do accountants help with business plans

Do Accountants Typically Write Business Plans ?

You’re in need of a business plan, so you’re probably here because you’re wondering if an accountant can write one for you.

The quick answer is no. An accountant doesn’t typically write business plans, but they do provide and produce information and advice that is vital to the business plan and its success.

Business plans are usually developed and written by business leaders, so if you own your own organization – that would be you! However, your accountant is there to collaborate with you every step of the way.

Without proper support, business plans can be daunting, so it’s important to surround yourself with the right expertise, such as a qualified accountant. That way, you can be sure you’re making sound decisions each step of the way.

So what role does an accountant actually play when it comes to business plans? Let’s find out!

What is a Business Plan?

A business plan is a document that outlines a company’s goals, strategies, financial information, and other relevant details that are necessary for the success of an organization.

You use a business plan to secure investments, attract potential partners and clients, and provide a roadmap for the company’s growth.

Essentially, it’s the tool that makes people take you seriously and proves that you’ve put some serious thought and analysis into the initial idea. For example, if you try to secure investments without a business plan, you’re likely to be laughed out of the door. Investors want to see how you plan to use their money and what exactly their return will be in the future.

What Does a Business Plan Include?

A business plan generally includes:

What Purpose Does It Service for a Company?

A business plan serves several purposes for a company, such as helping to define its goals, strategies, and long-term objectives including:

What Are Key Components of a Successful Business Plan?

A successful business plan will look like this:

How To Ensure Your Business Plan Is Effective

• Start with detailed research. Before you create a business plan, it is essential to research the industry and the market you are entering.
• Set SMART goals. These goals should be realistic and achievable
• Identify your target market. Knowing who your target market is will help you create a plan that is tailored to their needs
• Develop an effective strategy. Developing an effective strategy is key to ensuring your business plan is effective.
• Monitor progress. Monitoring progress will help you know if the plan is working or if adjustments need to be made

How Can an Accountant Help With Your Business Plan?

An accountant can help with your business plan in a number of ways by doing the following:

• Determine your break-even point
• Calculate your startup costs, and create a pro forma financial statement
• Create a budget and cash flow statement
• Provide advice on the best ways to structure your business
• Determine the most effective tax strategies for your business
• Review your plan and provide feedback on potential areas of improvement

Who Typically Writes Business Plans?

Business plans are typically written by entrepreneurs, business owners, and senior company executives. The plan should be written in collaboration with the company’s internal team, as well as outside advisors, such as financial advisors and legal experts.

Accountants will provide the following benefits for your business plan:

Legally Set Up Your Business Structure

First, your accountant will determine the type of business structure. This determines how the company is taxed, how profits and losses are distributed, and how the business is managed.

Then, your accountant will file the appropriate paperwork and register the business. Then they will obtain any required business licenses and permits.

Finally, the accountant will need to help open a business bank account to separate business and personal finances.

File the Necessary Paperwork

An accountant files the necessary paperwork by ensuring that all the relevant information is accurately recorded and reported. This includes ensuring that the financial projections are accurate and justified, validating the assumptions, and providing a thorough financial analysis and review of the business plan overall.

Additionally, the accountant makes sure that all relevant tax documents, such as corporate tax returns, payroll taxes, and any other applicable taxes, are accurately completed and filed.

Develop a Financial Plan and Track Your Expenses/Income

Now let’s take a look at what the financial plan looks like:

Advise You on the Tax Implications of Your Business Decisions

Your accountant will know the tax system inside out and will therefore be able to advise you on:

Provide Support During Audits or Other Legal Proceedings

An accountant can provide support during audits or other legal proceedings for a business plan by providing financial analysis to help ensure the accuracy and completeness of financial records and documents.

They can also help assess the financial impact of potential risks and opportunities and make recommendations for minimizing those risks. They may also provide advice on how to optimize the company’s financial performance and strategy.

Finally, the accountant can review and certify the business plan to ensure accuracy and compliance with applicable laws and regulations.

Act as a Sounding Board for New Business Ideas

An accountant can act as a sounding board for new business ideas by providing advice and guidance on the financial feasibility of the ideas, as well as offering suggestions for how to increase the chances of success.

They can also help to identify potential areas of risk and how to mitigate them. Additionally, an accountant can help to assess the potential costs associated with any proposed business plan and provide guidance on how to manage those costs.

Help You Negotiate Loans or Lines of Credit With Banks

Your accountant is able to help you negotiate loans etc., by providing the necessary financial statements, forecasts, and projections. They can also help ensure that all documents are prepared properly and accurately.

They will also be able to find you the best terms available from different banks and provide helpful advice on the risks and benefits associated with loan options.

Additionally, an accountant can help you better understand the financial implications of taking on debt and can help you establish a repayment plan that meets the needs of both you and the bank.

Provide Valuable Insights on Financial Trends in Your Industry

How much does it cost to work with an accountant.

The cost of working with a business accountant will vary depending on the complexity of your business and the services you require. Many accountants charge an hourly rate for their services, typically ranging from $50 to $200 per hour.

Hiring a virtual accountant from a trusted firm such as Finvisor is a cost-effective solution for getting top-notch advice and expertise. You pay for the level of service you require, which is much cheaper than hiring someone full-time, but you still get a fully qualified accountant.

What Should You Expect From Your First Meeting With an Accountant?

Your first meeting with an accountant should be focused on getting to know each other and discussing your needs and goals. You should come to the meeting prepared with a list of questions, as well as any documents related to your finances.

You should also discuss your current financial situation, your short and long-term goals, any tax issues, asset management, and the type of services you may need.

Your accountant will also provide you with an overview of their services and how they will be able to help you.

How Often Should You Meet With an Accountant To Go Over a Business Plan?

The frequency of meetings with an accountant to go over a business plan will depend on the specific needs of the business. Generally, an accountant should be consulted at least once a year to review the business plan and make necessary adjustments.

In certain cases, meeting more often may be beneficial, such as when the business is undergoing significant changes or when the business is in its startup phase.

If you want to know more about how an accountant can be a valuable asset when developing and executing a business plan, get in touch with Finvisor for more information.

To learn more about what we do, or to request a quote, contact us at [email protected] or 415-416-6682. We’re here to help you navigate deferred revenue journal entries so you can make the most of your assets!

*This blog does not constitute solicitation or provision of legal advice and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction.*

• Last Modified
• June 19, 2023

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Writing a Business Plan: Do I Need an Accountant?

Are you starting a small business?

Have you thought about hiring an accountant ?

Probably not, since you are likely focusing your time and energy on the growth of your business – but accountants are trained to do a lot more than payroll and taxes.

A professional accountant can help you develop your small business from writing a business plan to the official formation of your company.

While you don’t need to hire a full-time accountant to help you out, a couple of hours can make the difference in getting your small business off the ground.

Creating the Business Plan

An accountant will be able to help you write a business plan based on realistic information. You don’t want to risk a failed business plan based on optimistic assumptions and not current market conditions.

While optimism and risk tolerance can be beneficial to starting a business, an accountant can help you to balance the plan.

