The Basics of Starting an Accounting Firm

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When professionals consider progressing through the ranks in the accounting field, becoming a Certified Public Accountant can represent just the first of many steps. For example, after spending time working within accounting organizations, ambitious and driven individuals may take an entrepreneurial approach and establish their own accounting firms.

Two accountants work on figures

CPAs starting an accounting firm should make sure they are ready for the challenges and difficulties that can come with becoming a small-business founder. These professionals should have strategic and personnel leadership acumen, coupled with deep knowledge and expertise around key accounting concepts and practices. The information imparted in a master’s degree program can prove essential as these entrepreneurs strive to make their accounting businesses successful.

Why start an accounting firm?

Starting a public accounting firm rather than simply working for one is a decision based on control and responsibility. Finding a position at an existing company will always mean taking a role within a specific framework regarding the types of situations the company handles, its target audience, internal practices, and more. Founding a new business is a way to set these values from the start.

Creating a company means trading the security of a salary for the potential to reap rewards when the business reaches greater levels of success. Individual, independent CPAs and founders of their own new firms can strengthen their chances of success by going into the process with fully developed plans and a clear view of the requirements facing them.

What background should you have to start an accounting firm?

Many of the barriers to entering the accounting field aren’t hard-and-fast rules but questions of preparation. Founding a company depends upon readiness factors that founders will have to measure and assess for themselves, such as whether they can financially sustain their new firms during the startup period. As Hugh Duffy of practice development agency Build Your Firm specifies, founders of companies should have enough capital set aside to keep the practice running for a year before they open their doors. Even businesses that are eventually profitable may fail to bring in income at first.

Not only do accountants need to set aside the financial resources and clear their new business ambitions with their family members, they should also make sure they are ready to promote their company and drive customer traffic. Starting a new company means not having an existing client base to fall back on. Duffy suggests that professionals ready to strike out on their own as company owners should be apt at marketing, being able to appeal to potential clients, and able to differentiate themselves from competitors.

What are the key steps of founding and growing an accountancy business?

According to Duffy, there are four ways to start an accounting practice. Founders can begin from nothing, building up everything from the office space to the technology on their own. They can also begin the business part-time, taking on their own customers while working in an existing full-time role. It’s also possible to form a partnership, with multiple accountants sharing costs and risk, though Duffy notes that his business does not often recommend this option. A founder can also buy an existing practice to remake in their own image — this is an expensive, time-consuming option but does dodge some of the early startup perils.

After deciding on the general model to use when founding a company, the new business owner has to take meaningful steps to get the practice running. The American Institute of CPAs (AICPA) gives a framework to lead professionals through the developmental stages of a CPA firm.

  • Outline financial requirements: Company founders should ensure their personal finances can stand the hit of founding a company. Calculating startup costs is important, as is projecting revenue and expenses for at least a year. This is also the step when professionals should set the pricing structure of their services.
  • Determine business structure and fulfill administrative tasks: Each new company needs to be incorporated officially and registered with the relevant authorities. Companies also need to obey rules by acquiring tax ID numbers, corporate bank accounts, and more.
  • Check accountancy, legal, and insurance requirements: Accountants will have to ensure they are cleared to practice by the industry bodies in their states, obeying all relevant business laws and in possession of adequate insurance.
  • Establish quality control guidelines: Accounting firms that provide assurance services need to have quality control documents that lay down how they will serve their clients’ best interests effectively.
  • Create growth and development strategies: Accountants must know how they will acquire new customers and retain those individuals to grow over time.
  • Network within the accountancy field: Accountants can deal with one another through trade organizations and statewide associations. Such communication among practices may be helpful for firms of any size.
  • Formulate a business plan: Every element of a company’s preparation comes together as its business plan. This document may evolve over time, but it’s important to be clear on how various elements work together to encourage growth and ongoing success.

Surviving the first year as a new accountancy firm is the major challenge facing CPAs who opt to strike out on their own. With little name recognition, no customer base, and all the overhead that comes with purchasing real estate, tech tools, and even office supplies, some business owners will falter during this period. For those who hang on, however, the solid foundations they laid early on may help them hold up over the years to come.

What can you learn in the online Master of Accounting degree program?

Before professionals think of establishing their own places in the accounting field, they have studying to do. The Uniform CPA Exam is an important credential for accountants seeking to promote their abilities. The AICPA explains that passing the test shows boards of accountancy that graduates are ready for state licensure.

The degree programs accountants take in advance of the CPA exam are also formative parts of their professional growth, giving them the up-to-date knowledge and skills that will prove essential in their work. The online Master of Accounting degree program at the University of Alabama at Birmingham prepares students for the responsibilities they will face, whether they are employees or company founders. Since the courses are 100% online, students can fit learning into their existing schedules while still working full time.

Learn more about the possibilities with this degree on the program page.

Recommended Reading:

Issues and rewards in nonprofit accounting

Auditing manager: Explore careers and the value of an online MAc

Sources:

Journal of Accountancy – CPA credential delivers high value Small Business Administration – Small Business Readiness Administration

American Institute of CPAs – Public Accounting Firm Hiring Model Shifts: AICPA ‘Trends Report’

American Institute of CPAs – 2019 Trends

American Institute of CPAs – Starting your CPA Practice Planning checklist

American Institute of CPAs – Starting a CPA Practice