Banking and accounting for tech start-ups and other early-stage companies

Banking and accounting for tech start-ups and other early-stage companies

Nothing is as important to business as solid financial health. Both your bank and your accounting firm can be critical allies in your success, so choose wisely.
Research now can prevent future headaches and reap rewards. That’s why knowing what issues need to be addressed and what questions to ask at the start is important. Foremost in mind should be this question: Will this banker or accountant be a valuable member of my team?
Here is a list of issues and questions, presented in checklist forms for easy reference. Some of these questions will be similar because the impacts your banker and accountant can have on your business are similar. Many of these same considerations can help you choose the best lawyers for your team, too.
Banking

  1. Experience. Does the bank do regular business with start-ups? Does the bank have personnel who can help with your business plan? Will they be able to enhance your network of contacts for future financing and business opportunities? Does the bank have experience with international banking, or at least access to an international network of banks?
  2. Team. Does the banker work with a team that has experience with start-ups? If so, have you met the team members? Do you like the people you’ve met? You will need to do a lot of work with these folks, so you definitely should relate with them well.
  3. Compare. Visit several different banks to get a good comparison of the offerings.
  4. Fees and Expenses. Ask for information on ALL fees that you might have to pay. There are some usual suspects, but make sure there are no hidden surprises. Compare:
    • Check fees
    • Account fees
    • Processing charges for deposits and checks, including electronic systems
    • Line of credit fees (may be included in loan package)
    • Letter of credit fees (if necessary)
  1. Loan Rates. The bank’s stated rates will undoubtedly be higher than you can negotiate, so ask what kinds of deals might be available. Include term loan rates, line-of-credit rates (also known as working capital loans), letter-of-credit rates, equipment financing rates, etc.
  2. Creativity. Banking for start-ups needs to be flexible and creative. Gauge whether you believe the bank will work with you to design a package that will creatively meet your needs.
  3. Offerings. Can the bank handle all of your anticipated needs? Such as:
    • Line of credit (aka working capital loan)
    • Term loans
    • Equipment financing
    • Electronic payment processing
    • Wire transfers
    • Online banking
    • International banking
  1. References. Ask for some references of companies like yours. Nothing speaks more loudly than a good business-to-business reference.

Accounting

  1. Experience. Does the accounting firm do regular business with start-ups, especially for tech companies? Does the firm have personnel who can help with your business plan? Will they be able to enhance your network of contacts for future financing and business opportunities? Do they have the services necessary to grow with you? Consider their experience in these areas:
    • Tax planning and preparation
    • Personal planning
    • Employee benefits
    • Business consulting
    • Valuation
    • VC & angel financing
    • Accounting software and Internet applications
    • Financial accounting (and bookkeeping)
    • IPO and public company accounting (for later on)
    • Sarbannes-Oxley (for later on)
  1. Team. Does the accountant work with a team that has experience with start-ups? If so, have you met the team members? Do you like the people you’ve met? You will need to do a lot of work with these folks, so you definitely should relate with them well. A certified public accountant should be a key player on the team.
  2. Compare. Visit several different firms to get a good comparison of the fit and the offerings.
  3. Fees and Expenses. Ask for information on ALL fees that you might have to pay. Some accountants will work on monthly retainer, project basis, a fixed fee, or variations on those themes. Compare:
    • Tax preparation fees
    • Bookkeeping fees
    • Consulting fees (Hourly? Project based?)
  1. Creativity. Accountants can do much more than your books. Will they be able to advise you on more than accounting, such as your business plan and other business issues? Can they save you money and help you find money?
  2. References. Ask for some references of companies like yours. Nothing speaks more loudly than a good business-to-business reference.
Sverre Roang heads the corporate transactions and business acquisitions practice at the Madison office of Whyte Hirschboeck Dudek, and he is a member of the firm’s emerging companies and entrepreneurial services group. Roang earned his law degree from UW-Madison and currently serves as an adjunct professor at the UW Law School. He may be reached at sroang@whdlaw.com or 608-234-6079.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC. WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.