Experienced and expert accountants can use their knowledge to ensure your business plan is financially cohesive and realistic.

Forecasting Your Costs

When you create a business plan, you will be expected to forecast the various costs involved in starting and building your business. For first time business owners, this can be both daunting and confusing.

Accountants, however, can help you understand these costs by walking you through the numbers to create an accurate forecast for your business.

Determining Your Business Structure

When you start a small business, you can choose to incorporate it or run it as a sole proprietor. Both business structures have their own pros and cons , and are better suited to specific situations.

If you’re not sure about which way to go with your small business, an accountant can help you make the right choice by laying out the legal and tax advantages of incorporating your business – as well as the risks and pitfalls.

It’s a very important decision no small business owner would make lightly.

Registering Your Business

Do you know which programs you need to register with when starting a small business?

An accountant can help you out by making sure that your business is registered properly. For example, you may be required to register for GST/HST, payroll and your province’s WorkSafe entity.

Some business structures are not required to register for as many programs as others. Talk to an accountant about which programs are necessary for your small business.

Hiring an Accountant After Starting a Business

If you missed out on hiring an accountant to help you set up your small business, it’s not too late to benefit from their help!

In addition to the ways an accountant can help you get your small business off the ground, they can also help with many other aspects of your small business including:

• Bookkeeping
• Government Audits

So, even if your business is up and running, an accountant is a valuable asset when it comes to guiding and growing your business – as well as giving you back your time.

Ready to Get Started?

Our professional accountants at Liu & Associates are ready to help you get your small business started!

Contact us today to find out how we can help you write your business plan as well as guide you on the path to growing your small business into a huge success.

You can learn more about our business accounting services here .

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A Closer Look At How An Accountant Can Help A Business Succeed

Most people know the benefits of working with an accountant for tax planning and preparation. But there are numerous other ways a business benefits from partnering with an experienced and professional accountant.

Strategic Financial Planning

One of an accountant’s key contributions is the ability to assist in strategic financial planning. By working closely with business owners, accountants help establish financial goals and objectives that align with the overall business objectives. They analyze the company’s financial situation, industry trends, and market conditions to develop comprehensive financial plans that drive growth and sustainability.

Accountants also play a pivotal role in budgeting and forecasting, providing businesses with realistic financial projections. By analyzing historical data and market trends, they assist in making informed decisions about resource allocation, investment opportunities, and cost management. This guidance ensures that businesses have a clear roadmap for their financial activities and can make strategic decisions that align with their objectives.

Furthermore, accountants help businesses identify areas for cost savings and revenue enhancement. They conduct comprehensive financial analyses and review operational processes to identify inefficiencies and potential areas for improvement. By implementing financial controls and streamlining processes, an accountant helps businesses optimize their financial performance and maximize profitability.

Efficient Bookkeeping and Record-Keeping

Accurate and up-to-date financial records are the foundation of sound financial management. Accurate financial records provide businesses with a clear and organized picture of their income, expenses, and cash flow, enabling them to make informed financial decisions.

Accountants are skilled in maintaining meticulous records that track income, expenses, and cash flow. They ensure that all financial transactions are properly recorded and classified, including sales, purchases, payroll, and expenses. By efficiently and accurately documenting these transactions, accountants provide a reliable foundation for financial analysis, budgeting, and forecasting.

They use accounting software and tools to record and summarize financial data, making it easier for businesses to monitor their financial health. By regularly reviewing these records, accountants can identify trends, patterns, and areas of concern. This information allows businesses to take proactive measures to manage their cash flow effectively and make adjustments if necessary.

Accountants also play a significant role in helping businesses ensure compliance with tax regulations and reporting requirements, minimizing the risk of penalties or legal issues. They ensure that accurate financial records are maintained to facilitate the preparation of tax returns and financial statements such as Balance Sheets, Profit and Loss (P&L) statements, and Cash Flow statements. Expert accountants help businesses stay up-to-date with tax laws and regulations, minimizing the risk of penalties or failed audits. With their expertise, accountants keep businesses organized, compliant with industry standards and regulations, and well-prepared for audits or financial reviews.

Financial Analysis and Reporting

Interpreting financial statements and analyzing key performance indicators (KPIs) are crucial for understanding a business’s financial health and helping company owners make informed decisions. Accountants excel in this area, identifying trends, patterns, and potential risks that might not be apparent to others. They interpret a company’s financial statements and provide meaningful information to business leaders. Accounting professionals also help identify key performance indicators (KPIs) that reflect the company’s financial performance, such as profitability, liquidity, and solvency.

By analyzing financial statements, accountants identify trends, patterns, and potential risks that may impact the business. For example, if there is a sudden increase in expenses or a decrease in profitability, accountants can determine the underlying causes and recommend appropriate actions.

Moreover, an accountant’s in-depth analysis provides valuable insights for strategic decision-making, helping businesses optimize performance and allocate resources effectively. They can assist in identifying areas where costs can be reduced, or revenue can be increased. They help businesses evaluate the financial feasibility of investment opportunities and develop effective financial strategies. By presenting financial information in a clear and understandable manner, accountants enable business leaders to steer their operations in the right direction.

Tax Planning and Optimization

Navigating the complex landscape of tax laws and regulations can be overwhelming for businesses. Accountants specialize in tax planning and optimization, employing various strategies to achieve tax efficiency. They identify tax strategies that can minimize tax liabilities by taking advantage of deductions, credits, and exemptions available in tax laws. They also help businesses utilize government incentives and allowances, such as research and development credits or investment incentives, to further optimize their tax position.

One key area where accountants excel is in optimizing income distribution. They analyze the business’s financial situation and recommend the most tax-efficient ways to distribute income among owners and shareholders. This can include strategies like dividend payments, salary structures, or utilizing tax-saving vehicles like trusts or family limited partnerships.

In addition, accountants stay updated on changes in tax regulations and advise businesses on the most advantageous ways to structure their financial affairs, ensuring that businesses remain compliant and take advantage of new tax-saving opportunities. They advise businesses on tax incentives and credits that can maximize savings, such as energy-saving credits or hiring incentives.

Ultimately, by taking a proactive approach to tax planning and optimization, businesses can minimize tax burdens, freeing up valuable resources for growth and innovation. With the guidance of knowledgeable accountants, businesses can maximize their tax benefits.

Risk Management and Internal Controls

Mitigating financial risks is vital for business stability and growth. Accountants play a crucial role in implementing internal controls to safeguard assets, detect and prevent fraud and financial irregularities, and ensure regulatory compliance. They possess a deep understanding of financial accounting principles and are well-equipped to identify and assess potential risks that could impact a business’s profitability and sustainability.

An accountant’s first task in this regard is to conduct a thorough risk assessment. They identify and evaluate potential risks, including operational, financial, and strategic risks and provide recommendations to enhance internal processes and improve financial operations. With their expertise, accountants create a robust risk management framework that protects businesses from potential threats.

