Best CPAs for Startups: Choosing the Right Financial Partner

Cash is king. Any business needs cash flow to pay their staff, pay their bills, cover overhead costs and, ideally, profit and grow. But you could say that cash is even more key for a startup business. It’s their lifeblood, and managing this key resource is important to enduring the early days of a new firm and scaling up over time to gain more market share. That’s the value that a CPA can help provide to a young business. Read on to learn more about the importance of a good CPA for a startup firm.

What does a CPA typically do for startups?

As the name implies, CPAs for startups are certified public accountants designed to work with small, emerging businesses. Startups are companies that are in the initial stages of their business operations. They’re typically financed by the founder and aim to secure outside investments to grow and prosper and serve as the industry disruptors they intend to be.

Because of this, startups also have unique financial requirements – and one of the keys to their success is the right type of accounting services and financial management. It’s estimated that more than 80 percent of businesses fail due to cash flow problems and any successful startup needs to be managed properly to stray away from such problems.

At the same time, not all CPAs specialize in working with startup businesses. Just as you wouldn’t visit a dentist to have your car repaired, you don’t want to work with a CPA who doesn’t have experience working with startups. A good CPA can help a young company:

• Scale and grow by implementing the right accounting software tools and systems
• Grow with a business as it grows over time
• Provide robust financial reporting services and detailed financial statements
• Serve as a long-term partner and extension of your business

Why Startups Need a CPA?

Every business needs a good CPA, but such services are especially important for startup businesses. Keep in mind that more than 80 percent of small businesses fail due to poor cash flow – and there are various complexities that young businesses need to be able to navigate to meet various requirements. We’re talking about necessary paperwork, investor and board reporting requirements, tax credits and incentives, research and development credits, tax laws and regulations, and regulatory standards among others. Depending on how well a business can manage these factors could either cause a business to sink or prosper.

A good CPA for startups isn’t able to just manage the necessary financial requirements that startups must abide by to stay in compliance, but can also scale with your business as it grows and emerges in the market. From strategic planning to cash flow management and financial forecasting, a good CPA for startups should serve as more than just a partner, but as an extension of your business.

How to Choose the Right CPA for Your Startup

So how do you select the right startup CPA? Well, most startups more than likely do not need a single CPA, but would benefit greatly from a strong startup focused accounting firm. There are several factors that you want to carefully consider beyond just experience working with and aiding young businesses. Here’s a closer look at some of these considerations:

• Industry specialization: How much experience does the firm you’re considering have working in your industry? Different markets and industries face different financial challenges. An accounting firm experienced in your realm can help your operations that much more than one that is not.
• Cultural fit: Is the accounting firm you’re considering a good fit for your business? Do you share the same values? Are they transparent communicators? Financial proficiency is one thing, but cultural fit is also an intangible that you don’t want to overlook when selecting a firm for your startup.
• Tech proficiency: Bookkeeping these days is largely done outside the physical book. Today’s accountants utilize various software and programs to help streamline accounting operations in an easy-to-view dashboard. A good startup accounting firm is also one that’s technologically savvy and implements many of these programs for the betterment of your business.

So how do you properly assess an accounting firm to ensure they’re right for your business? Start by checking boxes on the basics, like credentials. Also, be sure to ask for references. Finally, you’ll want to sit down and chat with the specific professionals you’re considering to get a feel for communication preferences, cultural fit and more.

Services Offered by Startup CPAs

CPAs for startups can offer many valuable, specialized services for young businesses. These services include the likes of:

• Tax filing, tax planning, audit and assurance
• Bookkeeping
• GAAP compliant accounting
• Paying vendors
• Invoicing clients
• and more

A CPA for startup businesses may also offer more niche services that can be helpful to your business, such as R&D tax credit consulting, international tax planning and cryptocurrency accounting.

How CPAs Help Startups Secure Funding & Manage Financial Security

Fundraising rounds are essential for any startup — and a CPA can help ensure that financial records align with investor expectations. For instance, startups are less likely to gain investor support if their finances aren’t well managed.

Conversely, startups with clean finances tend to be attractive to investors because they offer more transparency and provide a more accurate snapshot of your startup at its current place and time. Investors don’t just select what startups they want to invest in and hope it all works out — they perform rigorous financial due diligence to ensure they’re able to maximize their return on investment. Ensuring that your startup’s financial data is well-managed and easily digestible is important for communicating your startup’s value.

