Each year, we like to tee up a few accounting tips. While there are absolutely some best practices all tech companies should deploy year after year, it’s also true that things change in the accounting world. As new regulation impacts taxes and new bookkeeping requirements get issued by the Financial Accounting Standards Board (FASB), for example, things shift.
That means making some adjustments on your end to keep up — and maintain compliance. Fortunately, we can help. We tapped our Founder and CEO, Akshay Shrimanker, for some suggestions for 2025. Here are Shrimanker’s top five accounting tips for the coming year.
#1: Leverage automation and AI for scalable growth
Heading into 2025, there’s no reason not to be deploying technology. The right solutions make life easier for your finance function while reducing the risk of human error. A variety of tools exist to automate — and consequently streamline — key accounting tasks like:
- Accounts receivable
- Accounts payable
- Expense management
- Payroll
- Month-end close
Shrimanker even has a few specific recommendations here. For spend management and accounts payable, he suggests looking into Rho. For accounts receivable, consider Tabs. For an AI-assisted month-end close, Numeric is a great option.
For even more software suggestions based on what we’ve seen be effective for our clients, turn to our guide. It also explores optimizing your fintech stack by finessing implementation and integration.
#2: Optimizing your chart of accounts for decision-making
Your chart of accounts should provide clear insights into your company’s key financial metrics, including:
- Gross margins
- Customer acquisition costs (CACs)
- R&D expenditures
Because this document lays such a critical foundation for your financial statements, it’s worth investing some energy here. Set your company up for success in 2025 by structuring your chart of accounts to provide the insights you need. We recommend organizing it so that you have fewer parent accounts to give you a high-level overview, with sub-accounts you can drill down into for more granular information when needed.
As an added bonus, the chart of accounts can make it easier to capture and categorize research expenses. You’ll need these to capitalize on the tax savings available through the R&D credit. With a well-organized chart of accounts, identifying all of the qualifying research expenditures gets much faster and easier.
#3: Monitor capital efficiency metrics
For any company to grow, it needs to keep a close eye on how well it converts money coming in, to more money going out. That said, capital efficiency is a key focus area for startups and growth-stage companies, when that incoming money is generally pretty tight.
To ensure you’re staying informed about the most critical metrics, Shrimanker and our team recommend implementing diligent tracking procedures for:
- Burn rate: This metric measures how fast your company is spending its cash reserves on operating expenses. Calculate both your gross burn rate (your total monthly expenses on ops, including rent, payroll, server costs, R&D, etc.) and your net burn rate. You can crunch the numbers on the latter with the following formula: (monthly revenue – cost of goods sold) – gross burn rate. The number you arrive at is your net burn rate.
- Runway: Knowing your runway tells you how much time your company has to make things work. The math is fairly easy here. Divide your total capital by your gross burn rate. The result is the number of months of runway you have left. If that number is small, it’s time to start looking at making changes — or a new round of fundraising.
- Rule of 40: This rule specifically applies to SaaS companies. It says that a healthy SaaS company’s profit margin percentage + revenue growth rate should equal 40% or more.
Not only does tracking these capital efficiency metrics keep your team informed, but it also demonstrates fiscal responsibility to investors. Being able to show how efficiently your company is managing their contribution helps to bolster confidence — and may even encourage future investment.
#4: Streamline grant or funding compliance (SBIR/STTR)
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs give your company a way to secure non-dilutive funding. As a result, they present an exciting opportunity — but one that’s not without its requirements.
If your company gets grants or federal funding, the funding agency likely has specific steps you need to take around tracking how that money gets spent. Take the time to understand those requirements in detail, then make a plan for your company to comply in 2025 and beyond.
Accurately tracking costs throughout the year makes it significantly easier to meet any reporting requirements without creating extra burden for your finance function when those reporting deadlines approach.
#5: Refine SaaS revenue recognition practices
If your company operates on a subscription model, you’re subject to specific revenue recognition requirements. Per the FASB’s Accounting Standards Codification (ASC) 606, you need to recognize revenue from contracts with customers as it’s earned (rather than as they pay it).
To put it in simple terms, if a customer pays you $12,000 for a year-long subscription in January, you can’t record that $12,000 on your books in January. Instead, you need to break it up and record it as that subscription is active. In other words, you would record $1,000 of revenue in each month throughout 2025.
Shrimanker recommends using tech tools to help here. Stripe, for example, has a specific Revenue Recognition software solution. Chargebee and Tabs also have solutions to make it easier to stay ASC 606 compliant in 2025 and beyond.
As the new year gets underway, it presents an opportunity for your company. 2025 can be the year in which you implement strong financial procedures. These give you the insights you need to make informed decisions about where you’re headed.
You don’t have to navigate this on your own, nor do you have to pile a bunch of work onto your finance team. Here at ShayCPA, we specialize in supporting tech companies. For help developing best practices, implementing processes, ensuring ASC 606 compliance, and more, you can turn to us. If you want to explore working together this year, get in touch with our team.
