Checklist for Successfully Starting a Firm

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Accounting is a hot business.

Why?

Almost every industry needs an accountant to keep, maintain and monitor financial records, send audits, file taxes and comply with rules and regulations.

To manage all the above things, these industries need accountants.

According to Statista, the accounting business industry in the US generated revenue of 167 billion dollars and employed over 1.2 million people worldwide.

Source: Statista

The number indicates a huge demand for accounting firms and accountants.

So, if you are a number nerd who has always dreamt of opening your accounting firm, now is the perfect time to start!

Accuracy, time management skills, attention to detail, and close attention to precision are essential in the accounting field. If you believe you have them all, you’re ready to open your CPA firm.

Learn how to start an accounting firm and whether it’s the right fit for you.

Let’s dive in.

Starting Your Accounting Firm: Is it the Right Business Choice for You?

Starting an accounting firms may seem like a viable option, but is it right for you? Here are a few questions to ask yourself to understand if starting your own accounting firm is the right decision.

Question 1: Have You Got What it Takes? Can You Take Responsibility?

When you think about how to run an accounting firms, you have to think of handling more than just the legal side of the business. Setting up your practice won’t suit you if you don’t have the qualities and skills needed to be your own boss.

As an employee, you could complete your 8 hours and be free at the end of the day. But as a boss, your responsibilities won’t end after 8 hours. You will be working more, especially for the first few years, to keep processes running smoothly and acquire more clients.

You must be incredibly organized and driven with a daring, confident, and approachable personality as a boss. There is no one else to keep you motivated and increase day by day work productivity, so only solid and diligent characters can sustain a business in the long term.

Question 2: Do You have the Drive, Support, and Experience to Manage a Successful Accounting Firm in the Long Run?

Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.”

It’s an excellent starting point. Not everyone is cut out to be an entrepreneur. Starting a CPA firm takes different skills and talents. According to the POE group advisors, you will need to establish and sustain the firm.

• Plenty of motivation and determination to grow and break through the obstacles you will encounter on your path.
• Communication skills. You must articulate your thoughts effectively to work with clients and other people in your firm.
• Last but not least, a positive attitude.

Question 3: Do You Have Enough Capital to Start and Sustain the Firm?

No one likes to take about the money part. But let’s be honest. You cannot start a business without money.

You will have to determine how much capital you would need to sustain. Generally, accounting revenue is seasonal, which means your cash flow will be poor in the start-up phase. Wells Fargo advisors recommend budgeting for at least the first 12 months to anticipate the dip and manage costs and expenses.

What do You Need to Start an Accounting Firm?

Starting an accounting firm takes a lot of effort, like any other small business, so keep in mind that you are starting a business.

First, you need to figure out your accounting firm’s goal, purpose, and market and mold your decision based on them. Then, you can decide the function of the services you want to provide, the mode of business you will offer, and your target demographics based on them.

To help you get your newly-launched business off to a smooth start, we have asked our experts what you will need to get started!

So let’s get right to it!

1. Obtain an Employer Identification Number (EIN) or Tax Identification Number (TIN)

The IRS issues small businesses Employer Identification Numbers or Tax IDs for tax purposes.

An Employer Identification Number (EIN) is not a requirement for owning and running an accountant firm, but you will need one if you want to hire employees.

We suggest obtaining EIN before opening your company to make things easier. It is also free and easy to get!

Develop Internal Policies and Rules

Internal Policies and Rules are documented guidelines to establish proper procedures and employee behavior and expectations.

To make sure any business works appropriately, it should have robust internal policies that establish expectations, provide guidance, and ensure fair and equal treatment.

So you need to develop robust internal policies and implement them in your accountant firm to get the most productive work atmosphere for you and your employees.

Talented and Creative Employees

To make your accounting firm run smoothly, you will need employees with qualifications, experience, and abilities. They also need to have soft skills.

While hiring accountants, it is better to look for certifications and aptitude and choose employees who will bring much more than just credentials to your firm.

Still, credentials like CPA, EA, attorneys, and state certifications should influence your final decision while selecting your team of employees.

