Hardware Accounting & CFO
Accounting & CFO Services for Hardware Startups
Inventory and COGS accounting with standard and landed cost, contract manufacturer deposits, gross margin by SKU, warranty reserves, and the working capital planning that hardware growth demands.
Hardware and deep tech startups spend cash on parts, tooling, and production runs months before a unit ships, so the balance sheet matters as much as the P&L. Get inventory costing wrong and gross margin is fiction; underestimate deposits and lead times and you run out of cash while orders pile up. StartupCFO pairs a CPA-led accountant with ClariFi to cost your inventory properly, track gross margin by SKU, and plan working capital so growth does not outrun your runway.
What's Hard About Hardware Finance
The hardware-specific challenges that generic bookkeeping services miss.
Inventory costing and COGS
Standard cost with variance tracking, landed cost that includes freight, duties, and inbound fees, and a consistent policy for capitalizing production overhead into inventory. We set the method, document it, and keep COGS defensible in diligence.
Contract manufacturers and deposits
Contract manufacturers often require deposits, tooling payments, and component prepayments well before delivery. We record deposits and tooling correctly, track open purchase commitments, and reconcile manufacturer invoices to units received.
Gross margin by SKU and working capital
Each SKU carries its own bill of materials, yield, and channel pricing. We report gross margin by SKU and model the working capital cycle, from deposit to cash collected, including the inventory financing options lenders offer hardware companies.
Tariffs and landed cost volatility
US tariff rates and their legal basis have shifted repeatedly since 2025, and changes can hit imported components with little notice. We keep duties visible in landed cost and model margin under different tariff scenarios, with customs and trade questions going to your broker or counsel.
Warranty reserves, R&D credits, and depreciation
Warranty obligations need a reserve based on failure and return history. Prototype engineering can support the R&D credit, domestic research costs are again deductible under section 174A, and qualifying equipment may be eligible for 100% bonus depreciation under the 2025 law.
How StartupCFO Helps
One integrated team (a bookkeeper and CPA on every plan, CFO support from Foundation, a full fractional CFO on Growth) running the right hardware playbook.
- Monthly close with inventory, standard or landed cost, and COGS accounting
- Contract manufacturer deposit, tooling, and purchase commitment tracking
- Gross margin by SKU, tracked as dimensional custom KPIs in ClariFi
- Warranty and returns reserve accounting from your actual history
- Fixed asset accounting for equipment and tooling, coordinated with your tax depreciation
- R&D credit study support on Growth, or as a Custom Project, covering prototype engineering
- Federal and state tax returns at a 50% discount on preparation of one federal and one state return
- Fractional CFO on the Growth plan for working capital planning, inventory financing, board packs, and fundraising
Hardware startup metrics we track
- Gross margin by SKU and by channel
- Standard cost vs. actual cost variances
- Inventory on hand, days of inventory, and inventory turns
- Deposits and open purchase commitments with contract manufacturers
- Warranty claim rate and warranty reserve
- Cash conversion cycle from deposit to collection
- Cash runway under production volume and tariff scenarios
Frequently Asked Questions
How should a hardware startup cost its inventory?
Most hardware companies use standard cost, set from the bill of materials and expected labor and overhead, and then track variances against actual cost. Inventory should be carried at landed cost, including freight, duties, and inbound fees, and production overhead is capitalized into inventory under a consistent policy. Reserves for obsolete or excess inventory are set from real data, not plugged.
How do you account for deposits paid to a contract manufacturer?
Deposits and component prepayments are recorded as assets, not expenses, until the related units are received, at which point they move into inventory. Tooling the company owns is typically a fixed asset. We also track open purchase commitments so your forecast reflects cash you have already promised to spend.
Can hardware startups claim the R&D tax credit on prototypes?
Often, yes. Engineering wages, contractor research, and supplies consumed in building and testing prototypes can qualify, and eligible small businesses may apply up to $500,000 per year of the credit against payroll tax. Separately, the One Big Beautiful Bill Act added section 174A, which again allows domestic research and experimental costs to be deducted currently for tax years beginning after 2024. R&D credit study support is available on Growth, or as a Custom Project.
Is equipment eligible for 100% bonus depreciation again?
Generally, yes for qualifying property. The One Big Beautiful Bill Act restored 100% bonus depreciation for qualified property acquired after January 19, 2025, and the IRS has issued guidance on the details. Whether your equipment qualifies, and whether taking it makes sense given your losses, is a decision we make with your tax advisor as part of return preparation.
How do tariffs affect our accounting and model?
Duties are part of landed cost, so they flow into inventory and then into COGS when units sell. Because US tariff policy has changed repeatedly since 2025, we keep duties visible as their own cost component and model gross margin and cash under several tariff scenarios. Classification and customs questions go to your customs broker or trade counsel.
Ready for Hardware-Native Accounting?
Book a free consultation and we'll walk through how we'd handle your hardware books, taxes, and CFO support. Once you start, your finance team is live within 2 business days.
