Startup CPA - Why startups need a good CPA
Wondering why you'd need a CPA when you can just handle accounting and finance decisions on your own? Even if you're an experienced founder with a solid understanding of finance and accounting, it's always handy to have a CPA a phone call away.
A CPA plays an undeniably crucial role when investors ask for financial packages or banks ask for financial statements, yearly IRS tax filings and audits. However, you can get a jump-start on all these things by involving a CPA early. That way you’ll have peace of mind that everything is getting done right. So what does a CPA bring to the table that startups wouldn’t already have? Here are 4 critical reasons why they matter:
1. Crystal clear picture so you can streamline the process
Unlike an accountant or a bookkeeper, a licensed CPA must pass four specialized exams after a standard undergraduate degree — plus over a year of work experience at a CPA firm. This process gives CPAs a deeper understanding of accounting. Not only do CPAs learn accounting rules by heart, they transform raw financial data into financial statements, tax returns, and audits. With this, CPAs help founders understand their numbers, receive better guidance, and can ultimately make better decisions.
CPAs can design a working process and help streamline that process from beginning to end. No pitfalls, no detours. With a CPA at your side, you’ll save time and effort, spare yourself the hassle of doing everything on your own, and give yourself the space and freedom to focus on running a successful startup.
2. Tax planning so you don’t overpay taxes
A CPA knows all the tips and tricks for putting revenue and expenses into financial reports. They’ll tell you what expenses qualify for tax deductions and tax credits, and how to report revenue the right way (e.g. avoid under or overpaying taxes).
Let’s say your startup owns fixed assets such as lab equipment, company vehicles, or a building. A CPA will understand exactly how to depreciate and amortize assets. If you’re doing research and development on how to innovate, a CPA has the right skills for finding qualified expenses to help you get the tax credits. A good CPA will always save you money in the long run.
3. A mentor that’s ready for every question
An experienced CPA who understands your startup can teach you everything you need to avoid common mistakes, and can guide you in the right direction. Get ahead in a competitive start up world by quickly identifying the experts and leveraging their experience.
Each startup faces unique challenges and more often than not, answers are not obvious. As a startup founder, you need the experts to fill the gaps, give you answers, and propose smart solutions that are backed by experience. A CPA can help you get there.
4. Sooner or later you’ll need a CPA anyway
In the life cycle of a startup, sooner or later you’ll l need to work with a CPA. If it’s not for tax filing, verifying financial statements, or conducting audits, then it’s likely all three. In other words, it’s inevitable so why not build that relationship sooner rather than later.
The amount of work doesn’t go down as time goes on. In fact, the longer you wait, the more difficult it is, even for a CPA, to handle. If you don’t know the right way to build your financial data, things eventually slip by and you’ll end up with a bad financial database. By then, it’ll be too late. A bad financial database can jeopardize the integrity of your end goal. Proactively involving a CPA early can help you stay ahead of any issues that come up.
Wait, but what if your company has a tight budget and can’t afford a CPA? If your budget doesn’t have room to hire a CPA full time, consider consulting with a CPA once a month or quarter.
Just like a good attorney can help you win cases, a good CPA can help you plan your company’s finances well to protect every hard-earned penny.
Once you decided to look for a CPA, here are 2 questions to ask when hiring a CPA:
1. Are a full range of finance and accounting services covered
Every rising startup needs someone to help with bookkeeping, monthly end close, financial reporting, tax filing, to advisory and fundraising services. Having one CPA firm that covers a full range of services can simplify things for you.
You’ll also save you time and money not having to hire multiple companies and sharing documents with various parties. Having a one stop shop to handle all your accounting needs as soon as they come up, understand your company’s history, and can tailor solutions around that.
2. Do you like working with them?
Domain knowledge aside, you want to work with someone who you get along with. Having the right chemistry goes a long way whether it’s your business partner, employee, assistant, and yes, even your CPA. Find yourself a CPA that’s easy to talk to, fun to work with, and good at what they do.
Takeaway:
Hiring the right CPA can make your life as a founder much easier. A talented CPA makes complex accounting and finance tasks seem effortless. It takes the friction out of the equation, making it fun and easy to get important work done.
Skilled CPAs prepare ahead of time and make sure nothing slips between the cracks. With the right CPA, you can feel ease and focus on the things that matter most—like taking your startup to new heights.
At Advisori Finance, our finance experts have been working with countless startups and have accumulated roughly 14 years of industry experience. Our CPAs have MBA degrees and frequently work at large tech companies. We’re passionate about working with startup founders to innovate and create solutions to make the world a better place. If you need someone to bounce ideas around, we’re always happy to chat.
