Smart startups hiring accountants from the beginning

Written on Jun 01, 2017

By Jessica Salerno, OSCPA content manager

Working in a startup can be exciting and fast-paced, but also usually means working on a lean budget. With only so much money to go around, certain areas of the business can go neglected.

OSCPA member Roger Prough, CPA, partner at RSM, said it’s common for startups to scrimp on accounting staff when they’re getting off the ground. It’s more cost-friendly to use someone on staff who has a financial background than to hire an internal accountant or pay someone hourly.

Prough was a guest on the recent Columbus Startup Week panel, “Legal & Accounting: Leave it to the pros.” Although it’s possible to download free legal documents and accounting forms off the internet to run your business, Prough discussed why that doesn't mean it’s necessarily the right path to take.

Prough“The main reason it’s wise to hire an accountant is to bulletproof yourself from having bad information, because most startups are looking for aggressive growth and exits,” Prough said. “The last thing you want is to not have your books and records in order.”

“It’s good procedural information for a potential buyer to have. And if you have something that’s been audited or reviewed by an accounting firm, it’s thought to be more credible than just internal financial statements.”

However, Prough understands that startups working within a lean budget are going to look for ways to save money any way they can. Smaller companies with five or 10 employees will be focused on the business growth or operational side, and less on the accounting processes.

“It is risk tolerant based,” Prough said, of a company’s willingness to forgo an accountant. When they do begin to seek out an accountant he said it’s usually the result of growing enough to need the extra oversight or a worse scenario: something has gone wrong.

“The best advice I could give to these startups is to have an accountant, although you may not see the value right now in the very first year,” Prough said. “However, when you want to exit or think about bigger picture things knowing that your books and records are accurate is an important thing.”

2 comments

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  1. B Attaway | Jun 12, 2017
    I have been involved with the start-up operations for six companies during my career.  The start-up accountant has the ability to set up the foundation upon which the recording of financial data is done accurately and is reliable.  This becomes very important in establishing the capitalized cost for depreciation purposes, the owner's equity in the company, not to mention the tax aspect for filing federal, state, and local taxes.  In addition management needs to have accurate financial information to make informed decisions on the progress and future growth of the company.
  2. Brent Berkman | Jun 01, 2017
    It's not just start-ups that scrimp on budgetary costs but existing enterprises as well.  After all, who wants to pay hundreds of dollars an hour in fees for nonexistent perceived value.

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