Startup bookkeeping for San Diego founders

What startups need from their books

A small service business needs profit and a tax figure. A startup that spends investor money needs different answers: how much cash leaves each month, how many months are left, and what the money was spent on. A board asks those questions every quarter. An investor asks them in diligence.

Founders in Sorrento Valley, Torrey Pines and UTC often run lab or engineering work with outside vendors, contract research organizations and grant money in the same bank account. Books kept on a cash basis, with everything in one expense line, cannot answer the board's questions.

What startup bookkeeping covers

• Accrual-basis books, so costs land in the month the work was done
• SAFEs, convertible notes and priced rounds recorded and tied to the cap table
• Prepaid expenses and accrued liabilities for lab services, CROs and software
• Costs tracked by program, project or grant, using classes or tracking categories
• Research wages, supplies and contract research coded so they can be traced
• A monthly close with burn, runway and cash by account
• Founder expenses and reimbursements kept apart from company spending
• Year-end books for your CPA, plus support for state and Delaware filings

Grant and contract funding

Many life science and defense technology startups take grants or government contracts alongside venture money. Those funds often come with rules on what costs can be charged and how they are reported.

The bookkeeping side is tracking. Each grant or contract gets its own class or tracking value. Wages, supplies and subcontracts are tagged as they are recorded. Then a report by program shows what was spent, which helps when a draw or a progress report is due.

Grant and contract cost rules vary. Your grant manager, contracting officer or advisor decides what is allowed.

Getting ready for the next raise

1. Close every month Investors ask for monthly statements. Each month should be reconciled and locked.
2. Tie equity to documents Every dollar raised in the books should match the signed SAFE, note or stock purchase agreement.
3. Clear founder items Personal charges are repaid or recorded as owed. Reimbursements are documented.
4. Explain the burn A short schedule shows burn by category, so a jump in lab or hiring costs has an answer.

Filings founders often forget

The R&D credit and payroll tax

A qualified small business can elect to apply part of the federal research credit against payroll tax. The IRS describes this as meant for startups with little or no income tax. For tax years beginning after 2022, the cap on that election is $500,000 a year. The election cannot be made on an amended return, so timing matters.

Clean books do not decide whether you qualify. They make the claim much easier to build. See R&D tax credit for how the partner team approaches it.

Where we work

We keep books for businesses across the City of San Diego, North County, the South Bay and East County.

• Carlsbad
• Chula Vista
• Downtown San Diego
• El Cajon
• Encinitas
• Escondido
• La Mesa
• Oceanside
• San Diego
• San Marcos
• Vista

Questions