Internal controls are procedures, policies, and systems implemented by businesses to safeguard assets, ensure accurate financial reporting, and comply with regulations. An accountant’s role is to design and implement these internal controls, creating processes for effective cash management, inventory control, record-keeping, and segregation of duties.

Additionally, an accountant plays a crucial role in fraud prevention and detection. They establish measures to identify and address financial irregularities, such as embezzlement, misappropriation of funds, or fraudulent financial reporting. Accountants conduct regular audits and reviews to ensure compliance with internal policies and procedures.

By working closely with company leadership, accountants help safeguard assets, ensure compliance with regulations, and maintain accurate financial records. Their expertise in risk management and internal controls is essential in protecting a business’s financial well-being and ensuring its long-term success.

Financial Forecasting and Scenario Analysis

In an ever-changing business environment, the ability to accurately forecast future financial performance is essential. Accountants employ advanced techniques to project financial outcomes based on various scenarios. They analyze historical data, market trends, and industry factors to predict future revenue, expenses, and cash flows. By using their knowledge of financial forecasting techniques and software, accountants can provide businesses with reliable and realistic projections.

In addition to forecasting, scenario analysis allows businesses to evaluate different potential scenarios and their impact on financial outcomes. Accountants can help businesses assess the risks associated with each scenario by considering factors such as market changes, economic trends, and industry dynamics. This analysis helps businesses identify potential opportunities and threats, enabling them to make informed decisions and develop strategies to mitigate risks, strategically allocate capital, adapt to potential challenges, and seize opportunities for growth.

Furthermore, accountants can assist businesses in managing their finances by monitoring and reviewing actual results against projections. By regularly evaluating performance, accountants can identify deviations from the forecast and help businesses make necessary adjustments to stay on track.

Ultimately, financial forecasting and scenario analysis empower businesses to plan for the future with confidence. By working closely with accountants, businesses can mitigate risks, allocate resources effectively, and position themselves for long-term success.

Business Growth and Expansion

Accountants play a crucial role in evaluating the financial feasibility of growth and expansion initiatives. They assess investment opportunities, perform due diligence, and analyze potential risks. They provide valuable insights into cash flow patterns, financial forecasts, and budget creation, helping businesses choose the best course of action and move forward with confidence.

By analyzing cash flow patterns, accountants can help businesses understand the timing and amount of cash coming in and going out. This information is crucial for managing day-to-day operations and planning for future growth. Accountants can identify trends, such as seasonal fluctuations, and provide recommendations on how to improve cash flow management.

Financial forecasts are essential for businesses looking to expand. Accountants use their expertise in financial forecasting techniques to create realistic projections of revenue, expenses, and cash flows. These forecasts help businesses plan for growth by identifying potential funding gaps and facilitating strategic decision-making.

When it comes to expanding the business, accountants play a key role in assessing the financial feasibility of growth initiatives. They analyze the financial impact of different expansion scenarios and provide insights into the viability of each option. Accountants can also consolidate revenue streams from existing and potential new ventures, helping businesses understand the overall financial picture and identify areas for improvement.

Moreover, accountants evaluate investment opportunities and potential risks associated with expansion. They perform financial analysis and assist businesses in optimizing returns on investments. By considering factors such as expected returns, payback periods, and risks, accountants provide valuable recommendations on which investment opportunities to pursue.

In addition to financial insights, accountants offer guidance on funding options for expansion. They can assess the financial health of the business, identify appropriate financing sources, and assist in the preparation of financing proposals. Accountants are well-versed in growth financing options, such as loans, equity financing, and government grants, and provide valuable advice on the most suitable funding strategy for the business.

Overall, accountants bring their expertise in cash flow management, financial forecasting, and budget creation to support business growth and expansion. Their expertise ensures that growth strategies align with the financial capabilities and long-term objectives of the business.

Collaboration with Stakeholders

Accountants serve as trusted advisors, working closely with management, investors, and other stakeholders to ensure the smooth functioning and growth of the company. They communicate financial information effectively, translating complex financial concepts into clear and meaningful insights. Accountants build trust and credibility through transparency, accountability, and their commitment to ethical financial practices. With their clear and concise financial reporting, they create a transparent environment that fosters trust among stakeholders. Their expertise fosters collaboration, enabling stakeholders to make informed decisions that drive business success.

Types of Accounting Services Available to Businesses

There are a variety of professional accounting services beyond tax preparation available to meet the unique needs of each organization. These services cover a wide range of financial tasks and responsibilities, ensuring that businesses can effectively manage their financial resources, make informed decisions, and grow with confidence. From basic bookkeeping to complex financial analysis, these accounting services play a vital role in helping businesses succeed.

Bookkeeping and Financial Reporting Services

Bookkeeping and financial reporting services help business owners control their finances, minimize taxes, comply with legal requirements, reduce risks, manage growth, and plan for important events.

Accurate bookkeeping ensures that financial records are up-to-date and organized, providing business owners with a clear picture of their financial position. This information allows them to make informed decisions and take necessary action to control their finances effectively.

Additionally, financial reporting services provide essential insights into a company’s financial health. These reports include detailed financial statements, such as balance sheets and profit and loss statements, which highlight the business’s performance and identify areas of improvement. By analyzing these reports, owners can identify opportunities for cost-saving, revenue generation, and strategic planning.

A skilled accountant plays a key role in providing these services. With their expertise and knowledge of tax regulations and financial management, accountants can help businesses minimize taxes by identifying deductions and credits available to them. They also ensure that businesses comply with legal requirements, such as the timely submission of tax returns and financial statements.

A comprehensive package of bookkeeping and financial reporting services includes regular maintenance of financial records, accurate preparation of financial statements, cash flow management, tax planning, and advisory services. By outsourcing these tasks to an experienced accountant or accounting firm, business owners can focus on core operations while having peace of mind knowing their finances are in expert hands.

Auditing Services

Auditing services play a crucial role in ensuring the financial accuracy, compliance, and overall performance of businesses. There are two types of audits: statutory audits, which are mandatory for certain businesses to comply with legal requirements, and internal audits, which are voluntary and conducted by the company itself.

Statutory audits are required by law and aim to provide an independent assessment of a company’s financial statements. These audits ensure that the financial records are accurate and that the company is complying with applicable laws and regulations. By conducting a statutory audit, businesses can demonstrate transparency and gain the trust of stakeholders, including investors, lenders, and regulatory authorities.

On the other hand, internal audits are conducted voluntarily by the company’s own internal audit department or outsourced to external auditors. Internal audits provide a comprehensive review of internal control systems, risk management processes, and operational efficiency. They help businesses identify any potential weaknesses or areas for improvement, allowing them to address issues before they become significant problems. Additionally, conducting regular internal audits can help businesses stay on track with their goals and prepare for a statutory audit more effectively.

Auditing services, both statutory and voluntary, are vital for businesses to ensure financial accuracy, compliance, and overall performance.

Consulting Services

An accountant is a trusted business advisor who can also provide valuable consulting services. With their expertise in financial management and tax regulations, accountants can offer advice and guidance that can help businesses succeed.

