The field of accounting offers tremendous opportunities for advancement, and there are thousands of CPAs out there who want to utilize those opportunities and consider opening their own practice.
If you are thinking of starting your own CPA firm, here are some factors you need to consider for avoiding any pitfalls along the way and get off a great start:
This is a great place to start. Isn’t it?
Exploring the idea of starting and owning a business can be rewarding, but it requires to put all your heart into the work.
Before you put your foot forward in starting up a firm, you need to ask yourself a couple of questions.
- Why do I want to start my own practice?
- Do I have adequate experience in public practice?
- Do I have the positive motivation to succeed on my own?
- Do I know how the accounting market works?
- Do I have the financial means and capital to get started?
- Do I have the ability to articulate my thoughts adequately to work with different clients?
If you can answer the above questions or ready to take up the early phase development challenges, the process of starting your CPA firm will be smooth.
2. Create a Business Plan
Like any other business, you need to comprehend what all you need to have in your CPA firm.
A Business Plan is a roadmap of your business that outlines your goals and how to achieve those goals.
Here is what to include in your business plan:
- The objective of your business and how to align your goals with the target
- Identify the skills and knowledge required to improve the customer experience.
- Define a hierarchical structure (sole proprietor, partnership, C Corporation, S Corporation, or Limited Liability Company).
- Identify your market and decide on the target audience.
- Outline the services that you are going to offer, along with its pricing model and strategy.
- Outline office space, equipment, tax software, and staffing requirements.
As rightly said by Benjamin Franklin, “By failing to prepare, you are preparing to fail.”
It gives us a view that anything without a plan is not worth it. So, before proceeding further, get a business plan ready.
3. Financial Considerations
Once you are done developing a plan for your firm, it is essential to take your economic factors and needs into account. At the early stages, the practices are cash flow negative, and there will be times when you get to experience the challenges accountants and CPAs face in this environment.
However, this is just a part of it.
Apart from your financial factors, consider the current assets, personal debt, payment schedule, estimated startup and operating cost, and revenue.
Moreover, cash management, borrowing costs, cost needed for office space, equipment costs, staffing costs, etc., all are the financial considerations that one must not forget.
So, take this jump only if you are ready to make this transition emotionally and financially.
4. Marketing Your Firm
After you have decided on the services you will offer, it is time to attain and maintain a steady clientele. This is when your networking skills will shine. Initially, with no client base, and when you have just started your CPA firm, positive word of mouth communication is the most cost-effective and the fastest to gain some clients.
There are many channels available to market your business and, in the case of CPA firms, to reach prospective clients.
Here are some traditional and online channels to consider for facilitating communication with your prospective clients:
- Get listed on yellow pages of local phone directories.
- You will want to have a robust social media presence to engage your clients and let them know your business exists.
- Volunteer into the programs and organizations; this will help in developing some business contacts.
- Join some local small business associations.
Some Other Best Practices to Consider Before Starting Your Cpa Firm-
5. Legal Considerations
Lawsuits are a fact of life in business, so be sure to make a note out of legal matters.
Get an attorney engaged to ensure you are abiding by the legal requirements, and there is no illegal practice happening. The legal attorney will handle the formal establishment of your firm as a legal entity.
6. Business Insurance
Before opening the doors to the public, ensure you have insurance to mitigate the risk in case of any losses. Hire an advisor that helps you in setting up insurance coverage and internal risk controls.
7. Maintaining a License
Many state licensing boards require CPAs to continue improving their skills through Continuing Professional Education (CPE) courses and other professional development opportunities to maintain the license.
Hence, you should make sure that all your CPAs are well-qualified and up to date with the latest requirements of the industry.
8. Billing Procedures
Consider establishing a billing process that sets the right fees, prompts bills on time, and handles professional collections. It is essential to set up the refined billing process so that it does not harm the firm’s revenue and cash flow.
9. Hiring Staff
A business cannot run without having to hire professional staff for your CPA firm. Those phone calls, fixing an appointment, handling office duties cannot be done single-handedly.
Make sure you do the background check before hiring an employee for your firm. If your staff does the bills and payroll part, ensure you put a fidelity bond in place.
10. Adopting the Right Tools
When you are starting your own CPA firm, adopt the tools and technologies that help in workflow automation, manage the costs, reduce the manual reporting error, and provides optimum security.
You can also look for better platforms to host your entire accounting process. One of the most advanced platforms available today is the Cloud, which enables all the employees as well as clients to access the accounting data and collaborate with each other in real-time.
Establishing your CPA firm is rewarding and challenging simultaneously at the startup phase. The above checklist will give you a clear picture of how to proceed. However, you also need proper planning, hard work, and self-motivation to grow your accounting firm.
Do you know other factors to consider before starting your own CPA firm? Do share with us in the comments section.
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