For startups, earning money is the exciting part of building a business (after building your product, of course). Tracking those earnings, your expenses, your payroll… that can be another ball game.
Even if you use accounting software to stay on top of it all, if you’re not experienced in this domain, you may quickly find yourself out of your depth. But you don’t have to go it alone — working with an accountant can provide the expertise and support you need to manage your business finances confidently.
Of course, you may not need an accountant in the earliest days of your business, depending on the complexity of the business and your own comfort with finances. Since an accountant is an additional cost, it’s important to understand what an accountant really does, at what point you should consider bringing one on board, and how to find the right one.
Understanding the role of an accountant
An accountant can perform a wide range of services, from managing record-keeping to preparing financial statements to providing tax advice. Accountants can also have various specialties, including analysis, planning, taxes, and so on.
Beyond the basics of managing your startup’s financials, accountants can also provide advice. If your company has received a round of equity or loan funding, an accountant can help you strategize, budget, and manage your money. An accountant can review your finances and suggest ways to optimize your current operations. They can also forecast your cash flow and help prepare financial projections.
Most importantly, an accountant can help you avoid financial mistakes. An error on your tax return or failure to comply with accounting standards can be costly, leading to fines, penalties, and reputational damage with your investors. To avoid mistakes — or worse, financial fraud — accountants can also ensure that your startup has internal controls. They know how to look for red flags and maintain proper oversight.
Assessing your business needs
In your company’s early days, bringing on an accountant might feel like an extra expense — and maybe one you can’t afford. But accountants can often be worth their cost in tax advice alone since they can help you plan properly, avoid penalties and errors, and inform you of deductions you might not be aware of. You may also need someone to help you manage your finances if you’re not comfortable doing it yourself.
While accounting help may be well worth it, if your business is small, you may not need someone full-time or in-house — if that’s the case, you can consider working with an accountant on a fractional basis, or hiring an accounting firm for part-time support.
If you have a smaller business and a good understanding of business finances — or you can’t afford part-time accounting help — there are options. Piecemealing things a bit can be better than nothing: accounting software and a bookkeeper can make sure that your financial records are in order, and a tax preparer can help you file your tax return.
But if you think you’ll need a lot of support with your business finances, well — you probably need an accountant.
What to look for in an accountant
Like any profession, accountants have different areas of expertise. It’s important to find one that can meet your specific business needs and provide you with tailored financial guidance.
Managing the finances of a tech startup is far different than managing those of a restaurant. Managing the finances of a subscription-based software business is different than doing so for e-commerce. The more experienced the accountant is with businesses similar to yours, the more likely you are to get the advice you need most.
An accountant that understands your industry
Accounting is complex, and there are transactional differences between inventory, real estate, accounts receivable, etc. Each has its own accounting standards based on the types of goods or services being sold and the expenses incurred. Not only should your accountant understand your type of business, but ideally they’re familiar with your overall industry in order to best help you maintain accurate records and stay aware of any relevant accounting changes.
For example, in the US, new guidance for IRS Section 174 was passed in 2017 under the Tax Cuts and Jobs Act and went into effect for tax years after 12/31/2021. Under the new guidance, software development and research activities must be capitalized and amortized, which is different from how such expenses were handled previously.
With a significant change like Section 174, an accountant paying close attention to any rules impacting tech-driven companies could be better equipped to make you aware of the new guidance and help you prepare for its impact. (Plus, as tax laws and regulations are subject to change, it's a generally wise idea to work with a professional who’s staying on top of the updates.)
An accountant that matches your working style
Do you want to be as hands-off as possible with your business finances? Or do you expect to regularly rely on your accountant for advice and partner with them for planning?
Your answer will dictate what you should look for when you’re hiring an accountant. Ask questions about working style, as well as the accountant’s availability. If, for example, you’re hiring fractional help, you’ll need to understand when and how the accountant will be available, whether it’s a few hours a week, monthly meetings, or quarterly strategy planning.
As you scope your options, you should also discuss communication and how you would contact the accountant with questions or concerns, if the accountant is not full-time. Fractional accountants or accounting firms will be juggling multiple clients, so you want to ensure you’ll get the attention you need. You don’t want to feel like your accountant isn’t available, especially if you have a pressing question.
How to hire an accountant
Knowing that you need an accountant who knows your industry and matches your working style, your next step is to start the hiring process.
If the role is full-time, you may want to go the traditional route of creating a job posting. For fractional support or using an accounting firm, you could ask other startup founders for recommendations. It's better to start with someone trusted by others in your industry rather than open the floodgates with a job posting.
And trust matters a lot. You’re relying on your accountant to provide you with the best advice for your business. The accountant will also have access to sensitive financial data and your bank accounts, so you need a seasoned, reputable professional.
Once you have some job applicants or referrals, discuss their prior industry experience with other clients similar to your startup. Dig into working and collaboration styles and the type of advice you can expect to receive.
A final consideration during the interview process is the accounting software you’ll use. If you’re not already using accounting software, your accountant should help you set that up. Or, your accountant may want you to switch to their product of choice (especially if they’re working with multiple clients). If you aren’t willing to switch accounting software to the accountant’s product of choice, then the accountant wouldn’t be a good fit.
Onboarding your accountant
Whether you hire someone full-time or part-time, accountant or bookkeeper, you’ll need to spend some onboarding. They’ll need access to your accounts and to understand how you’ve been keeping track of your finances to date and what your sources of income and expenses are. The more robust the rundown, the better equipped they’ll be to spin up quickly.
During that onboarding time, you’ll establish expectations for communication and deadlines for completing any tasks (such as reporting). You’ll also need to grant access to any of your existing tools, or work with the accountant to onboard to their tool of choice. Work with your accountant to create a centralized communication hub for all documentation going forward.
Perhaps most importantly, you’ll want to review any existing financial records you have, so the accountant has a clear view of your startup’s financial health and any areas that need immediate attention. Provide the accountant with any previously prepared reports, tax returns, expense reports, and any prior bookkeeping that had been completed.
And, of course, ensure you discuss confidentiality and provide any necessary NDAs.
Like adding anyone to your team, this onboarding period is critical. The more attention you give it, the more you set the person — and your business — up for success.
Anna Burgess Yang