Startup Tax Strategies: How CPAs Reduce Burn and Optimize Cash Flow

CPAs also play an important role in helping startups save on their annual taxes and in working with the IRS. For instance, CPAs can help startups take full advantage of the R&D tax credit, which offers a dollar-for-dollar tax reduction for qualifying activities related to the design, development or improvement of products, processes and techniques. A good CPA can help your startup define what qualifies and help minimize your total tax liability.

Additionally, CPAs can ensure compliance with IRS regulations and reduce the risk of an audit and any potential financial penalties that may come with non-compliance. They can also assist with tax planning to help optimize cash flow and extend runway.

Industry-Specific CPA Solutions for High-Growth Startups

Different industries have unique accounting needs. For instance, a SaaS startup is going to have different accounting needs than a HealthTech or eComm startup — it’s up to you to understand any unique requirements and comply accordingly. That’s another area where a CPA can help. Just be sure to find one who has experience in your industry and can deliver the kind of personalized service that you need.

Startups can also benefit from CPAs who understand venture capital funding and financial modeling. When you work with Graphite, we’ll pair you with a financial strategist who has specific expertise and experience in your startup’s industry to optimize your growth and add more value to the overall partnership.

CPA vs. Bookkeeper: Understanding the Difference

While many associate CPAs and bookkeepers as the same, they’re quite different. Bookkeepers are professionals who manage more of the day-to-day finances, like payroll and expenses. CPAs are more utilized for strategic planning and consulting purposes. In many cases, your startup is likely to need both a CPA and a bookkeeper.

Think of a bookkeeper and CPA like this: The bookkeeper is like the nurse. They’re the professional who takes care of more day-to-day activities, while the CPA is the doctor who analyzes the data and offers the necessary advice to stay healthy. The bookkeeper (nurse) can help advise the doctor about what they observe to create more of that necessary long-term strategic plan.

As we said, if you want your startup to grow and become more profitable over time, you’re likely to need both a bookkeeper and a CPA.

Common Mistakes to Avoid When Hiring a Startup CPA

From reading this post, you should already get an idea of what you should be looking for when selecting a good startup CPA. In this section, we’ll take a closer look at some common mistakes during this process that you’ll want to avoid. Here’s a closer look:

Don’t prioritize affordability over quality of service

As a cash-strapped startup looking to make a name for itself in a competitive business environment, it can be natural to want to go with the low bid when selecting a CPA. But it should go without saying that all CPAs are not created equal and you often get what you pay for. It’s more important to find the right cultural fit and a CPA who knows your industry and specializes in helping young firms flourish than it is to save a buck or two by cutting corners. Remember, a good CPA should serve as an extension of your business – and investing in a quality one is likely to return the investment over time.

Don’t underestimate the importance of cultural fit

Shared values, good working relationships and mutual trust and understanding are important factors when it comes to working with any partner, let alone one that you’re going to rely on for financial advice and strategic planning that’s critical to your future as a business. On this note, you’ll want to make sure you’re doing your homework to ensure that any CPA you consider is more than just experienced with startups and has experience in your industry, but able to build a positive working relationship with your firm as well.

Don’t hire a CPA with a cookie-cutter approach

You should hire a CPA with the intent of following their advice to help meet or exceed any short or long-term goals. In other words, you don’t just want to hire a CPA because you have to hire a CPA. Any CPA should serve as an extension of your business and act as someone that you take actionable advice from. Underutilizing a CPA’s experience can be a major issue that dictates the success of your business. And if you don’t trust the CPA that you hire, how are you going to utilize it to its full potential?

Don’t hire a CPA you haven’t set clear expectations with

Transparency is key in any relationship between a CPA and its business partner. That said, it’s important to set clear expectations with any CPA you’re considering, from how you plan to communicate to how you want to collaborate. Set clear expectations to ensure everyone is on the same page in this important relationship.

How to Find the Ideal CPA for Your Startup

Just as you would when selecting any valued partner, you’ll want to do your due diligence when searching for a CPA for your startup. Here’s a look at some determining factors that you’ll likely want to weigh as you search:

• Proper licensing
• Experience and expertise working with VC-backed startups
• Experience with tax strategies and knowledge of the R&D tax credit
• The ability to perform financial forecasting and fundraising
• Experience in your startup’s industry for more personalized service
• Intangibles such as how they prefer to communicate, pricing structure, level of service, etc.

Expert CPA Services for Startups Near Me

As qualified, experienced accounting professionals, Graphite serves startups throughout the United States with CPA and specialized financial services. We have a strong presence in various key cities with strong startup ecosystems.

