It is common for early-stage startups to put off hiring an accountant, either because they think they don’t need one or because they think they can’t afford one. In some cases, the idea of retaining an accountant is not even on the radar of early-stage founders yet. While it might seem too soon to some, most startups should make an accountant one of their first hires or outsourced services.
You might be saying, “No, not yet. Not us.” Your startup is likely trying to bootstrap and make every precious dollar work toward success. Maybe you don’t see the dire need to allocate some of that capital to an accountant. Many founders mistakenly think, “I hardly even have any money, why do I need a bean counter?” But the fact is, accountants do far more than count money and prepare taxes. In the early stages of a business, an accountant can be your trusted business partner. An experienced accountant can set your startup on the right financial path, placing you miles ahead of the competition in future financing and investment rounds.
Having a qualified accountant manage your books and financial plans can paint a very responsible and organised picture to investors. Investors, angels, and venture capitalists don’t just look at revolutionary services and products – they look for well-structured companies that are positioned to be able to scale easily when the times comes.
Read on to learn more about Accountants and early-stage startups.
When Your Startup Should Engage an Accountant
The answer to this question won’t be the same for every company. But the answer might be: sooner than you think. It would be best to have an accountant on hand after reaching the original round of capital-raising.
Once you have your Series A funding in place, having an accountant on hand can keep you from making expensive missteps with that hard-won capital. Also, as your expenses start to grow, your balance sheets will change dramatically and quickly. For example, taking on an office space, additional employees, starting or expanding development, production or manufacturing will fundamentally change many of the assumptions you formerly had about your finances. You’ll need financial reports and forecasts at the ready, both for your own planning and for prospective investors to review. Your new accountant can actually be a money saver rather than a major expenditure as they track your burn rate and recommend places where you can cut costs.
The Accountant’s Role in a New Startup
Far more than just a number cruncher, an accountant retained early in the life of your startup can provide a host of benefits and advice that you may not have considered. For example, they can: put payroll and other payment systems in place, help with creating business entities, acquiring the necessary licenses, implementing financial systems, financial planning and tracking money as well as the typical tax preparation and financial reporting expected of accountants.
Let You Focus on the Founder’s Role
Having an accountant allows you to palm off the duties associated with money management and focus on making your company as strong as possible. Imagine the time you could invest into marketing, creating strategic partnerships, hiring the right talent, customer service, sales, and product R&D if you did not have to spend hours balancing accounts and managing money.
Most of the hours that new founders spend on tasks that should be done by accountants could be far better used on other tasks. Most founders, unless they have a background in accounts, are far slower at doing these tasks and tend to make costly mistakes as well.
It is not surprising that most founders and small business owners that don’t engage an accountant cite taxes and other account-related issues as one of the most stressful issues they face at work.
Impress Investors
Your financial statements are an indicator of your entire organization and they need to be flawless in order to raise large amounts of capital. High-quality investors are rarely going to be impressed by the kind of low-level financial reportage that a founder without an accounting background can provide on their own. The old adage, “You have to spend money to make money” would fit well here. An investor wants to see that you have all of your financial processes in order and that his or her capital investment is as low-risk as it could possibly be.
Investors want to know that their capital is safe in the hands of a team with a strong plan in place. Any investor worth his salt will immediately ask to see financial reports, business plans, burn rates, market data and growth projections. Having a verified, experienced accountant will help tremendously in providing this kind of information. If you can’t provide this data, you can kiss big investors goodbye and watch as they invest with your competition.
Advice You Can Rely On
A good accountant that’s suited to your type of business will have worked with lots of businesses similar to yours and can often help you avoid pitfalls they have seen others make. His or her advice can be priceless when it’s time to expand. They can advise on timing, finances, the market as a whole and let you know how to minimize risk.
Added to that, having your finances in poor order is one of the leading causes of new business failure. No matter how great your product or service is, without the right infrastructure in place it is going to fail.
It is much better to start early with a qualified accountant than to struggle to put processes into place later and firefight when there are emergencies. Find an accountant that’s just right for your startup at Asia Accountants Network.
This article is written by Adrian Mah from Asia Law Network.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.