What Tech Startups Should Look for in an Accountant
Tech startups need accountants who can handle recurring revenue, contractor-heavy teams, software costs and the reporting that investors expect. A year-end-only practice built for a shop or a consultancy will miss how SaaS and product companies actually make and spend money.
Introduction
This guide is for software companies, app businesses, technology consultancies and early-stage product teams. It covers the finance metrics that matter, the tax topics that often arise, and how to keep the books ready for a raise without pretending every company will qualify for every relief.
Eligibility for R&D reliefs and venture capital schemes such as SEIS and EIS depends on the company’s circumstances and current HMRC rules. Nothing below is an offer of those reliefs or a prediction of a tax outcome.
What tech startups should look for in an accountant
Look for someone who can close the books monthly, explain cash runway, and map subscriptions, contractors and payroll into a pack a founder can take to a board meeting. Industry vocabulary helps; reconciled records help more.
Ask how they treat deferred revenue if you invoice annually, how they post marketplace or app-store fees, and whether they have produced investor packs before. If those questions draw a blank, keep looking.
SaaS, software, apps and technology consultancies
SaaS and subscription product companies live on recurring revenue and cohort behaviour. Software houses and app businesses may mix licences, services and store payouts. Technology consultancies look more like professional services: utilisation, project WIP and contractors.
The accountant should not force every tech company into one template. A consultancy that invoices time needs project-level views. A subscription product needs deferred income and churn context. Mixing the two without labelling them hides whether the product is working.
Subscription revenue, MRR and ARR
Monthly recurring revenue (MRR) and annual recurring revenue (ARR) are operating metrics. They are not a substitute for the statutory accounts, but they should be reconcilable to billed and recognised revenue in the books.
If you collect a year up front, cash arrives before the service is delivered. Management accounts should show that, or you will think a strong cash month is a strong profit month. Agree recognition with the accountant early, then keep it consistent.
App stores and platforms pay net of commission. Record gross sales and fees if you need a real margin; recording only the payout will understate both revenue and cost.
Burn rate, cash runway and gross margin
Burn rate is the net cash you consume. Runway is how long the bank lasts at that burn, after known receipts. Both belong in the monthly pack, even if the formal P&L is the place for accounting profit.
Gross margin for a product company should exclude noise such as one-off hardware or a single professional-services project, or at least show them separately. If “gross margin” includes everything below the bank feed, it will not help pricing or hiring.
Management accounts and investor reporting
A tech pack usually includes P&L, cash, runway, headcount cost, and a short commentary. If you report MRR or ARR to investors, include a bridge to the accounting revenue so the two stories do not diverge.
Forecasts should start from recent actuals. A model that has never been compared with three months of real books will not survive diligence.
Accounting systems and software integrations
Most teams need a cloud ledger, payment processor feeds, payroll, and a way to get subscription billing into the books. Integrations save time only if someone still reviews exceptions: failed payments, refunds, chargebacks and manual invoices.
Spreadsheets can sit on top for metrics. They should not be the only record of money in and out. When the billing tool, Stripe and Xero tell three different stories, the accountant’s first job is to pick a close process and stick to it.
Payroll for growing teams and contractor costs
Headcount is often the largest cost. Payroll must run through PAYE for employees, with pensions and real-time reporting as required. Founders taking ad hoc drawings instead of a defined salary or dividend policy create director loan issues.
Contractors are common in tech. Status, invoices, VAT and whether someone should have been on payroll are questions for the company’s facts, not for a template. Keep contracts, invoices and a clear unpaid-bills list. Overseas contractors add currency and withholding questions that should be reviewed, not guessed.
VAT and international customers
VAT on digital services, mixed supplies of software and support, and customers outside the UK is easy to get wrong if everything is coded as domestic standard-rated sales. The correct treatment depends on what you sell and where the customer belongs under current HMRC rules.
Registering, using a particular scheme, or applying a zero rate is not automatic because you are “a tech company”. Have the supplies reviewed when you start selling, and again when you add a new product or territory.