Supporting New York’s Startup Ecosystem

New York is one of the top startup hubs in the United States, home to various VC-backed companies in diverse industries. Graphite’s roots are in New York, and we’re still active here today, helping startups navigate their financial challenges to scale effectively and efficiently. New York also has unique regulatory compliance requirements, which we help startups meet. Our services also help assist with tax planning.

Empowering San Francisco Startups

San Francisco is another city with a strong, fast-paced startup ecosystem, especially in tech. Graphite has the experience and expertise supporting early-stage and high-growth startups in the Bay Area. We can also help tech startups understand tax credits and if the R&D tax credit applies to them.

One popular option for San Francisco startups is a fractional CFO, especially when it comes to managing burn rate and assisting with fundraising. Fractional CFOs can also grow and scale with your startup as it evolves, essentially serving your startup as a long-term partner.

Accelerating Growth for Austin Startups

Austin is emerging as one of America’s most robust VC-backed startup hubs, notably in SaaS and tech. Graphite’s CPA and fractional CFO services help support Austin startups with their financial forecasting and strategic planning initiatives. Such partnerships can also help ensure that startups are scaling responsibly. Other benefits of working with Graphite include ensuring tax compliance and maximizing tax strategies, especially considering the unique requirements of the SaaS and tech industries.

Austin, San Francisco and New York are just examples of key startup areas Graphite can help support. We also provide our CPA and fractional CFO services to startups throughout the country.

Why Choose Graphite as Your CPA Partner?

Graphite is more than just a trusted CPA partner, but a trusted CPA partner who specializes in working with startups. We’ve partnered with thousands of startups throughout the country to assist with financial management, forecasting, tax planning and more. We also offer CFO-level advisory services via our fractional CFO partnerships that go beyond basic accounting and financial management. We strive to be more than just a partner, but an extension of your startup to help it grow and evolve.

Secure Your Startup’s Financial Future

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As a startup, you’ve already got that idea that’s going to disrupt the market – now you need the right partners on your side to help you flourish. A good CPA is surely one of those partners that can help assess your financial health and offer strategic advice on how to meet your goals and scale your operations.

If you’re entering the market as a new business, don’t wait to select a CPA. Being proactive is key, as there will surely be financial challenges that must be navigated to stay compliant legally and seize any growth opportunities.

Graphite: CPA & Financial Advisory Partner Built for Startups

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If you’re a startup looking for the right financial services firm, connect with Graphite Financial. With a proven track record of serving startups and helping them meet short and long-term financial goals, we have the experience and expertise to get you off the ground running and serve as your long-term financial partner. When you work with Graphite, you can ensure personalized service and industry expertise as we aim to become a value-added extension of your business.

For more information and to schedule a consultation, contact Graphite Financial today.

FAQs

1. What are the typical fees associated with hiring a CPA for a startup?

The cost largely depends on the fee structure for a CPA. Some charge fixed monthly fees, while others will charge based on services provided or at an hourly rate. Make sure you discuss costs and budgets during any consultation with a CPA.

2. How can a CPA help in preparing for fundraising rounds?

A CPA can help keep the books clean and ready to audit to offer robust financial reporting through any fundraising efforts.

3. Do CPAs offer assistance with tax compliance for startups?

Yes, a CPA plays a significant role in helping to identify any eligible deductions or credits for a startup firm. A good CPA will also ensure any firm – let alone a startup – meets all deadlines and requirements on taxes.

4. When is the right time for a startup to hire a CPA?

As soon as possible. When it comes to your finances, you don’t want to be reactive. Start exploring your CPA options as soon as possible when you’re getting ready to formally launch your business.

5. Can a startup CPA assist in financial forecasting and budgeting?

Absolutely. A good CPA will become an extension of your business. CPAs will do more than just set strategy and create the financial infrastructure that can help your firm grow, they can also assist with forecasting and budgeting.

6. How do startup CPAs stay informed about the latest regulatory changes affecting businesses?

CPAs invest as much time in their profession as they do in the businesses that they serve. This often includes attending training sessions, webinars and workshops that help keep them updated on any changes. Many CPAs also subscribe to industry-specific magazines and newsletters that help keep them informed of changes or proposed changes.

7. What are the benefits of engaging a CPA with experience in the startup ecosystem?

Experience is everything, especially when you’re working with a niche segment like a startup. It should go without saying that startups tend to have different financial needs than established businesses – and it’s imperative to work with a partner that can meet those needs while also offering strategic financial guidance. That’s why it’s so important to find the right CPA partner – and to start engaging with that partner right away.