When you are looking for an accountant for your business, it is essential to keep in mind that not all accountants possess the same levels of expertise. Although all certified public accountants (CPAs) are accountants, not all accountants hold the CPA designation. It is very important for a business owner to be able to engage the services of a competent startup CPA.

Even while drive and perseverance can go a long way when beginning a new business, careful preparation is crucial to guaranteeing the continued success of your company. The sooner you accept responsibility for the financial health of your business, the better, as inadequate financial planning is one of the main causes of startup failure.

Although doing your own books could save you money in the short term, the truth is that if you don’t utilize a professional bookkeeper for your company, it could wind up costing you far more money overall than you would have saved by doing your own books.

When dealing with complex tax and accounting situations, such as the management of cash flow, issues surrounding remuneration, and the financial due diligence required by venture capitalists, hiring a certified public accountant (CPA) can help you save money, time, and possibly even your sanity.

How a CPA can help you and how to locate a CPA who is a suitable fit for your startup are both covered in this article.

What does a CPA do?

A CPA is an expert-level accountant. These experts in numbers are widely regarded as among the most important types of professionals for proprietors of small businesses.

Keeping accurate books and filing tax returns are typically the first things that come to mind. A CPA, on the other hand, may provide you with a variety of financial and advisory services that will assist you in increasing your profits and expanding your business. These services include the following:

Selecting a business entity

A CPA is qualified to offer guidance on the following business entity types: sole proprietorship, limited liability company (LLC), S corporation, and C corporation. This will have an effect on the amount of taxes that you have to pay, the papers that you have to file, and your liabilities.

Financial forecasting

A CPA is qualified to analyze the financial reports of your company and provide insightful, real-time information regarding your company’s cash flow, income, and expenses. Because of this, the decisions you make about the expansion of your company will be more informed.

Business consulting and advising

Are you planning to start and grow your business with the help of equity investment, grant funding, or loan money? Or did you create your business with only the money you raised from yourself? You can get objective guidance on strategic and financial topics from a CPA, including how to improve your cash flow, obtain finance, and other related concerns.

Financial statement audits, reviews, and compilations

In order to convince potential lenders, investors, and regulators that your business is legitimate, you must have properly created financial statements. You ought to be able to get audit, review, and compilation services for your financial statements from CPA.

A financial statement audit results in the highest level of assurance. In order to make sure that your financial statements don’t contain any material mistakes, your CPA will carry out investigations, physical inspections, balance checks, and extra testing throughout this stage of the process.

If an audit is not needed by law but you still want to look through your financial records, you can opt to have a review done instead of an audit. A review is thought to offer a low level of certainty. Here, a CPA can audit your financial statements, look into the startup’s accounting practices, and perform an analytical deep dive to look for mistakes.

The simplest definition of a compilation is a summary of your company’s financial accounts. In contrast to an audit or review, this process offers no guarantees. The CPA for your business won’t perform any tests or look into the reliability of the internal controls, but they will quickly go over the financial statements to make sure there are no obvious issues.

Tax planning and preparation

CPAs can provide assistance with tax planning and the filing of various tax forms, such as state and federal income tax returns, payroll tax filings, sales and use tax returns, and more. CPAs are required to participate in continuing education courses each year to maintain their tax and accounting skills in order to keep their licenses, which ensures that they are always current on the most current tax laws and modifications.

Forensic accounting

Forensic accountants are certified public accountants who specialize in providing assistance with disputes or litigation. As part of an insurance claim or a lawsuit for breach of contract, they can compute losses and economic damages; as part of a disagreement between company partners, they can appraise a business; and as part of a divorce case, they can even look for assets that have been hidden.

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Finding the proper startup CPA for your company

There is no one strategy that can be adopted or applied universally when it comes to finding the right CPA for your startup business. Because your CPA will be managing sensitive information pertaining to your business, it is imperative that you ask them the appropriate questions before you hire them. Otherwise, you might find out too late that they are not a good fit for you and it will be too late to find another CPA.

To ensure that you wind up with someone who is a good fit for you, there are six qualities that you should search for in a potential mate.

Startup-specific experience

Startup CPAs should be aware with the regulatory problems faced by startups, the appropriate paperwork, and the reporting obligations imposed by investors or boards. In addition, they should be able to accurately calculate and analyze crucial startup metrics such as burn rate (the rate at which you are “burning through” your monthly startup capital) and cash zero dates (the day on which you will run out of cash if you continue spending at your present rate).

Your CPA needs to have a comprehensive understanding of R&D tax credits as well as startup tax incentives in order to assist you with tax planning. In order to handle your company’s financial statements, your CPA needs to have a comprehensive knowledge of the fundraising process and cap table management if your company is supported by venture capital.

Expertise in your industry vertical

Any CPA that you decide to deal with should have prior experience serving clients operating in the same vertical as your business. They must to have prior knowledge with the financial modeling, tax procedures, and reporting standards that are unique to your sector of the economy. They should also be knowledgeable with the internal procedures of your firm as well as any other complexities that could assist in lowering your tax responsibilities or faults that could lead to an audit by the Internal Revenue Service (IRS).

Explores options and remedies

The benefit of a startup CPA extends far beyond their ability to assist with bookkeeping and tax returns. Find a CPA that can serve as a financial and company growth counsel for you. For instance, in order to give you the best possible service, do they keep up with the latest developments in technology and business practices? Do they recognize the specific difficulties you have and the possibilities they can provide you to succeed?

Timely responses

How quickly would your CPA respond if you had a pressing issue or a pressing need? You should ask about their contact hours and normal response time during your free consultation to get a sense of how they will manage time-sensitive accounting requirements. You might think about going elsewhere if your CPA is slow to respond or if you frequently need to get in touch with them to get answers to questions

Knowledge of accounting software

If you already use accounting software such as QuickBooks, Xero, or Bench, you should make sure that your potential startup CPA is familiar with using those programs. This is of utmost significance for any program that is specialized for a particular industry. For example, the financial toolkit required for a mobile app company is going to be formatted differently than that required for a SaaS organization. If your CPA is familiar with the software, they will be able to start using it right away to perform analyses of your inventory management, cash flow, and pricing as soon as they are ready to do so.

Friendly fee structure

Some business owners put off employing a CPA in order to reduce their operating expenses, but making the investment in the proper CPA will prove to be money well spent. Find an accounting firm or finance service that offers fixed monthly fees so that you can narrow down your budget in advance and get reasonable rates that details how your bill will modify as your startup grows. This will allow you to find a CPA whose pricing is suitable for the budget of your startup.

Conclusion

The process of starting a business can be both exciting and nerve-racking, especially for first-time owners. Profit and revenue are crucial in the early phases of your company, and the decisions you make with your finances could decide the success or failure of your business.

Making wise business decisions for your company based on reliable bookkeeping and accounting data will help to secure your investment. But who has the time to manage the day-to-day accounting duties while your business is just starting to grow?

A startup CPA can be a great resource to assist you in navigating the financial and business challenges and preventing costly mistakes. This will free you up to focus your efforts on other crucial tasks like growth, strategy, and scalability.