We’re trying our level best to make this Startup Strategy series as detailed and in-depth as possible. If you’ve been following this series of posts, then you’d already know that the last instalment revolved around what you need to do to get a business loan approved. Hence, the last post was about getting the much needing funding for your business. Now, we want to help you manage that funding. For this, the foremost thing you need to do is choose an accountant for your startup.
When Do You Need To Choose An Accountant?
The initial months of most startups orbit their need to balance their expenses with their incomes. This is the primary reason why the majority of entrepreneurs of small scaled startups tend to avoid hiring an accountant during the early phases of their businesses.
Instead, the entrepreneurs put on the accountancy hat with the help of a software programme like QuickBooks. While in the earliest stages of your business it is alright for you to handle your own accounts if you have some experience in the field, it’s certainly not recommended if you’re a complete novice with numbers.
In fact, it’s highly likely that, within a few months if not weeks, you’ll realise how difficult it is to handle your business’s financial books yourself. In fact, some entrepreneurs even find out that they’ve been losing money simply because they didn’t know some accounting nuance or trick of the trade.
Therefore, you should get ready to choose an accountant the moment you get a business loan approved. It’s alright if you want to wait but you shouldn’t push it more than a quarter. When you’ve decided to get an accountant, you’ll have some options available to you. Here’s a lowdown of those options.
In-House Accountant Or Third Party Service Providers: Which Is Better?
There are two options available to you when it comes to your business’s accounts. Your two choices will be to either get an in-house accountant on a retainer or hire a third party accountancy service provider on a contract basis. Both choices have their merits but at any point in the lifespan of your business, one of the two will be a better choice.
If you’re a new business, then you would most probably be strapped for cash. From that perspective, you might find it easier to maintain your invoices and purchase orders internally while hiring a third party accountancy service provider to handle the formalities when it comes to dealing with the authorities. The reason for this is that third party accountancy service providers tend to be on a contract which turns out to be much cheaper than any retainer based services.
When you choose an accountant from an established third party service provider, you get the option of negotiating the terms of the agreement which means that you can choose the kind of services you want. Typically, third party accountancy service providers offer services such as business advisory, basic accounting, recordkeeping, tax advice, and auditing.
You can choose an accountant for retainer type remuneration as well. This means that the accountant will be an employee of your organisation and will be available to you at all times. This option is more suitable to those businesses that have been around for some time and have needs that are more intrinsic and involved.
However, as is obvious, taking on an accountant as your employee will mean that your outlay towards accounts will be much larger than if you had taken on a third party service provider.
Which Services Should You Choose An Accountant For?
We mentioned above that there are different types of services that third party service providers offer.
Similarly, an in-house accountant can be used for any number of services since he’s on the books of the business. The big question is what kind of services should you look for when choosing an accountant?
When it comes to third party contracts, you have to absolutely make sure that you have the basics included such as recordkeeping and tax advice which includes smaller tasks such as creating income statements, balance sheets, and other financial documents.
These services are fundamental and included in most such contracts for most startups. If you can spare some extra cash, then you should try to include business advisory services which will include problem solving and sometimes even fund raising.
However, you should only choose to include business advisory services once you’re completely certain of the quality and experience of the firm you’re contracting. Therefore, you should try them out with a basic contract before trying to upgrade it at the time of renewal.
If you choose an accountant on a retainer basis, then you may have to pay special attention to his credentials and expertise. The next point deals with this task in a more elaborate manner.
What Credentials Should You Look For?
Credentials are absolutely important if you want to choose an accountant who will actually add value to your business in various ways. The credentials of the individual accountant aren’t as important if you’re contracting a third party service provider but they’re paramount if you’re hiring an individual as an employee.
The first thing you should look for in the accountant you’re considering is his educational and professional certifications. There should be the basic graduate degree along with all the pertinent certifications and licences. Some accountants also have management credentials which is always a bonus.
Another very important credential you should look for is industry expertise. If you’re in the manufacturing industry then an accountant with experience solely in tertiary sectors may not be the ideal candidate. What you need is an accountant who has worked in your chosen sector before so that he understands all the nitty-gritties of the niche you’re hiring him for.
Size is another key aspect to consider. This doesn’t refer to the physique of the accountant but the size of the companies that he has worked for in the past. Accounting requirements of small to medium scale businesses are distinctly different from the requirements of large scale businesses.
Moreover, larger businesses tend to employ teams of accountants where every accountant has a support system to rely on. In contrast, smaller businesses tend to hire one or two accountants, where that support system is lacking. This is why size of the company that the accountant has experience with matters.
Ask For Referrals, Interviews, and Verify
Whether you choose an accountant from a third party service provider or on a retainer, you should ask for referrals. Referrals and references are important because they show the performance of the individual or the firm with a previous employer.
Not only should you ask for referrals but also follow up on them. You need to talk to the representatives of the organisations and find out what their opinion of your candidates are like before you choose an accountant once and for all.
After you’ve verified the referrals, you will need to sit down and have interviews with your candidates. Whether you interview individual candidates or representatives of third party service providers, you need to get a feel of what your relationship will be with them.
You need to remember that you’ll be spending a good deal of time with your accountants. This means that you need to choose an accountant or an accountancy firm whose personality matches your personality as well as the personality of your business.
You should base this mostly around your gut feeling after you’ve shortlisted the right candidates on the basis of their credentials and referrals.
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