We have written a lot of articles in the past asking all the startup wonders to ditch DIY accounting and bookkeeping. That being said, CPAs are an important part of startups as they are well equipped with the nuances of accounting. In the initial phase, you can continue doing the accounting and bookkeeping yourself using excel. However, as the scale of operations increases, one needs to bring a CPA on board.
Simply put, CPA is an advanced-level accountant who can help not only with accounting but also with tax consolation, auditing, and business advice. Hiring a CPA who not only has skills but also can be affordable is tricky.
Here is a small checklist of things to look for when hiring a CPA for your startup and small business.
Specific industry experience
Specifically, ensure that your CPA understands SaaS (or whatever industry verticle you belong to) and has startup experience. Things are already pretty streamlined in big companies and other consulting firms. In addition to being a forthcoming self-starter, the CPA must understand the industry differences in financial modeling, assumption setting, key industry valuation metrics, etc.
Can work in a startup
A CPA needs to show greater involvement or perhaps even do a bit of handholding to the first-time founders and startup owners. There are a lot of regulatory intricacies, paperwork, tax formalities, etc that are specific to the startup world. Also, in a startup the teams are usually pretty lean, so the CPA needs to be someone who can work in a smaller setup. Another essential requirement is knowing about the details of fundraising. The statements need to adhere to certain standards if you plan to raise money in the future. A CPA who understands this and cap table management will be a good addition to your team.
Fee that is startup-friendly
Your startup may be bootstrapped or must have been through a friend and family around, so money is something you need to spend very judiciously. So many startups continue to handle accounting themselves because many cannot afford a full-time CPA. Full-time CPAs cost around 80K an year. Thus keeping the startup in mind, it's best to look for services that charge you monthly. It's better to find a service provider rather than hiring a full-time CPA in-house because paying them a full-time salary, health benefits, and other things will be very expensive.
Dedicated 24/7 support
Even if not 24/7, try to find a CPA who can be easily contacted when you face an issue. A responsive CPA will take away a lot of your headaches. That being said, they are hard to find as they charge by the hour and may not have very flexible working hours. Startup accounting is time-sensitive, thus, going for an accounting service might be a better option.
Understanding of your existing finance structure
Whether you are moving from excel to QuickBooks or from QuickBooks to fully automated software, the CPA needs to know the ins and outs of your startup's financial structure. Every business has different KPIs, drivers, and metrics. The CPA should be comfortable working with different accounting software. The more adept he is at using this, the better your statements will be.
Cognate: Your modern-day CPA
We are a cloud-based, AI-driven complete back-office software for startups and small businesses. We work with SMBs and startups and have a team with over 40 years of SMB and startup experience. This is your one-stop shop to streamline all your non-core functions.
We work with multiple client partners (QBO, Gusto, Bill.com, Expensify, Concur, Rippling, etc). So you don't have to sweat if you're using software that's other than QuickBooks. Our dedicated finance experts will be available round the clock to help you through your startup journey.
We want to see you succeed and below is how you can sit back, relax and get the Cognate edge
1. Daily updating of books that reflects on a comprehensive dashboard
2. One-stop shop for all operations. Say goodbye to multiple vendors
3. Financial insights to help you make the next move
If any of this strikes a chord, let's chat. The team that understands your needs is just one call away.