IT companies, like all other businesses, are required to maintain accounting records of all transactions and operations conducted as part of their business activities, as well as to submit financial statements to the state authorities in accordance with all applicable regulations and standards.
Information technology is a very broad industry, involving companies of various fields and specializations. Thus, the IT cluster includes both software and service IT companies, website and application developers, cloud services, data processing and cybersecurity companies, telecommunications companies, E-commerce companies, developers of artificial intelligence (AI) and machine learning (ML) methods, as well as projects and startups based on Web 3.0 and blockchain technologies and offering services related, among others, to cryptocurrency, virtual assets or NFT.
For many years the accountants and consultants of our company have been specializing in accounting services for the IT sector and have accumulated a considerable amount of knowledge and experience in this area. In this article we will talk about the main features and nuances of accounting, which are typical for representatives of the IT and innovation industry, as well as draw attention to accounting services which may be required for almost every IT project.
PECULIARITIES OF ACCOUNTING OF IT COMPANY
What should an IT-entrepreneur pay attention to in the first place?
The organization of accounting for IT companies and innovative startups differs significantly from accounting techniques in more traditional sectors of the economy. This is due primarily to the fact that IT companies deal mainly with intangible property and intellectual property in one form or another, as well as to the specifics of income and expenses associated with the activities of projects related to the information technology industry.
In addition, some of the most significant factors to be taken into account in the accounting of an innovative company are:
IT companies often invest considerable funds in software development or accumulate a significant list of other types of intangible assets (know-how, domain names, patents, etc.). It is extremely important to correctly assess intangible assets, to correctly reflect them in the balance sheet and to determine the procedure for calculating their depreciation.
Many IT companies and startups take out loans to provide financing for the company operations at the initial stage of the project existence. It is very important to properly account for these commitments and the costs associated with them.
Venture capital investments
Some IT startups receive venture funding, which can have a significant impact on the valuation of the company, as well as the amount of its equity and share capital.
Shares, stakes and options
IT projects and startups often use shares, stock options or other mechanisms to obtain ownership rights as an incentive for their employees. Designated compensation mechanisms must be properly accounted for in the company financial statements.
It is important to mention that the correct organization of accounting is not only a matter of compliance with the law, but also an important tool for managing a business project. Proper accounting and timely prepared statements help the company management to make informed management decisions, to monitor the financial condition of the startup, to plan investments and to ensure its growth.
ACCOUNTING SERVICES FOR IT STARTUP
What accounting services may be required by IT company?
We offer a full range of consulting and accounting services necessary for the successful functioning and dynamic growth of IT enterprises. Thus, the main accounting services that every IT startup should think about are:
Accounting and tax consulting
We will advise you on the taxation of commercial activities of IT companies in Estonia, as well as discuss opportunities to reduce the tax burden and optimize accounting processes.
Organization of accounting in IT project
Our accountants will help properly organize and automate the processes of collecting and processing of primary accounting documents.
Preparation of the annual report of IT company
Our specialists will prepare annual financial statements, taking into account all the subtleties and nuances of the business model of the IT startup, as well as provide assistance in filing its annual report to the Commercial Register.
Salary calculation for IT specialists
Accountants of our company will take care of all matters relating to the calculation and accrual of salaries of the employees of your IT project, including a calculation of payable taxes and submit all the necessary tax returns and reports.
Calculation of freelancer remuneration
We will provide full assistance in calculating freelancer remuneration, as well as determining the possible tax burden, which depends on the country of the freelancer’s tax residency.
Preparation of VAT tax returns
Our experts will take on all the tasks associated with preparing and filing monthly reports on your IT startup VAT.
Filing MOSS, OSS and IOSS tax returns
We will provide you with qualified assistance in preparing and filing reports for the taxation of sales tax (VAT) on electronic services (MOSS) and distance selling products (OSS and IOSS).
Accounting for virtual assets and cryptocurrencies
We will help you to understand all the subtleties of accounting for transactions with cryptocurrencies and investments in virtual assets, as well as help you to correctly display them in the company balance sheet.
This is by no means a complete list of accounting services, the receiving of which may be relevant to entrepreneurs in the IT sector. Depending on the specific activities and needs of your IT company, other types of accounting services may also be required. In this regard, our experts strongly recommend you to get a consultation from a qualified accountant before the start of active operations of your IT startup to exclude possible mistakes and violations, which can lead to serious financial costs and legal complications.
Does your IT company or technology startup need quality accounting support? If you have any questions or you want to order accounting services – feel free to contact our accountants and consultants! Together we will find the optimal solution for efficient organization of the accounting processes of your IT-company.