You’re heading a startup business and are trying to get your ducks in a row. Part of that means arranging all of the necessary business services. However, it’s tricky for new businesses to know when they need to start outsourcing accounting.
Maybe you’re ramping up but don’t fully know what you’re doing. If you’re the type of person who uses a financial advisor for advice on your personal funds, you’re definitely the type of owner who would be eager to use an accountant for advice on your business funds.
At CSI, we’ve partnered with thousands of small businesses over the past 50 years. In all of that time, we’ve noticed that startups tend to be the most excited about using our services and wanted to know:
- How can an accountant help start a business?
- Am I ready to work with an accountant as a startup business?
- What kind of startups does CSI like to work with?
- If I’m not ready for an accounting service, what should I do for now?
How an Accountant Helps You Start a Business
You may know what you want to sell but still not be business savvy. Although not common, it’s possible to partner with an accountant from the very start. Their expertise and connections can prove useful if you’re unsure of where to start.
Learn more about how an accountant can set up a chart of accounts, help you pick out accounting software, choose your ideal entity structure, and set up payroll. The article also includes details about questions to ask when starting your business!
When Your Startup is Ready to Work With a Monthly Accountant
We typically see startups as businesses with less than one year of having their doors open, although different industries have different lengths of time to be considered startups. Maybe they’ve started generating revenue - but not much. They also usually have higher expenses and are not really profiting.
Most startups aren’t large enough to have an on-staff accountant, and some are looking for service beyond what an annual tax accountant provides. They may also not be interested in continuing to “DIY” their accounting as it ramps up. That leaves them considering working with a monthly accountant.
However, monthly accounting may not be the best place to start out. What factors should you consider when determining if you’re ready to work with a monthly accountant? The potential for advice, activity increases, and funding to stay afloat. Let's dive into these topics some more.
Advisory Potential
Sometimes business owners are so eager for advice from an accountant that they don’t even know what they’re asking yet. It can be difficult to offer advice specific to your business before the wheels are rolling.
However, if your startup is already doing a decent amount of business, you may notice trends and find more specific opportunities to discuss with an accountant. It’s at that point when you would truly begin getting great value out of the service.
Accounting Activity (and Fee) Increases
Pricing the service is another challenge. Accounting services determine their fees largely based on how much work your account will take. If you’re not in motion yet, that fee can start very low but skyrocket once you’re ramped up in as little as a few months.
Make sure you're working with an accounting service that is honest about how your investment with them might change as you grow.
Funds to Lose
It’s one thing to be properly backed with funding from your own money or an SBA loan, but it’s another thing to expect that you’re going to lose quite a bit of the funds as you take off. Accounting is an investment - and investments are not instant returns.
Don’t start working with an accountant if you’re not financially stable enough to give some time to see results. Most likely, you won't see results overnight. Plus, different accounting services may expect you to possess different amounts of money. We go over what CSI works with in the next section.
What Startups CSI Works With
At CSI, we place some restrictions on the startups that we’ll accept as clients. It’s not that we don’t want to help you - it’s that we want to make sure you’re getting the proper value out of your accounting solution, and we want to ensure our “good fit” clients continue to have our focus.
We work with year-long contracts, and many small businesses fail in that time period. Once you get past a year, you’re no longer really considered a startup.
Ideally, we want to work with small businesses that are generating cash flow (not necessarily profits!) in the first three to six months - proving they are truly a business and not a hobby.
We like to work with franchises because they must have more funding behind them to handle the franchise fee it takes for them to get started. Industries with longer “startup” periods that won’t generate revenue for a few years are not a good fit for CSI while in that startup stage.
While we can work with someone fresh, we have to admit that they may be difficult to advise in-depth. We can offer general, getting-off-the-ground advice, but it’s difficult if there isn’t much accounting data yet. We also won’t be able to help you save on taxes right away if there’s a lack of tax history.
Later on, we’d be able to help you understand where you’re spending all of your money. Where is your revenue going? Can you start paying yourself a salary? These are custom things that all new business owners want to know, but we need to already have some data in place to advise you.
As we mentioned in the previous section, accounting services will have difficulty pricing startups because they can’t anticipate how your accounting activity is going to look once you get ramped up. CSI reevaluates your fee routinely to ensure you’re paying the correct amount for the services you’re getting.
You should also have patience and an understanding of how startups work; your expenses will likely exceed your revenue for at least three to six months, and you may not even be profitable in your first year of business when you consider your startup expenses. This is all completely normal! The value you get from an accounting service takes some time, especially considering these additional hurdles that startups face.
What to Do Instead if You’re Not Ready for an Accounting Service
If you’re not ready to work with a monthly accounting service, that’s okay! There are other options that are not as much of an investment. In the meantime, feel free to use our free resources, such as our Learning Center or our Small Business Accounting Kit.
It’s perfectly fine to start by doing your own accounting. However, if you don’t know how to reconcile bank accounts and see where your money is going, you should get help with bookkeeping and work with a tax accountant annually. Make sure you work with a business attorney, too!
Other resources you should look at include:
- Your Secretary of State’s website for free guides
- Your local chamber of commerce for networking opportunities
- Google (Seriously! There are so many free resources for startups.)
Partner With a Monthly Accounting Service
As a startup, it’s hard to know when you’re ready for an accounting service. However, now that you know more about how an accountant can help you get started, if monthly accounting is a good option for you or not, if you’re a good fit to work with CSI Accounting & Payroll, and what your other options are, you should feel more confident moving forward.
Do you align with the types of startups that work well with CSI Accounting & Payroll? If so, we invite you to schedule a free consultation by clicking the button below:
Not ready to talk yet? That’s okay! Remember, you can always visit our Learning Center or download the Small Business Accounting Kit below:
Your Secretary of State’s website for free guides
Your local chamber of commerce for networking opportunities
Google (Seriously! There are so many free resources for startups.)
