Should I use an accounting firm or independent contractor?
In every business I've been involved with we've always used the services of small independent accountants. In my new business I'm considering using an accounting firm.
Any benefits in working with a firm when it comes to capital raising, legals and growth? Any advice in general?
Obviously there's a difference in terms of service, ability to scale and price. I don't know your business model nor your financial position but as a startup, I'd be looking at trying to get the best of both worlds by employing a small independent professionals initially and then when you get to the next phase then consider using somebody bigger. I had a consulting business previously and I just used small firms. When I sold my company, the due diligence process required the books to be audited so that's when it was performed by a larger firm (which the acquiring company chose). Obviously if you need specific advice around some of the matters you mentioned then you will likely need to hire specialists in those areas.
This will work out better as you don't pay premium rates for everyday tasks.
Hi Brent, as an accountant that now owns and runs a smaller accounting firm, and has also worked for a large firm, the answer is - it depends.
An accountant in a larger firm tends to specialise in a particular aspect of accounting - eg audit, business services, tax, etc. In a smaller firm, one has to be more rounded, and be across all aspects of accounting. A good small practice should be able to accomplish 95% of everything a business requires, but should also have the contacts, the network and the awareness to refer to a specialist when something is beyond their skill set.
I have found that a smaller firm can generally provide quicker and more personalised service to clients, but many smaller firms are so busy with compliance deadlines that they can offer little else, unless they have structured themselves to do so.
In short- it depends on what you want to achieve, and very much depends on the firm you engage. I suggest that you speak to a number of firms, and base your decision on your ability to relate to the firm you eventually engage; be that large or small.
Pitcher Partners, who you are considering, are an outstanding firm. As with most accounting firms, large or small, the service you get depends on the partner you are using as it is really a large group of small practices trading as if they are one. Ask yourself 'What is it I need to grow my business?' and if the partner fits into this space use them.
Of course, there is an abundance of individual accountants (contractors) who will do your books but may not have the skills to provide quality business advice. It is the business advice which can make or break a growing company so tread carefully if you go the independent route.
Of course, an entrepreneur may not need the business advice as they have the skills to interpret the data a contractor is providing. You will need to make the call.
I would suggest use a simple software like Eazybooks and record your income and expenses at your own pace, then just send your documents to independent contractors. This will save you fees.
Having navigated through this challenge I can offer the following thoughts based on what worked for my business. Initially its important to provide a profile of the business so you can match your requirements against this.
- Issued between 50-100 invoices per month
- Operated PAYG for 10 employees
- Paid circa 10 debtors per month
- Used MYOB live accounts
We executed payroll, debtor payments, monthly bank statement reconciliation and invoice generation via an internal resource (admin assistant) Each Quarter we employed a qualified MYOB book keeper to finalize the quarter end and submit our BAS statement. This usually took about 3-4 hours each month. Our book keeper was known by our Accountant which I'd strongly recommend.
At the year end we engaged with an accountant to prepare our Report and accounts.
We found this approach delivered 3 key outcomes:
- By managing the day to day accounting activities internally we gained a good on going understanding of how we where performing and monitored the key financial levers in the business.
- We kept our fees down to an efficient level
- We became conversant with MYOB so we could run reports to more fully understand the key financial performance indicators in the business