Companies often benefit from payroll tax compliance consulting services that assist businesses in navigating the complexities of payroll taxes, ensuring that they meet all legal requirements and avoid any penalties or fines. Accountants can also help businesses streamline their payroll processes, saving time and resources.

In addition, accountants can also provide guidance for the purchase or sale of businesses. They can help with financial due diligence, assessing the financial health of the target company, and identifying any potential risks or concerns. Accountants can also provide assistance with valuations and financial negotiations, helping businesses make informed decisions and ensuring a smooth transaction.

Another consulting service offered by accountants is assistance with VAT registration or working with foreign companies. They can guide businesses through the process of registering for VAT, ensuring compliance with regulations, and maximizing tax benefits. Accountants can also provide advice on international taxation, helping businesses navigate the complexities of working with foreign companies.

Qualities to Look for When Choosing a Business Accountant

It’s important to consider several key qualities that will contribute to the success and growth of your business when choosing a business accountant. A skilled and experienced accountant can play a vital role in managing your finances, guiding financial decisions, and ensuring compliance with tax regulations. Here are some qualities to look for when choosing a business accountant:

1. Education: A trusted financial professional will have an accounting degree and appropriate industry certifications.

2. Expertise: Look for an accountant who has a deep understanding of accounting principles and regulations. They should have a strong background in financial management, accounting procedures, and tax planning.

3. Experience: An experienced accountant will have the knowledge and skills to handle complex financial situations and navigate challenges that may arise in your business. Look for someone who has worked with businesses in your industry or has a track record of success in similar situations.

4. Attention to detail: Accounting requires meticulous attention to detail and accuracy. Look for an accountant who is thorough and can spot errors or inconsistencies in financial records.

5. Communication skills: A good accountant should be able to effectively communicate financial information, making it easier for everyone to understand the financial health of the business and make informed decisions.

6. Trustworthiness: Your accountant will have access to sensitive financial information, so it’s important to choose someone who is trustworthy and maintains strict confidentiality.

By considering these qualities when choosing a business accountant, you can ensure that you find the right professional to help drive the financial success of your business.

Professional Certifications and Experience

When it comes to managing your business finances, having an experienced and knowledgeable accountant is crucial for success. A business accountant plays a vital role in ensuring accurate financial records, making informed decisions, and ensuring compliance with tax regulations. One of the key qualifications to look for in a business accountant is their professional certifications and experience in the field of accounting.

Certainly, an accounting degree provides some measure of experience in the field of accounting, but it is not enough to stop there because laws, regulations, and technology are continually changing. So it’s essential to find an accounting professional who is committed to staying abreast of legal, regulatory, and industry changes.

Professional certifications such as the Certified Public Accountant (CPA), Certified Management Accountant (CMA), or Chartered Financial Analyst (CFA) demonstrate an accountant’s expertise and commitment to the field. These certifications are not just a title, but the result of rigorous examinations, ongoing education, and practical experience requirements.

Having a CPA certification, for example, indicates that the accountant has met strict educational requirements, passed a comprehensive exam, and has gained a minimum level of experience. A CMA certification demonstrates proficiency in financial planning, analysis, and management accounting. Similarly, a CFA certification showcases an accountant’s advanced knowledge in corporate finance, investment management, and portfolio analysis.

Industry certifications, like Intuit’s QuickBooks ProAdvisor certifications, demonstrate an accounting professional has expertise with specific accounting software you may choose to use in your business. And QuickBooks ProAdvisors also have experience in cloud-based accounting software that enables businesses to have real-time financial insights and remote access to financial data.

By having these certifications, business accountants are equipped with the necessary skills and knowledge to handle complex financial situations, provide sound financial advice, and help businesses thrive. Furthermore, their experience working with businesses in your industry or facing similar challenges can prove invaluable in finding effective solutions and strategies.

Understanding of Your Business Structure and Goals

Understanding a business’s structure and goals is vital for an accountant to provide effective financial support. By comprehending how a business is organized and what its objectives are, an accountant can tailor their services and strategies to best meet the business’s unique needs.

Different business structures, such as sole proprietorships, partnerships, or corporations, have different accounting requirements and tax implications. An accountant who understands the intricacies of each structure can ensure that financial records and reports are accurately prepared and that compliance with relevant regulations is maintained.

Furthermore, by understanding a business’s goals, an accountant can provide more targeted and valuable financial advice. Whether the goal is to increase profitability, expand into new markets, or improve cash flow management, an accountant who is knowledgeable about the business’s objectives can offer insights and strategies to help achieve those goals.

This understanding also allows the accountant to anticipate and address potential financial challenges or risks that may arise. By staying ahead of the game, the accountant can provide proactive advice and guidance, helping the business make informed decisions that will lead to long-term success.

In conclusion, accountants are indispensable partners in the pursuit of business success. From strategic financial planning to risk management, financial analysis, and tax optimization, their contributions are multifaceted and invaluable. By leveraging the expertise of accountants, businesses can achieve sustainable growth, enhance profitability, and navigate financial challenges with confidence. Embracing proactive financial management and collaborating closely with accountants paves the way for long-term success in an ever-evolving business landscape.

Scott Meister, CPA

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Accounting 101: A Guide for Small-Business Owners

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So you're launching a business—congrats! But along with a rock-solid business idea, you need to chart a path to financial success by documenting, assessing, and analyzing your finances in a process known as accounting. Most small-business owners aren’t accountants, and without a background in finance, setting up an accounting system for the first time can be (understandably) overwhelming. Keep reading: our crash course in small-business accounting walks you through each step of the process.

Small-business accounting 101

• Consult a bookkeeper, accountant, or CPA
• Create a business bank account
• Choose your accounting method (cash or accrual)
• Set up your books
• Start recording financial transactions
• Start generating financial documents
• Understand your tax responsibilities

1. Consult a bookkeeper, accountant, or CPA

You can learn a lot about how to do accounting for small businesses just from browsing the internet. But nothing beats up-front, personalized advice from a certified professional—in this case, a bookkeeper, accountant, or CPA. Bookkeepers, accountants, and CPAs all bring something different to the table.

• Bookkeeper: Keeps and organizes financial records. Can also handle financial tasks like payroll and invoicing.
• Accountant: Keeps and organizes financial records while providing deeper insight into your business's financial state. Can also tackle tasks like filing taxes.
• CPA (Certified Public Accountant): Accountants who have passed the Uniform Certified Public Accountant Exam, which holds accountants to more exacting standard

Some CPAs and bookkeepers require a retainer if you want monthly assistance, but many simply charge by the hour. You can pay for the advice you need and go from there.

Bookkeeping vs. accounting: What’s the difference?

People who aren't small-business accountants or often use bookkeeping and accounting interchangeably, but they actually mean two different things. Bookkeeping refers to keeping financial records. Accounting means not just keeping financial records but also analyzing and interpreting financial data so you can make wise fiscal decisions.

• Small-Business Bookkeeping Basics
• The Difference between Bookkeeping and Accounting
• The Top 10 Bookkeeping Errors that Are Costing Your Business Money

When should you hire a full-time bookkeeper or accountant?

