Finding the Right Accounting Solution for My Startup

Luke Frye, CPA

Many first-time founders struggle to find the right accounting software for their startups. It isn't just about tax compliance—it's about finding a tool that truly supports your financial management needs. 

Your startup needs software that integrates with your existing tools and scales with you. It should be intuitive and easy to use, even for founders without an accounting background. 

Your focus should be on building your company, not getting lost in financial details.

How do you choose the right accounting software as a startup? 

Ask yourself these five questions to make sure your software has the features you need.

  1. Do you plan to raise capital?

If the answer is yes, you need both cash and accrual accounting. Accrual accounting is non-negotiable for providing the financial reporting investors demand.

Puzzle gives you built-in accrual and cash accounting, saving you from the manual, expensive, and slow combo of Quickbooks + bookkeepers + spreadsheets. Another big risk is revenue recognition, a critical part of financial reporting that is not fully handled by Quickbooks, Xero, Bench, Digits, Finta, or other accounting software often marketed to startups.

With Puzzle, founders don't have to spend up to 6 months preparing their financials for fundraising. Additionally, you're getting integrated revenue recognition and payroll features, ensuring compliance with tax regulations and giving you a complete picture of your financial health.

  1. Is your business growing fast or is your market changing quickly?

Trust me, you will want daily drafted financials with Puzzle. Quickbooks, and bookkeepers who rely on it, generate summary financial statements once a month, which suits slow-growing, stable companies. But when you're in the fast lane, you need real-time insights for effective financial planning. 

Puzzle's accounting software is built for speed, with the scalability and features to keep pace with rapid changes. Ask yourself this: how many successful founders don't think about their budget on a daily, weekly, or monthly basis? 

  1. Do you want your bookkeeper to have AI-embedded software overseeing their work for accuracy?

QuickBooks gives your bookkeeper ultimate flexibility, much like a spreadsheet. This means they can do anything, including accidentally making mistakes. Puzzle’s accounting software uses AI to review their work, tagging and identifying common mistakes before they become a problem. Plus, it embeds accrual schedules and pulls data directly from the source, so there's no need for the copying and pasting that often leads to errors. 

If you're a startup looking for accuracy, efficiency, and reliable customer support, Puzzle is the robust option you need.

  1. Do you want to understand your financial health and business drivers?

Puzzle's accounting software is the key to unlocking those insights. It lets you dive deep into your financials, from high-level statements and metrics all the way down to individual transactions. You can see who spent the money or which customer paid you. This level of detail is crucial for businesses to understand their financial health and key business drivers.

Puzzle makes it easy to track expenses, monitor cash flow, and analyze revenue streams. Plus, you get access to advanced features for financial management that'll make your life as a founder so much easier.

Founders, you need these insights to make informed decisions about your budget and business strategies.

  1. Do you want to outsource one of the most important parts of business building - your money?

I get it, you didn't start your company to do accounting. While tempting, it also increases the risk of bankruptcy, unnecessary dilution, and seriously complicates things when it's time to sell your company in an M&A. Submitting incorrect financial statements to your investors or the IRS can even get you fired.

There are many options available but it's crucial to choose the right one for your startup. That's where Puzzle's accounting software comes in: it's got all the features you need, like expense tracking, real-time insights and payroll management, so you can keep control of your finances without the risks of outsourcing. 

Managing your money in-house with the right tools ensures accuracy and reduces risks. Trust me, you want Puzzle in your corner.

Choosing the Right Accounting Solution for Your Needs

Selecting the right accounting software and approach is crucial for your startup's success. Different solutions cater to various needs, from comprehensive accrual accounting for fast-growing businesses to simple cash accounting for smaller operations.

Let's break down the best options in each category to help you decide.

Accrual Accounting Solution

Founders need both cash and accrual accounting. Accrual accounting recognizes revenues and expenses when they are earned or incurred, regardless of when cash is exchanged. This gives you a crystal-clear picture of a company's financial health, which is crucial for startups seeking investment or preparing for future growth.

Accrual accounting helps companies meet investor expectations, ensures compliance with regulatory standards, and provides insights necessary for strategic financial planning and budget management. The right accounting software can streamline this process.

