Starting Your own Accounting Practice For CPAs
Many CPAs use their credentials for advancement on a job. An even smaller percentage of CPAs work for regional or local CPA firms. There the possibility exist of persuading the clients you work on, to join you in your new private practice. But, that means you would be stealing the hard earned business your former employer may have struggled to get. A very poor move would be to burn that bridge when you’re just starting out. A smaller percentage of CPAs start by working for national or even international CPA firms. Unfortunately, the probability of getting a fortune 1,000 company as a client is poor.
It’s not necessary to start an accounting practice in the dark or stab a former employer in the back. The Saafenet Corporation developed a means for CPAs to start their own private practices and earn millions with it. The Saafenet strategy will also work for CPAs that decided to use their credentials for advancement in industry, as well. Even when they have no public accounting experience.
CPAs planning to practice would be advised as follow:
Accounting graduates have a bad reputation for giving away free services to friends and family. Most times they think it’ll give them exposure to real accounting and tax situations. Don’t start a practice if you haven’t taken steps to prepare for that challenge. And, giving away services is not a good way to get exposure. The best place to get some exposure is while performing client engagements. You have to use your discretion on whether you want to charge for research hours when learning something new.
Charge for professional services as though you’re a professional accountant, not a bookkeeper, or a para professional. Preparing for the CPA exam will have shown you how to research accounting, auditing, tax, and business law topics. Thus, you won’t be entering private practice in the blind. Your service has value and if you prepare properly, it’s not necessary to undercharge. Or worse, give away your time free. By the same token, don’t overcharge. Look at what established firms charge, then use that as a yard stick to determine a fair price. You don’t have to know every detail of an engagement to accept it. But, you may want to avoid accepting engagements where the research time will be overwhelming. That can be damaging to the realization for the work.
Plan to provide value to your clients
Let’s examine the best way to prepare, so you provide value to your clients, and a decent living for yourself. The first step is not to rush into this and leave your job prematurely. It takes a while to build a client base, and a regular stream of income. You still have to live, until you get this going. Stop and take an inventory of your skills. This will help you to determine the types of services it makes sense for you to offer. Next, realistically decide what you’re willing to study to firm up any weaknesses you feel you have. You must then decide who would most want the services you plan to offer.
If you worked in industry or government and performed general ledger work, that would be most appealing to larger companies. You may be able to promote your services as a freelancer. However, that would limit the types of clients you might serve. So, you may want to look for other services you may find interest in offering. As a CPA, you can always offer limited reviews and compilations. Even with those, remember you must have work to fill your down time, when no one is buying freelance or financial statement services. That’s a personal choice, so, be certain you select alternate services that keep regular revenue coming in.
You have a head start if you have previous public accounting experience
This is not an indication those who worked in government and industry should overlook private practice. They would simply need to do research helping them understand the playing field for public accounting. If you worked in one of the international or national CPA firms, you may have developed audit, tax or management skills. Audits tend to occur during what’s known as the audit season. And, we’re no longer allowed to offer the same company both management and auditing services, helping prevent us from auditing our own work. You may choose to offer tax services year round, which is a possibility. Remember, the lion’s share of tax work occurs during tax season, but you can develop tax planning and tax resolution services that can help keep you busy. If you left your former employer on good terms, you may also be able to get him to hire you for overflow work when they’re in need of additional staff. But, you must plan to market your own practice, making that choice unsuitable for long range income.It can fill some gaps in your earnings when your practice is new.
If you worked in a regional or local CPA firm, you may search for opportunities similar to those you previously worked on. In my opinion, CPAs planning to leave small firms have the greatest opportunity to set up profitable general practice, operations. Just be certain you’re prepared to offer the full range of accounting services. This can be done with a combination of your own skills and through subcontractors wiling to allow you to white paper the services they perform on your behalf.
Once you understand what you are capable of offering you can search for your niche
Understanding what your strengths and weaknesses are, gives you a starting point for what you are capable of offering, and/or gaining the skills to offer. If your experience is focused in a single area, unless you have firm agreements with companies before starting to practice, you may want to expand your knowledge of services clients expect from CPAs. Then decide if you’re willing to learn new skills, expected from a CPA. Don’t allow yourself to become a jack of all trades and a master of none. Specialization has it’s advantages. Unfortunately, it can also have drawbacks if it’s all you can do.