Consulting part-time with a small-business bookkeeper or accountant can work nicely for newer, smaller businesses. But once your business is big enough that you can't (or simply don't want to) wrangle finances by yourself, it's probably time to get a bookkeeper or CPA on your payroll.

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2. Create a business bank account

The second you decide you’re going to launch your business, you should immediately separate your personal finances from your business finances. That means setting up a separate business bank account to handle all your small-business transactions, including a business savings account to cover your business on a rainy day.

Why is separating your financial accounts so crucial? For one, it's easier to track your business's financial progress if it isn't jumbled with your personal cash and credit. For another, it protects you legally: if your business gets sued, your personal assets can't be taken as collateral .

Looking for a business bank account? Start by learning all about how to open a business bank account , then check out our top recs for business checking and business savings accounts to find the right account for you.

• Small-Business Bank Accounts: Your Ultimate Guide
• Types of Business Bank Accounts
• Can I Have Two Business Bank Accounts?

Do you need a business credit card?

It can be a good idea to use a business credit card, but don't rely on it to make overdue payments or fund big purchases. Most business credit cards offer customer rewards, which can save you money on travel expenses, and paying off your business credit card's balance each month is a good way to build good credit for your business.

If you think a business credit card could benefit your business, learn how to get a credit card , then take a look at the best credit cards for small businesses .

• When Is the Best Time to Apply for a Business Credit Card?
• Lines of Credit vs. Credit Cards
• Can You Get Business Credit Cards with Only an EIN?

3. Choose your accounting method (cash or accrual)

Business owners have to settle on one of two basic accounting methods before filing their first tax returns: cash-basis and accrual-basis accounting.

The accounting method you choose has a huge impact on your business, so we highly recommend you talk to your small-business accountant, CPA, or bookkeeper about which method works best for you . With that caveat in mind, here's a quick overview of the two types—and which type certain businesses are legally required to use.

Cash vs. accrual accounting

If you set up your finances with cash-basis accounting, you'll record financial transactions when the cash moves accounts .

• For instance, as soon as you pay a bill or receive an invoice, you’ll record that transaction in your financial accounts—whether or not the external company processes the payment that same day or not.

If you set up your finances with accrual-basis accounting, you'll record financial transactions when they occur, not when the money moves accounts.

• For instance, if you charge a client for repair work you finished on April 15, you'll record the income on that same date. If you received an invoice in September, you'll record it then, not when the company you owe actually processes the payment.

Most accounting software (with some notable differences) use the accrual method by default, but you can learn more about which method is right for you by talking to an accountant and reading a few more informational articles.

• What Is the Difference Between Cash and Accrual Accounting?
• What Is Accrual Accounting?
• What Is Cash Accounting?
• Why Cash Flow Is Important for Your Small Business

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4. Set up your books

Once you've settled on an accounting method, it’s time to set up your books. Here are the main questions to ask that can guide you toward creating the best bookkeeping records for your small business.

Should you choose single-entry or double-entry bookkeeping?

• What Is Double-Entry Bookkeeping?

What method should you choose to keep your books?

There are three primary methods for keeping your books:

• Spreadsheet software like Excel or Google Sheets
• Accounting software (like QuickBooks Online or Wave Accounting)
• Bookkeeper or accountant .

Using spreadsheet software is the cheapest accounting option (especially if you use a completely free software, like Google Sheets). Hiring an in-house bookkeeper, setting up an in-house accounting team, or outsourcing your bookkeeping and accounting to a virtual provider is the most expensive accounting option, but it frees you up to focus on the business side of things (not just the financial side).

Accounting or bookkeeping software is a good middle-of-the-road option, both in terms of how much hands-on bookkeeping you want to do and how much you want to spend on accounting software. Depending on the software provider you choose and the plan you sign up for, accounting software automates most of bookkeeping's most tedious tasks, from calculating sales tax to generating easy-to-read financial reports.

Accounting software ranges in price from free to hundreds of dollars a month. And generally, no matter the plan or price, accounting software is more reliable than by-hand spreadsheet accounting.

• 12 Reasons Business Owners Say to Use Accounting Software
• 10 Reasons You Should Outsource Your Accounting
• Benefits of Making the Move from Paper Accounting to Digital
• The Best Business Budget Templates for Small Businesses

How frequently should you update your books?

How often should you sit down with your books? As a responsible business owner, you need to record every single financial transaction you make—so the answer might depend on how many bills you pay and invoices you send out. At the very least, you'll want to sit down for bookkeeping monthly, but we strongly recommend you update your books at least weekly , though preferably daily.

5. Start recording financial transactions

You've opened a business checking account, chosen your accounting method, and decided how you're going to keep your books. Now you're ready to start recording the transactions themselves.

You'll record each transaction in a separate financial account in your general ledger. There are five primary types of accounts:

• Asset accounts , where you list everything your business owns
• Owner's equity (or shareholder equity) accounts , where you list everything you or your shareholders have invested in your business
• Liability accounts , where you list everything groups other than yourself or your shareholders have invested in your business (for instance, banks)
• Revenue accounts , where you list money your business earns by selling products or services
• Expense accounts , where you list the money your business spends to stay afloat and operational

Your CPA can advise you on which types of accounts you need. Alternatively, as you set up your accounting software, you should see a list of optional financial accounts for you to add to your chart of accounts and general ledger. 

Crucial documents for accurate accounting

To make accurate journal entries and record financial transactions correctly, you need to hang on to some essential financial documents :

• Tax statements
• Invoices and bills
• Employee tax forms, like W-2 and 1099 forms

Most accounting software automates entering information from the documents above. For instance, receipt scanners let you take photos of receipts that you upload to your software for easy journal-entry generation. And if you send invoices or pay bills with your software, the numbers should sync automatically with your ledger.

• What Are Generally Accepted Accounting Principles?
• 5 Useful Accounting Tips for Small Businesses
• How to Calculate Your Break-Even Point

6. Start generating financial documents

Once you have all your bookkeeping, accounting, and payroll processes set up, it’s time to start doing the actual accounting. As soon as you’ve entered financial transactions for a certain period of time—whether that’s a day, week, or month—you can use a spreadsheet template or your accounting software to generate crucial financial documents . (You can also ask your CPA or bookkeeper to create documents for you, though they should be doing that themselves without your prompting.)

The most important financial documents for any business owner who wants to understand their finances are balance sheets, cash flow statements, and income statements. You can look at these documents yourself or collaborate with a financial professional to analyze the state of your business’s finances. Our accounting tips can get you started on your way to assessing your finances.

• How to Read a Financial Statement
• What Is a Balance Sheet?
• How to Prepare a Profit and Loss Statement
• What Is a Cash Flow Statement?

7. Understand your tax responsibilities

And now for everyone's favorite subjects: small-business accounting and taxes.

