Creating company policies

At an early stage startup one doesn’t need detailed accounting policies. But a general guideline helps set up some order. Most common policies are Travel and Entertainment Policy, Capitalization policy, Revenue Recognition policy.

The T&E policy could be detailed but what usually works for startups is a generic policy which conveys what the culture is regarding spending. Letting people take ownership of the company’s money is a good way to define the policy. Spend the company money like you would yours, could be how the policy is written.

Capitalization and Revenue Recognition have to have a bit more structured as these are governed by Generally Accepted Accounting Principles. But you still have some leeway in defining the policies.

For example, the capitalization policy will state whether the company will book the purchase of an asset like computer as a fixed asset and then depreciate over a period of time or would it book the entire purchase as an expense in the period it was bought. The policy defines what will be capitalized, usually for small companies anything under a particular amount ($1000 or $500) is expensed vs. capitalized. Big companies would usually have a bigger threshold for capitalizing.