9 Accounting Challenges of Starting a Business And How to Overcome Them

Starting a business is an enticing venture, but it’s far from smooth sailing. In fact, data from the U.S. Bureau of Labor Statistics shows that over 20% of small businesses across various sectors don’t even make it past the first year.

Starting a business isn’t for everyone. It demands not only skills and resources within your control but also factors beyond it. There’s a degree of luck and timing involved. However, positioned between both sides is an essential element: the expertise of others.

This is where outsourcing accounting services comes in, as both a precautionary measure and a strategic advantage for starting a business the smart way. In this article, you will discover the most common challenges faced by new businesses and how each can be effectively mitigated and improved through expert services.

Outsourced Accounting Support for Startup Success

Facing financial challenges at the start of a business venture is rarely straightforward, making it one of the most significant obstacles to overcome. Effective financial management is as much about maintaining stability as it is about driving growth.

That’s why many business owners delegate specialized functions to those with the right expertise, allowing them to stay focused on overall strategy.

Financial struggles are almost unavoidable. Even the biggest brands face them. Effectively managing finances—reviewing the past, controlling the present, and planning for the future—demands strong attention and deep financial knowledge to make the right decisions.

Typically, outsourcing for startups becomes a practical solution, whether used temporarily or long-term depending on the provider. Here’s how these experts help address common issues:

1. Difficulty Tracking Finances

Even when you’re starting small, one step at a time, it can easily get overwhelming to keep track of financial documents. The need for proper storage and backup also adds to the pressure.

Tracking essentially ensures smart budgeting, and many startups struggle to maintain this over time. Keeping accurate records of income, expenses, and receipts could also get mixed up with personal expenses, which eventually blurs boundaries.

Solution: Accounting professionals can efficiently and accurately track a business’s financial transactions, making records not only up-to-date but also organized and reliable.

Bookkeeping Services
Document Management and Digital Storage
Tracking Systems Setup

2. Unexpected Expenses

There are costs that can often get missed even though it may be predicted. That’s what makes financial management more complicated. Without a carefully calculated cushion to absorb these surprises, business growth can easily be stunted.

Cash flow interruptions and unforeseen expenses often push business owners to rely on loans, credit lines, or personal funds. This reactive approach can snowball into larger financial challenges, threatening the stability of the business.

Solution: Outsourcing accounting functions can significantly mitigate these risks. Professional accountants and financial advisors bring expert foresight and structure that increase your preparedness.

Cash Flow Monitoring
Budget Forecasting
Financial Planning

3. Use of Personal Funds

Compartmentalizing is what you do to manage expectations, limitations, and resources. For the smallest businesses, covering shortfalls with personal savings can be risky, but proper delegation helps mitigate that risk.

By entrusting financial management to professionals, funds are strategically allocated and monitored, ensuring stability and supporting growth.

Solution: Small business accounting services can offer a multitude of advantages, such as reducing the risks of error and overspending. By outsourcing accounting, business owners gain access to expert services such as:

Account Reconciliation
Budget Allocation
Financial Guidance

4. Inaccurate Financial Reporting

The accuracy of financial reports directly impacts how a business performance is being assessed. Generating reliable reports is time-consuming due to it being heavy on data. Without placing importance on accurate reporting, it’s harder to tell what and where to improve.

These also often deal with strict deadlines and compliance, which can increase the pressure on accounting teams and raise the risk of errors if processes are not well-managed.

Solution: Outsourcing your accounting team not only provides the necessary skill and expertise but also helps prevent burnout and improves long-term employee retention.

Financial Statement Preparation
Data Validation and Error Checking
Advisory and Consulting

5. Filing Taxes and Maximizing Deductions

Another layer of complicated detail that businesses face a learning curve on is dealing with taxes. Navigating tax rules and identifying eligible deductions can be overwhelming for new entrepreneurs.

Often, small businesses without expert guidance end up missing key details and spending more than necessary due to lost opportunities, such as overlooked deductions or filing errors.

Solution: Outsourced accounting support handled by certified professionals helps ensure full adherence to tax obligations while identifying eligible deductions. This reduces the risk of costly errors.

Tax Preparation and Filing
Deduction Optimization
Record Organization for Audits

6. Adapting to Changes

Constant updates in tax laws and requirements make it difficult for small businesses to keep up. With divided attention and understaffed teams, it’s easy to fall behind on the latest news, discussions, and regulatory changes.

These requirements can be challenging to interpret, and without clear guidance, businesses may struggle to apply them correctly. This creates a significant liability that can jeopardize a small business before it even has the chance to thrive.

Solution: By using outsourced accounting services, you gain access to professionals who stay current on regulatory changes and provide the guidance needed to navigate evolving issues and scenarios as they arise.

Regulatory Monitoring
Compliance with Standards
Comprehensive Risk Management

7. Costly Penalties

Late payment, late filing, and underpaid estimated taxes are just some of the most common penalties small businesses can face. These can lead to unnecessary fines, reputational damage, and even poor financial or investment decisions

Controlling business expenses is one thing. Avoiding penalties is another.

Solution: Expert accounting professionals have the foresight and experience needed to navigate the nuances of tax compliance and prevent costly mistakes. An outsourcing partnership ensures the timeliness and accuracy required to stay financially secure.

Deadline Management
Compliance Audits
Budget Allocation

8. Poor Financial Decisions

We often hear that business owners wear many hats, but accounting is one that truly requires careful attention to detail. Managing finances isn’t something to take lightly, and the choices made here have a direct impact on business growth.

Many founders lack accounting knowledge, which can easily lead to weak analysis and uninformed decisions about strategy and direction.

Solution: Outsourced accounting support provides guidance at every step–through concerns, setbacks, and accomplishments. By outsourcing, small businesses can ensure they’re getting smart, well-informed input into their financial performance.

Financial Literacy Support
Performance Analysis
Strategic Insights

9. Cybersecurity and Outdated Technology

Small businesses often lack the tools and resources needed to operate efficiently. Using outdated accounting software or unsecured systems not only lowers the quality of work but also increases the risk of data breaches and operational inefficiencies.

Solution: Outsourced accounting services come equipped with modern, industry-standard tools and secure systems. With professionals who know how to leverage these technologies for your specific business needs, operations can run more effectively and securely.

Secure Accounting System
Data Backup and Recovery
Software Modernization

Unlock Comprehensive Benefits with Accounting Experts

The aforementioned accounting challenges for startups highlight the need for stronger teams as a time-saving and adaptable improvement to accounting functions. By managing documentation, reporting, and compliance together, outsourced support provides well-rounded benefits with proven readiness, expertise, and flexibility that help make starting a business worthwhile.

Author Bio

Erika Dela Peña is a multifaceted writer who explores both innovative and industry-focused topics, creating engaging and contemporary content. With a strong background in marketing and communication arts, she enjoys diving into thought-provoking ideas and compelling narratives to come up with practical insights from the creative to the business world.