Why You Can't Afford to Ignore Accrual Accounting:

  1. Accuracy and Consistency: Accrual accounting matches revenues with related expenses, giving you a clearer picture of profitability. This is essential for evaluating business performance over specific periods. Accruals give you a consistent view of your financial health, which is a lifesaver for startups with irregular cash flows.

  2. Fundraising: Investors prefer accrual accounting because it provides a more accurate reflection of your company's financial position. Trust me, they will ask for accruals.

  3. Regulatory Compliance: Many regulatory frameworks require accrual accounting for financial reporting. If you're planning to go public or are subject to audit requirements, you need to adhere to these standards. It also helps with accurate tax reporting and avoiding penalties.

  4. Financial Planning and Management: Accrual accounting provides detailed insights into receivables and accounts payable, helping you manage your cash flow more effectively. It allows for better forecasting and budgeting, as it reflects all earned revenues and incurred expenses, giving a realistic view of the company’s financial obligations and potential income.

🏆 Winner in this category: Puzzle

Puzzle (Puzzle Bookkeeping LLC, Fondo, Burkland, Accountant, Anchor) is the only accounting software that gives you both cash and accrual accounting. It's as simple as toggling between the two in your dashboard! 

Our general ledger and financial data platform are built by finance leaders to replace outdated accounting systems, providing simultaneous cash and accrual financials, automated categorization, and robust analytics on metrics like burn, runway, ARR, and MRR​.

🥈Runner Ups: Pilot and Quickbooks, Zeni and Quickbooks.

While you can do accrual accounting by combining Pilot and Quickbooks, or Zeni and Quickbooks, they require additional manual processes and integrations for something that Puzzle offers by itself, without manual work or additional expenses. These solutions provide solid support for stable, slower-growing companies but lack the real-time automation and startup-focused metrics that Puzzle excels in.

Cash Accounting Solution

Cash accounting records transactions only when cash is exchanged, making it simpler and more intuitive for small businesses. This method is best suited for businesses with straightforward financial activities, providing clear visibility into cash flow but lacking the depth of accrual accounting.

🏆 Winner: Digits

Digits excels in cash accounting with its intuitive interface and real-time transaction tracking. Its features are designed to provide clear and straightforward financial management, making it ideal for startups that need simplicity and accuracy without the complexities of accrual accounting​.

🥈Follow-up: Bench

Bench offers a reliable cash accounting service with dedicated bookkeepers who provide personalized support. While effective, it doesn’t offer the same level of automation and real-time tracking as Digits, making it a strong but slightly less advanced option.

Solution for Solopreneurs

Solopreneurs need accounting solutions that are easy to use and tailored to their unique needs. These solutions should handle invoicing, expense tracking, and provide financial insights without overwhelming the user.

🏆 Winner: Collective

Collective provides tailored services specifically for solopreneurs, offering comprehensive support and resources to efficiently manage finances. Its platform is designed to be intuitive and user-friendly, ensuring that solopreneurs can focus on their business rather than their books​.

🥈Follow-up: Xero

Xero offers a robust platform with flexible features that can adapt to the evolving needs of solopreneurs. It excels in invoicing and expense tracking, providing a solid alternative for those needing a slightly broader toolset​.

Self-serve Solution

You shouldn’t have to hire a bookkeeper just to navigate your accounting software. Self-serve accounting solutions allow users to manage their finances with guided experiences and expert support as needed. This includes intuitive interfaces and automation to simplify financial management. 

🏆 Winner: Puzzle 

Puzzle leads in the self-serve category with its user-friendly dashboard supported by accountants and tax experts. It offers comprehensive features like real-time financial insights, automated revenue recognition, and seamless integrations, making it the best choice for startups looking for a self-serve solution that doesn’t compromise on quality​. 

Puzzle’s AI-powered workflows and smart categorization significantly reduce the manual workload, giving you a streamlined and efficient accounting process​.

🥈Follow-up: Finta and Spreadsheets

Finta provides a user-friendly platform tailored for startups. It offers essential features but may lack some of the advanced automation and support found in Puzzle. Additionally, Spreadsheets remain a versatile and customizable option for those who prefer manual control, though they require more time and expertise to manage effectively. 

Your accounting software can make or break your business. You need a solution that scales with you, provides real-time insights, and ensures accuracy.

Get Puzzle and take control of your startup's finances today! 

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Luke Frye, CPA
Recovering CPA a.k.a Head of Customer Success

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