“Running out of cash” has been listed as the second most common reason for the failure of startups since 2018. It’s so common for startups to get lost in 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 the right business accountant, you can get clear on working capital cash flows, avoid early pitfalls and protect your startup against investigations. 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” with accounting software.

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 the right accountant for your business is recommended from the beginning.


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Benefits of hiring a business accountant for your small business

One of the key benefits of hiring the right accountant is that they have the experience and knowledge to recognize problems before they affect the business. This might manifest through a forensic accounting process (i.e. to discover fraud), keeping track of financial statements 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 keep financial records and get ahead on tax returns, so you’re not left with nasty surprises at the end of the tax season.

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.

Types of accountant

The types of services that your accountant may be able to perform depend on their qualifications and experience.

However, 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 businesses.

Certified public accountants are often cheaper than hiring a full-time employee for your business structure, 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.

Reasons for hiring an accountant

An accounting firm can help with financial forecasts and ensure your small business or startup 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 ATO investigated 40,000 individuals and business situations in Australia.

Startups are often comprised of small teams, which should limit exposure to fraudulent practices. Yet, chartered accountants’ 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 and financial planning advice will help impact your overall business plan, and impact key financial decisions such as pricing, for example.


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How to find a good accountant for your small business

Here is the step-by-step guide to choosing 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 to look for in a chartered certified accountants

As mentioned, you really want to work with a qualified and licensed accountancy professional. In Australia this means hiring a CPA, it usually means somebody who has qualified with the Certified Practising Accountant (CPA). So, find out about the required credentials in your own region and screen candidates by whether they hold your preferred licenses.

Referrals, testimonials or endorsements

More often than not, your business network is likely to contain recommendations for a good accountant. It is said 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 avoiding shady financial practices.


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Availability

You don’t want to be caught out hiring a chartered 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, and tax advice almost 9 months out of the year!

Instead, ensure that your new hire is available year-round and will solve problems in addition to taxes and record statements. Many small business owners like to utilize an accountant’s services including discussing business planning, financial management, operating costs, recording transactions, tax laws, tax preparations and business needs with their accountants, not just delivering the tax return.

Communicating with chartered accountants

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 the right certified public accountant who fits your style of communication should be an important part of the process.

ACCOUNTING TECHNOLOGY & SOFTWARE

When you chose an accountant there’s no point in hiring a technophobe who only works with old-school methods if you’re up-to-date with the latest accounting software.

Some startup founders and small business owners 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 for your business needs.

 

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 a monthly retainer, or will the accountancy fees change every month based on the number of hours worked?

It can be difficult to work with a business 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 or small businesses, check out our other resources for growth finance options and whether you’re eligible today.

Have a question?

No business or path to success and growth is the same. If you have a question, are ready to apply or would like to learn more about Fundsquire, please contact us today.

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Suneha Dutta

Suneha is digital marketing expert, helping innovative companies learn more about Fundsquire's seamless, timely, and innovative funding solutions. She brings diverse experience in creating compelling narratives and content across industries and markets.