Determine the Total Cost for your Startup

While starting an accountant firm, the actual cost for the startup will depend on your location, your goals, and whether you want to set up a physical office or a virtual office.

It can cost anywhere between $2,500 to $25,000 to set up a secure and attractive accountant firm right now.

Aside from the money for office space, new accountant firms need to locate and install the essential equipment and technology to run efficiently.

Discuss an Optimum Pricing Structure for Services

After you are finished setting up your office space, you will need to focus on the optimum pricing for your services. This includes accounting, bookkeeping, and premium CPA services.

You can take suggestions from other firms, use the average quotes, and determine an optimum and competitive price for your services.

Apart from this, when starting your accounting firm, you can advertise using promotions and special offers to gain a loyal customer base.

Consider the Best Business Insurance for You

Insurance protects businesses from any financial loss and intellectual damage caused by everyday operations, so you need to choose good and trusted insurance for your firm.

Among the many types available on the market, it’s essential to choose those that meet your needs and requirements. For example, an adequate insurance policy can help your accounting firm grow without worrying about liabilities.

Our list ends here, but you might have more requirements for starting your accounting firm!

Steps to Start an Accounting Firm

Before starting your own accounting firm, you need to go through several steps. We have listed the essential steps below.

Step 1: Meeting the Requirements

Like any other business, you will need to meet the requirements before starting the accounting firm. They are as follows:

• Request an Employer Identification Number from the Internal Revenue Service (EIN). It will assist you in identifying the business for tax purposes.
• Licenses and permits are required for local business operations. You can apply for a home business permit if your business is based at home. 
• Open an account for your business.
• Protect your personal assets by taking out business insurance such as a business owner’s policy (BOP), professional liability insurance, and data breach coverage.

You may need another requirement while starting your accounting firm, which is a CPA certification.

Do you need to be CPA to start an accounting firm?

Let’s try to understand when and why you require CPA licensing. Is it significant? The answer to this is yes and no.

Starting an accounting firms does not require a certified public accountant (CPA) license. However, you will be severely restricted in what services you can provide to the clients without a license.

The license affects what you are going to serve through your business. So, if you are a certified public accountant, you can provide services such as auditing, attestation, and other assurance services.

And all the above services cannot be provided by a person who is not a CPA. So, in the end, it’s up to you to decide which service you want to deliver and whether you will need certification to provide those services.

Step 2: Come Up With a Business Plan

A business plan is essential since it highlights the goals, the services your business will offer, the target market, and other vital information. One of the critical parts of the business plan is to choose your firm’s legal structure.

All new companies can choose between four basic legal structures, and it is vital to select the correct one for your firm, so you should make your final decision with a legal or tax advisor. The most common types of legal entities are as follows:

Each type of business entity offers unique legal and tax implications that might confuse you. A legal entity such as an LLC or Corporation provides you with protection if your accounting firm is found to be non-compliant. Hence, it’s the most popular option.

Step 3: Choose a Niche

Source: Corvee.com

If you’re starting an accounting firm, choosing a niche is essential. Focusing on quality rather than quantity helps you be more productive. The advantages to choosing a niche are the following:

• Helps you find your ideal customers: Build effective marketing strategy to focus on your target audience. A niche defines what you need to serve your audience.
• Sharpen your skills to become professional in your niche: By focusing on your niche, you will be able to become an authority in the field.
• Higher ROI marketing: Focusing on a particular niche helps get your firm to top google pages. Most users look for a specific service, such as taxation, auditing, planning, etc. So if your firm is only providing taxation services, you have a higher chance of being recognized by the people.

Your own accounting business can flourish if you choose a niche. Here are some top niches you can take help from:

• Financial accounting: Manages business transactions and financial history.
• Cost accounting: It is primarily concerned with operations expenses in manufacturing.
• Managerial accounting: Offer business consulting services, such as budgeting, forecasting, and cost analysis.
• Auditing: Controls the accounting process for the company.
• Accounting information system: A company’s accounting system is evaluated for accuracy, completeness, and efficiency.
• Forensic accounting: Investigating legal cases such as financial frauds, business disputes, etc.
• Tax accounting Formulates tax plans for various clients.
• Fiduciary accounting: Manages clients’ financial circumstances, including property, estate matters, and guardianship.

