are doing.

  • Yash

    Proper management of accounting and tax functions is essential for any startup aiming for long-term sustainability. My advice is to invest in reliable accounting software early on to streamline financial tracking and compliance. Efficient systems established from the get-go can significantly reduce future stress and provide valuable insights for informed decision-making, ultimately contributing to the business’s success.