Thus, a material effort must be placed on understanding the basics of what you hope to offer clients. Even if you white paper some of your work, you need to be able to review what will be issued under your company name. Once you make those decisions, you must decide who’ll most benefit from the services you plan to offer. The selection of a niche, hungry for your services is one of the most important steps you’ll ever take. Attempting to sell to everyone, or accepting any work you can get, seldom works to your advantage.
Consider making small business programs a part of your niche where possible
Many large companies have small business programs. Join those as quickly as possible. You may not get work from them for a while, so it’s not a good idea to try to build a practice on those alone, If you can prove disadvantage the state and federal governments offer a wide array of small and disadvantaged programs. These can make a material difference in your earnings once you’re able to start getting work from them. However, no firm can be built exclusively on small business programs. The federal government offers several excellent business development programs for CPAs and others who sell products and services they use. Their best programs are the HUB Zone and 8(a) programs. The HUB Zone program is location based, with other requirements for your employee mix. But a better choice may be the 8(a) program, where the right location isn’t a requirement. To get in the 8(a) program requires you have an existing practice that has been self supporting for a couple of years. You must also be prepared to prove your operation payed you enough to live on, and you had no W-2 income prior to applying for entrance into that business development program.
Properly used you would build your firm to a point it could survive after graduating from that program. You could then qualify to get open market contracts from the federal government that can be extremely lucrative. Government work should however be viewed as a single revenue source. You shouldn’t plan to build a practice around it. I have never seen a CPA firm work exclusively for the government and prosper over the long run. There are exceptions to that view, but, it’s better not to plan for that for the future.
Planning for the Implementation of Your Practice.
Having determined what you’re most comfortable doing, and who’s most likely to buy it, it’s time to make the first draft of your business plan. Starting any business without a plan can become a disaster. Developing a business plan for yourself, will give you some incite on how to offer that service to potential clients. Preparing your own plan must include how you’ll address presenting the right image to the clients you to plan to attract, and situations you should avoid. Developing a client’s plan must include the same care.In the process you’ll have gained exposure to a service many clients approach CPAs for. You must however, be prepared to research the industry a client request a business plan for, unless it’s for an area in which you have extensive exposure.
Many CPAs prepare a plan required for a loan. Others prepare a plan to get into a small business program. Some CPAs use them to attract partners and dozens of other reasons. Your business plan is your roadmap to success. You wouldn’t take a trip to a place you’d never been without a map or GPS (which is essentially a map), so why attempt to start your business without a roadmap. In developing your plan, it must be flexible, as it may require updates as early as your first week of operation. Attorneys are seldom willing to prepare business plans, and many times turn to us for that service. Most online services offer clients a weak business plan for use in managing companies. Most people in search of a business plan look to CPAs for that type of help. Don’t wait until you get a request to learn the right way to develop one. Substantial literature is available on that subject and it should be a part of your library.
Having Developed Your Plan, take a serious look at your ability to finance it.
There are many ways to finance a new accounting practice. However, there are three methods you should avoid. Borrowing from a financial institution is great once you get underway. However, it should not be used for startup. Because, the only assurance you’ll have is you’ll need to make a regular loan repayments. This can be bad when you’re having a bad month which is a high probability when your firm is new. Investors can cause the same problems. Though, in some cases they can be made to wait for your payment as long as the wait isn’t too long. If you’ve accepted a royalty arrangement with investors, they can worry you to death about their royalty payments. And, if those royalties are tied to a lien to your assets, there’s no telling what types of problems they can cause.
Finally, grants can be great because you don’t have to repay them. However, seeking one puts you in competition with potentially tens of thousands if not hundreds of thousands of other grant seekers. Many of those people will have been through the process multiple times, some have professional writers, and other professionals increasing their chances of getting a particular grant, and if you think you can beat them, good luck. Many grant recipients will have lost the fire to start a business by the time they receive grant funds. In some situations they can be useful when planned for use as a revenue stream after you open for business.
Determine Your Equipment Needs
And, plan to pay for it with your own saved money, elbow grease, and/or the Saafenet five (5) point fundraising plan. The Saafenet training manual will show you how to completely establish the foundation for an accounting practice which will include addressing both your equipment as well as research needs. During this 120 day start-up period, you would develop a business plan. Using Word Press, you would develop a blog or a website. You would apply for every small business certification program you could find, laying the groundwork for future revenues. With the understanding those small business programs might not yield fruit for around a year.