Step 4: Attracting Clients to Your Firm

After you have built the foundation for handling licenses, getting a niche, and setting up necessary tools, it’s time to market your services to find potential customers who will bring in revenue.

Therefore, you need clients to get your business started in the right way. There are many ways in which you can market your services against your competitors:

One of the best ways to market the new firm is word-of-mouth marketing. This is a word of mouth marketing in a nutshell. When we like some service or product, we generally gravitate to share it with others, such as friends. It’s a cost-effective strategy to get your foot out of the door since almost 92% of people believe in suggestions from friends and family.

Other things you can do to gain new clients are:

Following these practical marketing steps can lead your business to the right people.

How to Acquire More Clients and Grow Accounting Firm?

Source: accountingtoday.com

One of the biggest mistakes that many accounting firms make is thinking business will automatically come to them. But it’s not true.

Here’s how to get clients when you are just getting started.

Be Where Your Clients Are

Keep yourself in your client’s shoes. Think about how you will find accounting services when you need them?

Google search, social media, websites? There are many options that your clients will choose.

The key here is understanding where and how your potential prospects spend their time and being present.  Whether it’s Google, social media, or a website, you need to position your firm in its path to help them find you.

Introduce New Services

Introducing new services is another way to grow accounting firms. For instance, you can add financial planning, auditing, or digital security systems on top of traditional accounting services.

However, adding a new service does require a considerable amount of time and effort. Add a new wing, promote the new services, and hire the right people.

However, keep in mind that newly developed tax services are in tune with your core services. Since adding out of the box can water down your brand and make you look like a generalist. Thus, if you want to consider adding a new service, check whether the market accepts it and whether you have enough time and effort to develop it.

Partner With Other Professionals

Partnering with professionals can seem counterintuitive, but hear us. Several professional services perfectly complement the accounting business. This includes lawyers, business consultants, investment advisors, and even IT businesses that may have clients who need accounting and bookkeeping services.

Content Marketing

When running a CPA firm, content marketing may not be at the top of your to-do list. However, content marketing offers golden opportunities to bring in new business in this digital world.

Some content types you can cover are:

• Videos: According to Smart Insights, consumers spend 100 minutes per day watching videos. So, if your firm is interested in creating videos, you can start a YouTube channel or create reels to gain traction.

• Articles: if you already have a website, you can publish articles and blog posts discussing industry topics. This will help you position yourself as a leader in the audience’s mind.

Threats to Your Accounting Firm that You Should be Aware of

Just as many opportunities might come knocking at your accounting firm’s door, threats will also loom at equal intensity. Here are some common threats you can be aware of:

Financial Documents Scam

There have been cases where attackers can impersonate the IRS, claiming they were sending an important document.

Attackers generally use emails to attack the firm. The email is sent to one employee or the whole office, hoping someone could click on a malicious link. Unfortunately, clicking on this link can spread malware to all systems connected.

It is essential to make every employee aware of how legal procedures are conducted so that they do not fall prey to such scams.

Data Leaks

Data leaks are flooding the news every day. According to Gemalto, 68 or more records are stolen each second. Generally, an attacker becomes a middleman and accesses the data passing between the client and your firm.

It’s very challenging to stop such attacks, as both the firm and the client won’t see any changes on their screen. However, your firm can take steps to prevent such attacks by using secured servers such as VPN software.

Stolen Identity

Identity theft remains a common threat. According to the FTC, identity fraud incidents rose by 45% in 2020 and will increase because more people are going online.

With advanced tools at their disposal, hackers can easily steal SSNs to impersonate people for several reasons such as financial, health reasons, etc.

The only way to avoid identity theft is through awareness. Talk to your clients about how SSNs work and who legitimately requests them. And to teach them not to disclose such information to unknown people.

Start the Journey of Your Accounting Firm 

Accounting has always been a hot field and will remain that way as long as we have complex tax and legal systems. So this checklist on how to start an accounting business. However, building a business takes years. You will face hidden issues.

Once you show your client why your services are worth it, they will keep coming back for more while bringing in other people.