Software development costs: capitalise vs expense
Some development spend may be capitalised in the accounts; much of it is expensed as it is incurred. The right treatment depends on accounting standards, the nature of the project, and whether internally generated software meets the tests for an asset. It is a judgement, documented with project records, not a lever to invent profit.
Tax treatment can differ from the accounts. Do not assume that capitalising code in the ledger creates a tax deduction pattern you have seen on a blog. Agree the approach with the accountant and keep it consistent.
R&D-related accounting considerations
UK companies may be able to claim Corporation Tax relief on qualifying research and development, under the schemes that apply to the accounting period. For periods starting on or after 1 April 2024, HMRC guidance describes a merged R&D expenditure credit scheme and, for some loss-making intensive SMEs, enhanced support. Older periods used different SME and RDEC rules.
Qualifying activity, qualifying cost categories, overseas restrictions, and the additional information form that must accompany a claim are all fact-specific. Eligibility and tax treatment depend on the company’s circumstances and current HMRC rules. Do not file a claim on the basis that “we write software”.
The accountant’s role is to keep costs analysable (who worked on what, which invoices relate to the project) so a claim, if appropriate, can be supported. Poor time records cannot be invented at filing.
Funding rounds, SEIS and EIS awareness
SEIS and EIS are HMRC venture capital schemes that can make a share issue more attractive to some UK investors if the company and the investor both qualify. Advance assurance is a common request before a round. It is not a guarantee of relief.
Eligibility and tax treatment depend on the company’s circumstances and current HMRC rules, including the nature of the trade, how funds will be used, and investor conditions. Do not promise investors that a round will qualify. Get specialist input before you issue shares, and keep formation, option and share documents in a file that diligence can open.
Due diligence readiness and financial controls
Diligence typically tests: bank reconciliations, revenue contracts, payroll, VAT, contractor status, related-party balances, cap table, and whether management accounts match the ledger. Months of tidy closes are cheaper than a six-week reconstruction under a term sheet.
Controls scale with the team: spending limits, two-person approval for large payments, a monthly close checklist, and access rights to banking and software. Founders keeping every password in a browser is a risk, not a culture.
How DepoTax works with technology companies
DepoTax supports tech and high-growth companies with bookkeeping, payroll, tax and management reporting. The work is to make the ledger match how the product earns money, then report cash and performance in a form founders can use.
For a wider startup overview see the startup audience page. For how to compare firms, use the buyer’s guide. This page is the specialist checklist for product and software businesses.
Frequently asked questionsFAQ
Do SaaS companies need a specialist accountant?
They need someone who can reconcile subscriptions, deferred revenue and payment-processor fees to the ledger, and report cash runway. A generic year-end file is usually not enough once recurring revenue and investors appear.
Should MRR appear in the statutory accounts?
MRR and ARR are operating metrics. They should be reconcilable to billed and recognised revenue, but they are not a replacement for the profit and loss account used in the statutory filings.
Can software development costs be capitalised?
Sometimes, if accounting tests for an internally generated asset are met and the treatment is documented. Much development spend is expensed. Tax treatment can differ. Agree the approach with the accountant and keep it consistent.
Will my tech startup qualify for R&D tax relief?
Only if the activity and costs meet HMRC’s rules for the relevant accounting period. Writing software does not automatically qualify. Eligibility and tax treatment depend on the company’s circumstances and current HMRC rules.
Should we apply for SEIS or EIS before a round?
Many investors ask about advance assurance. Qualification depends on the company, the trade, the use of funds and the investor. It is not guaranteed. Take advice before issuing shares.
How should app-store or Stripe payouts be booked?
Do not treat the net payout as the only sale. Record gross receipts and fees, plus refunds and chargebacks, or margin and VAT will be wrong.
What will investors ask our accountant for?
Current management accounts, a cash and runway view, payroll and VAT filings, and a ledger that matches the metrics you have been reporting. Missing reconciliations are a common diligence delay.
Does DepoTax work with software and SaaS companies?
Yes. DepoTax supports technology companies with bookkeeping, payroll, tax and management reporting, including businesses that sell software, apps or technology services.
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