As a startup founder, you have a lot on your plate. You're responsible for everything from product development to marketing to sales. But one area that's often overlooked is finance and accounting.
Finance and accounting are essential for the long-term success of your startup. They can help you track your cash flow, make informed financial decisions, and comply with regulations.
If you're not familiar with finance and accounting terms, it can be tough to get a handle on your business's financial health. That's why we've put together this list of 10 common finance and accounting terms every startup founder should know.
1. Closed the books
This means that we have classified and reconciled all of your transactions, booked any necessary adjustments, and are ready to sign off on the accuracy of your financial statements.
2. Cash burn
This is the amount of money your startup is spending each month. It's important to track your cash burn so that we can make sure you have enough money to fund your business until it becomes profitable.
3. Runway
This is the amount of time your startup can continue to operate before it runs out of money. It's calculated by dividing your cash on hand by your cash burn.
4. Reconciled
This means that our records match your bank statements or other financial records. It's important to reconcile your accounts regularly to ensure that our financial statements are accurate.
5. Accrual
This is an expense that we have incurred but have not yet paid. For example, if we have a bill that is due next month, we would record an accrual for that bill in the current month.
6. Great margins
This means that our costs are low in comparison to our income. High margins are a sign of a healthy business.
7. Send me the financials
This means that we want to see the startup's income statement, balance sheet, and statement of cash flows. These financial statements provide a detailed overview of the startup's financial health.
8. Revenue run rate
This is the amount of revenue that the startup is generating on a monthly basis. It's calculated by multiplying the startup's current monthly revenue by 12.
9. Audited financials
This means that the startup's financial statements have been reviewed and approved by an independent accounting firm. Audited financials are often required by investors and lenders.
10. Churn
This is the rate at which the startup is losing customers. High churn is a sign of a problem with the startup's product or service.
We hope this list of finance and accounting terms has been helpful. If you're not sure what a particular term means, be sure to look it up. Finance and accounting are essential for the success of your startup, so it's important to understand the basics.
In addition to understanding these terms, it's also important to work with an expert to manage your accounting. Fondo is an all-in-one accounting platform for startups that can help you get your books closed, taxes filed, and cash back from the IRS (the average startup gets back $21,000).
Fondo helps 600+ startups including Rewind.ai and Posthog.com with:
- Bookkeeping (Annual, Quarterly, or Monthly options)
- Startup tax preparation and filing (including Federal, State, and Delaware franchise tax filing)
- R&D Tax credit study & filing where you can get up to $500k back from the IRS
We are a great option for startups that need help with their accounting. We are affordable, reliable, and experienced.