You already know this, but just to make sure it's crystal clear, taxes are ridiculously complicated . Small-business taxes vary between industries, states, and business types, so to get the best advice on what taxes your business needs to pay, consult with your accountant. For the most part, though, you’ll probably end up paying income taxes, sales taxes, and payroll taxes .

If you’re self-employed, you'll pay self-employment taxes , which is a little different from small-business taxes and personal taxes. You can get more guidance on how to record and pay a small-business tax with your accounting software and tax professional.

• How to File Small-Business Taxes
• What Small-Business Owners Need to Know About FICA Taxes
• When Are Business Taxes Due?

The takeaway

Creating your own small business might be one of the hardest things you ever do—but we have complete confidence that you can handle it. When you stay on top of your bookkeeping and accounting processes, you empower yourself to make wise financial decisions. With these basic accounting tips for small-business owners under your belt, we’re sure you have the tools you need for small-business success.

Haven’t finished creating your business yet? Check out our guide on how to establish a small business so you can start turning a profit ASAP.

Related reading

• The 7 Best Small-Business Accounting Apps of 2023
• The 7 Best Accounting Software for Freelancers in 2023
• The Best Bookkeeping Software for Small Business 2023

Small-business accounting glossary

Accountant : A professional who records financial transactions, creates financial documents, analyzes financial data, and works to set financial goals. 

Asset : Any resource owned by a company. An asset can be tangible, like a piece of equipment, or intangible, like a copyright.

Balance sheet : A financial document that shows your assets, liabilities, and shareholders' or owner's equity. If your business is healthy and growing, a balance sheet should show that your assets are equal to your liabilities and equity.

Bookkeeper : A professional who records financial transactions and keeps detailed financial records.

Cash flow statement : A financial document that shows all of a business's sources of cash, namely cash flow from operating, investing, and financing activities. The document also shows where that cash goes and determines if you have negative or positive cash flow. If you have negative cash flow, your business is losing money; positive cash flow means you're earning money.

Chart of accounts : A list of every financial account in your general ledger. Financial accounts include asset, liability, equity, revenue, and expense accounts.

General ledger : A collection of financial records and accounts that details a business's financial history. Information in the general ledger can be used to generate financial reports that help stakeholders make informed decisions about the business's growth and future.

Liability : Everything owed by a company (aka debts).

Profit and loss statement : A financial document that lists a business's profit and loss (including revenue, operating expenses, and non-operating expenses), also known as an income statement.

Small-business accounting checklist

Phew, you made it to the end—nicely done! Thanks for sticking with us, and best of luck to your small business. We know you're going to do great.

9 steps to successful small-business accounting

• Consult an accountant, bookkeeper, or CPA: Get expert advice on important topics like how to organize your books, what taxes you can expect to pay, and how to read important financial documents.
• Create a business bank account: Protect yourself legally and financially by setting up business checking and savings accounts and splitting your personal and business finances.
• Choose your accounting method: Get your CPA's advice on the right accounting method for your business: cash-basis or accrual-basis accounting.
• Set up your books: Decide if you want to use accounting software or work with an accountant to keep your books. Choose between single-entry bookkeeping, which is simpler, and double-entry bookkeeping, which is financially safer.
• Start recording financial transactions: Set up your general ledger and chart of accounts.
• Start generating financial documents: Create balance sheets, cash flow statements, and income statements, then analyze the data to move your business in the right direction.
• Understand your tax responsibilities: Get familiar with income, payroll, and sales tax, including the tax deadlines for each.

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• Do You Need an Accountant to Help Write Your Business Plan?

Business accounting is a critical aspect of running a successful business. Learn the basics of accounting and when you should seek professional expertise.

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• Hiring an accountant to help write your business plan ensures you start off on the right foot. It gives you a better chance to raise funds or get a small business loan approved.
• Writing a business plan can be a complicated process, and whether you are trying to raise funding, preparing to launch, or planning for growth, writing the plan itself is a vital piece of the puzzle.
• Hiring an accountant means you have a professional on your side, someone with the knowledge and experience to guide you through each stage of the planning process.
• Read on to find out the benefits of hiring an accountant to help you write your business plan.

Whether you are an established small business owner or a budding entrepreneur, a business plan is a wonderful opportunity – and an important step – for you to document everything you know and understand about your potential market, including your big picture visions and goals for the business, and your execution strategies.

Writing a business plan is a potentially complicated process, and whether you are trying to raise funding, preparing to launch, or planning for growth, the plan itself is a vital piece of the puzzle.

While drawing from your existing knowledge base, documenting your vision, and trusting your instincts are all equally significant, securing the right kind of advice early in the process will ensure the plan includes realistic outcomes, is structured and written in a professional manner, and has a better chance at achieving a positive result for you.

The Value of Hiring an Accountant to Help You Write a Business Plan

Can an accountant help write your business plan? Absolutely. 

An accountant is much more expensive than a bookkeeper, but a good accountant can provide so much more value to your business than simply solid bookkeeping skills, a streamlined payroll, and neatly filed taxes.

Imagine a strategic business partner, one who understands and shares your vision and is equipped to help you achieve your financial, management, and business goals. Build a relationship with the right accountant and he or she will be able to grow your financial forecasts into real, long-term value for your business.

A Fresh Pair of Eyes and a Reality Check

As an independent advisor, an accountant will be objective enough to look at your business for what it is, rather than the potentially rose-tinted view that you apply to your business.

He or she will be able to help you identify strengths and weaknesses found within your prospective or existing operational or financial structures, to help you prepare a business plan that addresses both opportunities and potential problems in detail.

Hiring an accountant means you have a professional on your side, someone with the knowledge and experience to guide you through each stage of the planning process. He or she can help you develop a statement of purpose, do a SWOT analysis (to determine what your Strengths, Weaknesses, Opportunities and Threats are), define your goals, and help you write and revise the plan in a way that it will be most appealing to your plan’s audience. Potential investors or business partners, for example, will expect to see a great deal more financial detail in your plan than your employees or vendors.

Navigating a Potentially Complex Web

Business plan development requires scrutiny of various aspects of your operations, finances and organisation. Accountants are uniquely qualified to help you and your business through the multiple stages of this process.

A good accountant will have a broad background in not only finance, but also business matters, and will be able to offer you valuable advice and assistance in ensuring that your plan is as exceptional as it can be.

The Australian Government’s Department of Industry, Innovation and Science lays out the steps you’ll need to take in order that your business plan is in the best shape, and they offer some good advice in obtaining professional help to draft a business plan on their  ‘How to write a Business Plan’ page on their official website.

“Get some help,” they declare. “If you aren't confident in completing the plan yourself, you can enlist the help of a professional (i.e. Business Enterprise Centre, business adviser, or accountant) to look through your plan and provide you with advice.”

Pitching for Finance – Who’s Got Your Back?

If you are looking to launch a business which requires funding of any kind, your business plan is the most important document you will ever produce and will be one of the factors which determine whether or not you will end up raising the funds you need to get off the ground.

Business plans for startups should be a ‘realistic’ view of the business’s immediate and long-term objectives and expectations. At the same time, they need to provide an operating framework within which you have outlined a clear and systematic path to success.

