Seed
Bookkeeping for seed-stage startups
Seed is where informal records stop being adequate. You now have someone else's money, and they will ask how it is being spent.
Seed is where informal records stop being adequate. You now have someone else's money, and they will ask how it is being spent.
At a glance
Seed is the stage where bookkeeping stops being administrative and starts being reporting. You have taken outside money, and the people who gave it to you are entitled to know how much is left and how fast it is going.
Net burn and the runway it implies. Not revenue, not headcount — how many months of cash remain. If that number is a month stale it is not usable, because a month is a meaningful fraction of the runway itself.
Our burn rate calculator does the arithmetic, including the date you should start raising rather than the month you run out. The harder part is having books current enough to feed it.
A qualified small business can apply the federal research credit against payroll tax rather than income tax, up to $500,000 a year. That matters enormously at seed, because an income-tax credit is worth nothing to a company that owes no income tax.
Gross receipts under $5 million for the tax year, and no gross receipts before the five-year period ending with this year. Most seed companies pass both comfortably. The election has to be made on a timely-filed original return, so it cannot be picked up later on an amendment.
Our R&D credit calculator estimates it. What it cannot do is decide which of your engineering costs qualify, which is where the value actually is.
Cash basis stops telling the truth once you have contracts that bill differently from how they deliver. An annual contract paid upfront looks like a spectacular month on cash and a normal one on accrual, and the accrual view is the one that predicts next month.
A monthly close with a named accountant, investor-ready reporting, burn and runway current rather than lagging, and the R&D credit substantiated properly rather than estimated optimistically.