Startups Who are GAAP Compliant are More Attractive to Investors

No matter what stage a startup is at, it is never too early to start thinking about GAAP revenue recognition compliance. Being GAAP-compliant means accounting on the full accrual method, in accordance with accounting rules generally accepted. Due to founders being focused on sales, early stage startups often take shortcuts or compromise on what they consider to be less important areas. Improper accounting can lead to major problems for future growth. GAAP-compliant financial statements provide essential insight into the inner workings of your company. From revenue to pricing, GAAP financial statements give you a clear view into what’s working and how. GAAP compliance works to guarantee your company has transparent financials that will help to make informed decisions for your company. Financial statements are utilized in everything from obtaining business credit to vendor negotiations. Financial statements prepared in accordance with GAAP can lead to better vendor terms and lower interest rates on bank loans. Properly prepared financial statements will also provide managers with the data they need to grow their business.

A startup is much more attractive to investors if it can show it is compliant with GAAP. GAAP compliance aids in the valuation of a company, if the accounting books are properly kept, a valuation can be determined based off the numbers. Creating GAAP compliant financial statements requires diligent effort, GAAP compliance shows the company is organized and disciplined. Investors believe the effort that is put into keeping proper accounting records is a sign of good management.

For more information on being GAAP-compliant, contact an Anders advisor.