The accounting requirements for start-up businesses

Abstract

PURPOSE: The purpose of this study is to highlight the importance of accounting information within Start-up Businesses especially during their early stages of business, and to analyse how such accounting information is used by the directors in order to ensure the smooth running of the business. The factors taken into consideration whilst setting up the accounting function of the Start-up Business will also be examined. This study will also determine whether Start-up Businesses prepare a business plan before starting the business. DESIGN: The objectives of this dissertation were achieved through semi-structured interviews with representatives from a number of Start-up Businesses, banks and accountants. FINDINGS: This study shows that exhaustive research must be carried out by the business owners and directors before embarking on their new business venture in order to ensure that all aspects of the business and the risks of failure are being considered. This research is normally presented in a Business Plan and a supporting Financial Plan. This study also reveals that the accounting function within a Start-up Business can provide directors with information that can be used to make better, well informed decisions. CONCLUSIONS: The main conclusions emerging from this study include the fact that although start-up businesses may generally lack the resources to employ an accountant, the need for one increases as the business grows. It has also been concluded that the elaborateness of the Business and Financial Plan depends on the complexity of the business and the reason for which it is being prepared. The importance of accounting knowledge has also been highlighted throughout this research. IMPLICATIONS: This study should be used as a guide for start-up businesses in order for them to become aware of the importance of accounting information during the start-up phase of the business and how this can assist in minimising the risk of start-up failure.