How to find an accountant for your startup

“Running out of cash” has been listed as the second most common reason for the failure of startups in America since 2018. It’s so common for startups to get lost among cash flow management, that they end up struggling to make sense of the numbers. But accounting for the cash is crucial for successful funding applications and sustainable growth.

The solution is clear; when you hire an accountant, you can get clear on working capital cash flows, avoid early pitfalls and protect your startup against investigation. Yet, such a small percentage of startups actually invest in accountancy services from the beginning of their launch.

Today, we’re going to discuss when a startup actually requires chartered accountants, as well their potential services and how to screen the right person for the role.

 

When does your startup need an accountant?

As a small business owner, it’s pretty common that funding is scarce. You’ll have to make difficult decisions about cuts and savings in every area, so it’s usually hard to justify investment into accountancy. Especially when the bookkeeping process can be “do-it-yourself”.

For the most part, this works well for small businesses, but startups are a different category of company. Startups are looking for extreme growth over a short period of time, usually requiring investor dollars to achieve this. Due to the expectations around the explosive nature of a startup, hiring an accountant is recommended from the beginning.

One of the key benefits of hiring an accountant is that they have the experience and knowledge to recognise problems before they affect the business. This might manifest through a forensic accounting process (ie. to discover fraud), or sorting out your accounting records in order to get ready for a round of funding and pitches.

The other occasion that a startup should hire an accountant is to work more efficiently. An accountant can help you decide where and when to make cuts, and enable the cash flow of the company to work harder. They can also help you get ahead on tax returns, so you’re not left with nasty surprises at the end of the tax season.

Finally, an accountant is often cheaper than hiring a full-time employee, while being just as productive and valuable. Plus, this way, you can skip the learning curve of online bookkeeping software and simply hand the reigns to the accountant to run their own outside program. The right accountant will make tax planning a breeze, and the information they provide should aid your business plans for the next quarter or year.

 

Reasons for hiring an accountant

The types of services that your accountant may be able to perform depend on their qualifications and experience. There is a legal requirement for professional qualifications; known as a ‘chartered accountant’ or ‘certified accountant’. These individuals are approved by a professional body to provide specific services, and should have the relevant experience to give strategic advice for your small business.

Accounting firms can help with financial forecasts and ensure your business is running in a tax efficient way. Again, ensure you hire a qualified accountant who knows tax law in your area and can ensure your business adheres to tax compliance regulations. In 2021, the IRS investigated 2,500 individual business situations.

Startups are often comprised of small teams, which should limit exposure to fraudulent practices. Yet, an accountant’s services should also use best practices, such as forensic accounting processes.

Administrative tasks, such as payroll and bookkeeping will also ensure that your business statements and records are in order. This can be highly beneficial for startups who are looking to pitch as the business grows. Moreover, financial reporting will impact your overall business plan, and impact key business decisions such as pricing, for example.

How to find an accountant for your startup

Here is the step by step guide to finding an accountant for your startup:

  1. Check credentials
  2. Find referrals, testimonials or endorsements
  3. Check availability
  4. Check communication styles
  5. Check billing

Credentials

As mentioned, you really want to work with a qualified and licensed accountancy professional. In the US, this means hiring a CPA, but in the UK, it usually means somebody who has qualified with the Association of Chartered Certified Accountants (ACCA). So, find out about the required credentials in your own area and screen candidates by whether they hold your preferred licenses.

Referrals

More often than not, your business network is likely to contain recommendations for a good accountant. There’s a running joke that good accountants are very hard to come by, so to find the best accountant, you should always ask for testimonials or endorsements from anybody you are vetting. This way, you can check the legitimacy of your potential new hire. Since you’re effectively letting a stranger into the inner workings of your business, this step is key to avoid shady financial practices.

Availability

You don’t want to be caught out hiring an accountant who is only available during tax season to deliver the annual accounts (yes, this really happens). It can leave you high and dry without a solution for other areas, such as payroll, almost 9 months out of the year!

Instead, ensure that your new hire is available year-round and will solve problems additional to taxes and record statements. Many small business owners like to discuss business planning and business needs with their accountants, not just delivering the tax return.

Communication

Speaking of availability, it’s a good idea to get a feel for how your accountant communicates. In a startup environment, you’ll most often find freelance or contracted accountants instead of full time hires. Therefore, finding an accountant who fits your style of communication should be an important part of the process.

There’s no point in hiring a technophobe who only works with old-school methods if you’re up-to-date with the latest software.

Some startup founders prefer to use integrated tech like Slack, Trello or Asana to communicate with partners and assign tasks. Others prefer email, phone calls or even programs like Whatsapp. Integrating your accountant into the team communication will be important.

Billing

Finally, find out the billing cycle and how you can pay for your accounting services.

Can you set up a monthly direct debit on retainer, or will the the accounting fees change every month based on the number of hours worked?

It can be difficult to work with an accountant who charges hourly, as the amount you owe can fluctuate on a day to day basis. This can save money in quieter times, which may be preferred, depending on your financial situation.

Alternatively, a retainer fee setup may be preferable as you’ll be able to manage the budget in advance. The downside here is that there may be months when your accounting firm barely does any work- so you might be left wondering if it’s a worthy investment when every penny counts.

If you’re looking for help with growing and managing your startup, check out our other resources for growth finance options and whether you’re eligible today.

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