How Start-up Businesses View and Use Accounting in Early Year Operations

Contessa Hutchins

Authors:  Contessa Hutchins, Lisa Hinson CPA Ph.D.

Faculty Mentor: Lisa Hinson CPA Ph.D.

College:  Warrington College of Business

Abstract

This research analyzes how start-up companies implement accounting in their early operations and if that use of accounting (or lack thereof) has played a role in acquiring funding. Prior research shows that the quality of financial statements positively affects investing efficiency for companies in emerging markets (Chen et al., 2011). In this paper, we evaluate the hypothesis that start-ups using financial statements more extensively receive more outside funding than their counterparts. This was tested with a 27-question survey broken into three sections: demographic, accounting use, and financial information. There were 44 participants. The typical start-up profile is 5-6 years old, employs ten people, and identifies in the technology industry. Approximately 75% of participants reported using financial statements. While mostly viewed positively, some participants feel strongly against using standard accounting practices. Results showed companies who use financial statements more often reported a higher percentage of debt and investment funding received than those who used financial statements less frequently or not at all. In conclusion, accounting helps start-ups communicate higher quality information to investors, thus leading to a better chance of capital investment/debt financing. This sample selection was not chosen randomly and, therefore, is not a statistical depiction of the entire population.

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Mark S. Long
Mark S. Long (@guest_58)
1 year ago

Awesome!! This poster and report will be EXTREMELY HELPFUL to Incubator Managers/Directors all over the world! I have already spoken to the International Business Innovation Association, and they are interested in publishing it on their website! Thanks for this great information!!

Tess Hutchins
Tess Hutchins (@guest_2578)
Reply to  Mark S. Long
1 year ago

Thank you for all the help and support!! An InBIA publication is AWESOME!

Jennifer Harrell
Jennifer Harrell (@guest_60)
1 year ago

Excellent job and analysis, Tess. I could not agree more with your research findings. This is a brilliant way to help early-stage entrepreneurs further understand the importance of accounting and financial statements…MONEY!
– Jennifer Harrell
Incubator Manager
UF Innovate The Hub
Fisher School Alum

Tess Hutchins
Tess Hutchins (@guest_2660)
Reply to  Jennifer Harrell
1 year ago

Thank you Jennifer! I appreciate your support!!

Tess Hutchins
Tess Hutchins (@guest_342)
1 year ago

Hi,

Please follow this link to join my live Zoom conference. I will be available to answer any questions until 3:00 PM.

https://ufl.zoom.us/j/256673775

If you miss the meeting, feel free to email me your questions or comments at hutchinstess@ufl.edu!

Thanks for stopping by!
Tess Hutchins

Merrie Shaw
Merrie Shaw (@guest_928)
1 year ago

This report is spot on for the start up companies we deal with in Incubation. I’m having all of early seed entrepreneurs read and take note of this. Well Done!
Merrie Shaw
Assistant Director
UF Innovate Sid Martin Biotech

Tess Hutchins
Tess Hutchins (@guest_2872)
Reply to  Merrie Shaw
1 year ago

Thank you Merrie! Your words mean the world to me; I hope I can help some entrepreneurs too!

Elliott Welker
Elliott Welker (@guest_1434)
1 year ago

Fantastic research, Tess! Your work is very helpful to early-stage entrepreneurs. Founders will be well served to read your findings. Thank you for sharing!

Elliott Welker
Incubator Manager, UF Innovate | Sid Martin Biotech

Tess Hutchins
Tess Hutchins (@guest_2952)
Reply to  Elliott Welker
1 year ago

Thank you for stopping by my Zoom conference! Your support is always appreciated!

Nik Mirsaderov
Nik Mirsaderov (@guest_1662)
1 year ago

Cool stuff! This is very useful in today’s world where entrepreneurs are everywhere. Accounting is a big part of today’s economy, especially in start-up companies. I’d like to see how your theory effects larger companies, such as Google or Facebook.

Tess Hutchins
Tess Hutchins (@guest_3876)
Reply to  Nik Mirsaderov
1 year ago

Hi Nik,

Thanks for stopping by and commenting! Going into public accounting, I’ll be able to see how accounting affects larger publicly traded companies as well. Publicly traded companies (such as Google and Facebook) are required by law to issue financial statements so I imagine the issues they face surrounding accounting would be centered more on the business processes. It’s something I’d like to look into the more I get into the accounting career.

Thanks again!
Tess

Jacob ferris
Jacob ferris (@guest_1966)
1 year ago

I like that you used the better poster idea instead of the traditional format. It really helps channel the reader’s attention and gives them the gist of what the project is about. Good work!

Tess Hutchins
Tess Hutchins (@guest_3978)
Reply to  Jacob ferris
1 year ago

Thank you! I thought the video highlighting this format was spot on too!

Anna Welch
Anna Welch (@guest_4158)
1 year ago

This is a very interesting topic! How did you come up with your idea for it? I am an accounting student, and was wondering what research in this field looks like for undergrads!

Tess Hutchins
Tess Hutchins (@guest_7748)
Reply to  Anna Welch
1 year ago

Hi Anna,

I’ve been working at UF Innovate | The Hub for almost two years now so I’ve spent a lot of time around start-up companies. Since this is an area of interest for me, I wanted to focus on those companies and see what accounting looks like for them. There isn’t a whole lot of data out there that focuses on start-ups so it is perfect for creating some research of your own. I do recommend doing research locally as your data sets can make a bigger impact to those affected. Email me if you need help choosing a topic!

Best,
Tess

Brooke Bernstein
Brooke Bernstein (@guest_4854)
1 year ago

I like your inclusion of a QR code on your poster! I haven’t seen previous research on start-ups, so this was an interesting read!

Tess Hutchins
Tess Hutchins (@guest_7750)
Reply to  Brooke Bernstein
1 year ago

Thanks for the comment!

Courtney Janka
Courtney Janka (@guest_7730)
1 year ago

Very important research for entrepreneurs! CEOs of start-ups wear so many different hats, it is important for them to see the benefit of taking the time to complete financial statements! Great job!

Courtney Janka
UF Innovate| The Hub

Tess Hutchins
Tess Hutchins (@guest_7752)
Reply to  Courtney Janka
1 year ago

Thanks Courtney! I appreciate your support!