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5 tips for choosing a startup CPA

If you're a startup company looking for a CPA, there are several factors that you need to take into consideration.

August 30, 2021

5 tips for choosing a startup CPA

If youre looking for a startup CPA, there are several factors to consider.


Whether you want to find the right person or firm for your business depends on what services they offer and how quickly they respond.

Take some time to think through these five questions before choosing!

What is a CPA

A CPA (certified public accountant) is a certified public accountant who has passed a national examination and can provide attest services to clients in the country where they are licensed.
When engaging with a CPA, you might hire a CPA professional or a firm providing CPA services, notably one of the "big four."

The following are the primary services that an accountant offers:

  • Preparation of the company's financial statement.
  • A statutory independent audit of financial statements
  • Submission of annual returns to the Registrar of Companies
  • Submitting reports to various authorities, such as the Internal Revenue Service (IRS)
  • Unaudited reports can't be used with the government, but they can provide additional information to the management or board of directors.
  • Tax planning
  • Fundraising planning
  • Hiring, salaries, and benefits planning
  • Business financial planning, including debt and cash flow preparation.
  • Review of required compliance
  • Review of accounting records maintenance

There are many CPA firms and professionals out there, but how do you choose what is right for your startup?

#1) Make sure you know who will handle your account

Many firms advertise well and will engage with you very closely when you onboard, but in later stages of the day-to-day, they might delegate all of your affairs to a junior CPA.

This is not necessarily bad as junior team members are priced much lower than senior partners, but you must set the expectations in advance.

You must have direct access to the managing partner of your account for an agreed set of cases, and you need to be able to hold short quarterly meetings to review the company's affairs and make sure everybody is aligned.

#2) Set reasonable costs and fees.

Fees can vary widely between accountants. Make sure to compare quotes and understand what is included in the fees.

You should be able to call your accountant for advice on a specific problem without any additional charge. You should also be able to call without penalty during business hours and on weekends in case of emergencies.

Some CPAs will charge an hourly rate, whereas others will charge a flat fee for their services. For some companies, such as those with an established history, the cost to find resources may not be as big of a concern.

However, for startups, it's better to agree on a combination of both.

A flat retainer fee that includes the items you will surely require:

  • Financial reports audit as required by the authorities
  • Tax reports
  • Financial due-diligence material preparation when an investment is planned
  • Reviewed management reports
  • Providing financial info to 3rd party up to four times a year.

The last item on the services included in the retainer is for this reason: it allows you to hire an external CPA for extra services without being bound as a captive customer by your primary CPA.

If you need any other services, such as international tax planning or compensation planning, you can hire a professional specializing in those specific topics.

However, the last item ensures that your offer will still be competitive if you shop around for a lower price.

#3) Agree on a response time.

Many CPA firms provide services to a wide range of corporations of various sizes.

The truth is that they spread the burden among their teams, so each team will handle both your startup and many other businesses, many of which may be significantly larger than yours.

These companies may shell millions in fees per year for various services, which makes them precious customers.

You will not be surprised to find that the CPA firms put the large companies first when prioritizing their work.

Regularly, this is the reality you'll need to learn to deal with (or work with a much smaller firm - more on that later on).

The problem arises when you need your business to be prioritized.

For example, when you need your data room to be ready for series A round.

In such cases, you need to agree on a trump card you can pull, and you get your job to prioritize.

This is hard to achieve as a formal agreement, but at least have a candid discussion with the managing partner and make sure he understands why you might be aggressive.

#4) Startup CPA is better than other CPA firms. Startup CPA in your industry is the best.

While all CPA firms know how to handle corporate of various sizes, startups have specific characteristics that make them unique to other companies.

They tend to grow faster than traditional companies, and they have a unique cost structure; they straddle multinationals from inception and often lose money for many years.

It's better to work with a CPA firm that serves startups and gains the needed perspective to provide you with the information on what is expecting you in the next stage.

We must also take into account the distinctions between industries. A B2B SaaS firm, for example, may be a startup just as a Biomed medical solution is. Both are quite distinct in every aspect of their operations.

If you can discover an accountant who has advised companies similar to yours, you may profit from their expertise on what to expect in your journey.

This might include fundraising advice, industry investors intros, regulators and compliance specific to your industry, business best practices, and more.

#5) Nothing beats the endorsement of a successful entrepreneur.

If you hire one of the big four, you'll be in an OK spot, but there is no guarantee that the local team handling your account is an expert in your field.

Moreover, many companies pride themselves on providing special startup programs. Shop around to understand what is offered, but don't be dazzled by promises of "fundraising help."

Thus, before hiring a Startup CPA, take it one step further and ask the opinion of someone who started their own company.

You ought to find people who have entrepreneur experience in your industry that would be more than happy to provide an endorsement for their favorite Startup CPA.

Good referrals are gold for startup companies that need all the help they can get.

Conclusion

The decision on who to hire as a Startup CPA can be difficult, but several factors affect your choice.

When you're deciding between different firms, consider the following: how specialized their services are for startups, what fees they charge and how quickly they respond.

You should also figure out an agreement with companies in which you prioritize them if a situation arises where you need your business prioritized over others.

If all of this sounds intimidating or overwhelming, let us know! We've been there, and we're happy to provide advice based on our own experience.

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