A step by step plan is laid out for you in the Saafenet training manual to accomplish those tasks. Should you need professional advice from current and former CPA firm owners, a website and specific direction on how to operate your new accounting firm, contact the advisors at Saafenet. They offer several levels of start-up packages for new entrepreneurs that include a website, and advice for operating your accounting firm successfully offline. And, the cost are thousands of dollars below market rates allowing you to become a practicing accountant without spending every waking moment in research or spending every dollar you have, to get started.
Preparing to open for business
As you moved near your grand opening, you would send out announcement cards. Begin to develop a content marketing strategy for your website, and perform other actions to begin to get clients online. The most important issue you must address offline is your location. You’ll find most of the business you’ll get will come from within a few miles around the location of your office. Take an inventory of the businesses you drive by and make a decision based on the industry and your best guesstimate of the size of the business. Even if you work from home, which we strongly suggest initially, the lions share of your clients will be individuals and companies close by. A beauty of starting an accounting practice is most of the work you do will be at the client’s location.
If you want to specialize, remember the accounting profession does not have an examination allowing you to advertise you’re an expert. Consequently, you must be careful in how your promotions are worded. You’re able to state you have extensive exposure to a specific knowledge base, but not much else. Should you plan to build your practice around a particular area of expertise, you may want to investigate joining with other CPAs with extensive exposure to something else. This would make it easier to say you have an accounting firm. All CPAs are authorized to do limited reviews and compilations, so it’s possible to build a firm around your area of expertise and other basic functions expected from all CPAs.
You didn’t take a three day exam to be a bookkeeper
Avoid doing bookkeeping work yourself. You didn’t take a three day exam to be a bookkeeper. It’s labor intensive with low realization. Though it’s essential for your clients, it isn’t work a CPA should be doing. If you must do it, see if you can find an accounting firm, freelance bookkeepers, subcontractor or others that will let you white paper that service, send it to you rather than your clients and allow you to present it as your own work. You could earn the amount of any discounts on fees you might pay bookkeepers. Allowing you to earn money on work in which your involvement could be limited to review.
Some companies will contact you for bookkeeping work, because they may be unaware of all CPAs can offer. You may be pleasantly surprised once you educate them. It’s also a good idea to have a pamphlet or a flyer to offer to them as a reminder. Most state societies of CPAs also list services clients can reasonable expect to get from their CPA. You might also direct them to those websites. You must have a firm agreement with whomever you select to do bookkeeping for you, that there be no contact with your clients. These arrangements must be established prior to your grand opening, as you want to turn away as little business as possible. Especially if it fits within the parameters you’ve determined will identify your practice.
The Areas You Should be Working In
Passing the CPA exam indicates you have a good understanding of accounting, taxes and management. Compared to a lay person, you’re an expert, but without an exam to prove that, we can’t say we’re expert in anything. However, those are the three areas dictating the services you might offer. You should look to maximize revenue in accounting, which should include auditing, limited reviews and compilations. Prior to tax season, you could register to have Turbo tax for the Web or another well known web based DIY tax program added to your website. You may not earn a lot the first year, but in future years it can be a real money maker. Then you could offer tax planning, compliance and resolution services to your clients offline. All you could offer in the management consulting practice would be too much to mention in an article of this size.
You might then arrange with drop shippers to sell accounting supplies, calculators and computers online. This may lead to you earning money 24 hours a day even when your firm was closed. Over time you could specialize and offer niche accounting services to niche clients. By becoming a Saafenet affiliate You could arrange to have our business consulting services white papered. All you would have to do is read the reports and be ready to discuss them. Or, you could transfer the reports to your letter head, and charge hundreds or thousands of dollars for them. But the cost would be minimal. Allowing you to give your new private practice a look of depth, while you earned money on every referral we worked on. You may start alone, but with us, you’d immediately have the look of a multiple person CPA firm.
There’s so much more you could use to start earning money, both prior to and after leaving your job. It would be impossible for us to include all of it in this post. You have to feel out your clients to see what they’ll tolerate. Now, let’s look at another business you may consider, if you’re trying to get away from debits and credits accounting. Many people are able to continue their love for numbers by practicing financial planning.