Obtaining bank financing or other investment capital to start your business is an area brimming with obstacles. First impressions last, and when it concerns potential investors, there are other options they can fund. Therefore, making a positive impact with a clearly set out business plan is critical.

David Jackson, a committee member of Sydney Angels Inc,  outlines a number of the key features of a successful pitch for investment, which include:

• Current active users
• Sales & revenue (including per customer)
• Gross margin
• Customer acquisition cost (CAC)
• Payback period
• Capital required
• Predicted future users/clients/sales
• Breakeven point

If you are pitching for finance, engaging a professional accountant will likely increase your chances of securing funding for your business, and with it, your likelihood of ongoing success once the funds come through.

While preparing a business plan won’t guarantee you’ll get the loan or investment you’re seeking, the absence of one will almost certainly guarantee you won’t.

Know Your Business; Know Your Goals

A business plan is usually broken up into various sections, covering everything from:

• An overview of the company structure
• Details on products and services being offered
• Market overview
• Your proposed marketing and sales strategies
• Management plan
• Vital financial information and forecasting

As the financials are widely understood to be one of – if not the – most important element in understanding and determining the success of your business, developing them, or at the very least, having a professional review them is highly recommended.

Hiring an accountant at this stage, as early in the game as it is, will mean you benefit from the advantages which come from their financial knowledge, as well as their professional advice, right from the start. Taking care of the ‘big ticket’ items like this at the outset is guaranteed to save you time and money in the long run.

Many small business owners will launch head-first into forecasting without any foundational knowledge of the finance or accounting. Although well-meaning, they are often misguided and ill-equipped knowledge-wise, where structures will be skewed, figures out of proportion or forecasts inaccurate. They’ll then hire an accountant to guide them out of the labyrinth, clarifying data and setting them straight onto the path they should have been on to begin with!

It’s unanimously acknowledged that bad management is the primary cause of small business failure, and there’d be nothing worse than failing before you even begin.

What Comes Next After the Business Plan?

Sound financial planning will enable you to monitor, and hopefully, help you towards achieving the financial forecasts outlined in your business plan.

• Seeking finance
• Superannuation
• Succession planning
• Risk management

Moreover, engaging an accountant for more than business plan forecasts means that over time, as the business grows and evolves – taking on new staff, for example, or going into partnership or debt – your accountant will have a long-term outlook and be able to assist with your business’ ongoing business and tax strategies.

The Department of Industry, Innovation and Science website also offers business owners a few useful links for small business owners to investigate all the options available to them, including links to  ASIC’s MoneySmart site , which can guide you through the process of selecting the right accountant for your business.

Accountants Give Sound Advice, Anyway

Even outside the realm of preparing a business plan, having an accountant is a good idea. You won’t find a small business that doesn’t benefit from working with an accountant in order to make the most of their financial analysis and advice.

It’s generally a good rule of thumb that your business checks in with an accountant on an annual or bi-annual basis so that you can update your tax strategy, as well as go over your finances, expenses and receipts that they’ll need to properly prepare your taxes, even if that information is shared electronically on an ongoing basis.

It also goes without saying that you should ensure that your accountant is properly qualified and certified, including being registered in Australia with a formally recognised industry body such as:

• Charted Accountants of Australia & New Zealand (CA ANZ)
• Institute of Public Accountants (IPA)
• CPA Australia (CPA)

Your business plan will be tailored to your specific audience, and there are several factors which will influence its content, length, complexity, and how much of it needs professional scrutiny.

An experienced accountant will likely have worked with many other businesses like yours and be experienced in and understand how your operational, structural, management and financial goals and strategies should tie in with each other within your business plan.

Your business is your potential livelihood, so make sure you are collaborating with someone who knows what they’re doing and is qualified to do it.

Can an accountant help you launch a startup?

An accountant can play a vital role in helping you launch a new business. They can estimate your business and operating costs, help you forecast a budget and work with you to develop the financial aspects of your business plan or strategy. They can also assist you with a funding or loan pitch and advise you on which lenders to approach.  

What does an accountant do for a small business?

Accountants play a pivotal role in supporting a small business's growth. An accountant records, analyses and interprets financial data to create reports, conduct audits, prepare financial reporting records and file tax returns. An account also has the expertise to advise you on business trends and economic forecasts to identify areas in which your business can grow. 

What are the three professional accounting bodies in Australia?

The formally recognised industry accounting bodies in Australia are: 

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How To Write a Winning Accountant Business Plan + Template

Creating a business plan is essential for any business, but it can be especially helpful for accountant businesses who want to improve their strategy and/or raise funding.

A well-crafted business plan not only outlines the vision for your company, but also documents a step-by-step roadmap of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success.

This article provides an overview of the key elements that every accountant business owner should include in their business plan.

Download the Ultimate Business Plan Template

What is an Accountant Business Plan?

An accountant business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.

Why Write an Accountant Business Plan?

An accountant business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable.

Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.

Writing an Effective Accountant Business Plan

The following are the key components of a successful accountant business plan:

Executive Summary

The executive summary of an accountant business plan is a one to two page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.

• Start with a one-line description of your accountant company
• Provide a short summary of the key points in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast among others.

Company Description

This section should include a brief history of your company. Include a short description of how your company started, and provide a timeline of milestones your company has achieved.

If you are just starting your accountant business , you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your accountant firm, mention this.

Industry Analysis

The industry or market analysis is an important component of an accountant business plan. Conduct thorough market research to determine industry trends and document the size of your market. 

Questions to answer include:

• What part of the accountant industry are you targeting?
• How big is the market?
• What trends are happening in the industry right now (and if applicable, how do these trends support the success of your company)?

You should also include sources for the information you provide, such as published research reports and expert opinions.

Customer Analysis

This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.

For example, the customers of an accountant business may include small business owners, individuals with complex financial situations, or other businesses that need accounting assistance.

You can include information about how your customers make the decision to buy from you as well as what keeps them buying from you.

Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or accountant services with the right marketing.

Competitive Analysis

The competitive analysis helps you determine how your product or service will be different from competitors, and what your unique selling proposition (USP) might be that will set you apart in this industry.

For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation and/or advantage; that is, in what ways are you different from and ideally better than your competitors.

Marketing Plan

This part of the business plan is where you determine and document your marketing plan. . Your plan should be clearly laid out, including the following 4 Ps.

• Product/Service : Detail your product/service offerings here. Document their features and benefits.
• Price : Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
• Place : Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
• Promotion : How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, launch a direct mail campaign. Or, you may promote your accountant business via word-of-mouth or referrals from satisfied customers.

Operations Plan

This part of your accountant business plan should include the following information:

• How will you deliver your product/service to customers? For example, will you do it in person or over the phone only?
• What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?

The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.

Finally, and most importantly, in your Operations Plan, you will lay out the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for an accountant business include reaching $X in sales. Other examples include adding new products or services, expanding to new markets, or opening new locations.

Management Team

List your team members here including their names and titles, as well as their expertise and experience relevant to your specific accountant industry. Include brief biography sketches for each team member.

Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.

Financial Plan

Here you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix). 

This includes the following three financial statements:

Income Statement

Your income statement should include:

• Revenue : how much revenue you generate.
• Cost of Goods Sold : These are your direct costs associated with generating revenue. This includes labor costs, as well as the cost of any equipment and supplies used to deliver the product/service offering.
• Net Income (or loss) : Once expenses and revenue are totaled and deducted from each other, this is the net income or loss.

Sample Income Statement for a Startup Accountant Business

Balance Sheet

Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:

• Assets : All of the things you own (including cash).
• Liabilities : This is what you owe against your company’s assets, such as accounts payable or loans.
• Equity : The worth of your business after all liabilities and assets are totaled and deducted from each other.

Sample Balance Sheet for a Startup Accountant Business

Cash Flow Statement

Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:

• Cash Flow From Operations
• Cash Flow From Investments
• Cash Flow From Financing

Below is a sample of a projected cash flow statement for a startup accountant business.

Sample Cash Flow Statement for a Startup Accountant Business

You will also want to include an appendix section which will include:

• Your complete financial projections
• A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
• Any other documentation which supports what you included in the body of your business plan.

Writing a good business plan gives you the advantage of being fully prepared to launch and/or grow your accountant company. It not only outlines your business vision but also provides a step-by-step process of how you are going to accomplish it.

The goal of any business plan is to provide a roadmap for the future. A winning accountant business plan does this by providing a detailed overview of your company, its operations, and its financials. If you are seeking funding, your business plan should also include an appendix with your full financial projections and supporting documentation.  

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• Small Business

The Single Best Accounting Tip for Small Business Success

Published on May 28, 2024

By: Ben Gran

• Small business owners don't have to suffer through the mundanity of manual accounting spreadsheets.
• The best accounting software can connect to your bank account, track your business expenses and income, and otherwise make managing your business finances a breeze.
• Even freelancers can choose a low-cost software subscription that fits their needs.

Check out our pick for the best cash back credit card of 2024

This question might make many small business owners squirm: Are you still doing your accounting, invoicing, and other bookkeeping tasks with manual spreadsheets? If so, why are you making life so hard for yourself?

But most small business owners should consider getting accounting software. Stop suffering and start saving time (and money) during tax season and throughout the year. And even if you, like me, love your spreadsheets and feel like you've got a good system in place? You can probably benefit from accounting software, too.

Current top accounting software options

Below are some of our current top picks for small business accounting software that combine value for the cost, combined with the features we consider essential for running your business accounting needs.

Accounting software saves you time, money, and stress

Most of the best accounting software programs will help you track your business income and business expenses automatically without you having to create spreadsheets and do manual data entry.

Small business owners are some of the busiest people on Earth. You're already thinking about so many things every day. Why add one more to that list? Wouldn't you rather save a few hours per month and let the magic of modern business software take these tasks off your plate?

Accounting software can be "right-sized" for your business

Account software can help you if:

• You have employees
• Your business manages inventory
• You have to track sales tax
• You have any other complex, higher-level accounting needs

The best accounting software tools have a wide range of features and different recommended plans based on your number of employees. Some accounting software also includes bill pay and payroll software, so you can run payroll and manage other aspects of your business finances all in one place.

If you're a solo entrepreneur, professional services provider, or freelancer (like me), you might have simpler business finances, but still want to save time on tax prep and invoicing. You can choose a lower-cost "light" version of accounting software that gives you just what you need, without all the advanced features.

Don't assume that accounting software is complicated to use and expensive. Even if you need to have a call with the accounting software sales team, you can quickly get help to figure out which plan is the best fit for your business. And if you need to power up your business's accounting software as your company grows, you can do that.

Accounting software connects with your bank accounts

Probably the biggest immediate benefit that every small business owner will get from accounting software is that the software automatically connects to your bank. Check to make sure your bank is compatible with the accounting software, but assuming it is, the accounting software will integrate with your business checking account (and often your business credit cards) to track your business transactions.

You don't have to worry anymore about downloading your business expense transactions into a manual spreadsheet. The best accounting software can keep track of all the numbers for you 365 days per year.

Accounting software can work with your accountant

You don't have to choose between accounting software and your favorite accountant! You can still get the benefits of professional tax help from a real human along with the time-saving support of accounting software. Several of The Ascent's picks for best accounting software have features that let you share your business finance data directly with your accountant.

Bottom line

I still love my clunky, manual, self-designed spreadsheets for tracking my small business finances, and maybe you do, too. But this year, I'm going to think seriously about signing up for accounting software. Even if your company has just one staff member, and especially if your business has multiple employees, accounting software is becoming a must-have for every business owner. The best accounting software can help you crunch the numbers, track the transactions, and balance the books.

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Our Research Expert

Ben Gran is a freelance writer based in Des Moines, Iowa. He has written for regional banks, fintechs, and major financial services companies. Ben is a graduate of Rice University.

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What is Accounting and Why it Matters For Your Business

Reviewed by

March 4, 2022

This article is Tax Professional approved

When you start a business, you’ve suddenly got all kinds of new responsibilities. One of the most important? Business accounting.

But what exactly is accounting? What value does it provide your business? And how much time is it going to require?

The good news is that with the right people, tools, and resources, accounting doesn’t have to be a black hole for your time.

I am the text that will be copied.

In this post, we’ll cover the basics of accounting, from budgets to other accounting functions. But if you want to jump straight to the how-to, you can download our free guide to small business accounting .

A simple definition of accounting

Accounting is how your business records, organizes, and understands its financial information.

You can think of accounting as a big machine that you put raw financial information into—records of all your business transactions, taxes, projections, etc.—that then tells you a story about the financial state of your business.

Accounting is how you get a clear picture of your financial position. It tells you whether or not you’re making a profit, what your cash flow is, what the current value of your company’s assets and liabilities is, and which parts of your business are actually making money.

Accounting vs. bookkeeping

Accounting and bookkeeping are both part of the same process: keeping your financial records in order. However, bookkeeping is more concerned with recording everyday financial transactions and operations, while accounting puts that financial data to good use through analysis, strategy, and tax planning.

The accounting cycle

Accounting begins with recording transactions. Business transactions—any activity or event that involves your business’s money—need to be put into your company’s general ledger . Recording business transactions this way is part of bookkeeping.

Bookkeeping is the first step of what accountants call the “ accounting cycle ”: a process designed to take in transaction data and spit out accurate and consistent financial reports.

The accounting cycle has six major steps:

• Analyze and record transactions. Collect any invoices, bank or credit statements, and receipts from business transactions.
• Post journal entries to the ledger. It’s time to take those documents and start making journal entries for your transactions. Journal entries include three components of a transaction: when it happened, what it was for, and how much it was. Some businesses use single-entry accounting where only the expense or revenue is entered. But more common is double-entry accounting, which records each transaction in two accounts: where money is coming from and where it’s going.
• Prepare an unadjusted trial balance. At the end of a reporting period, list all of your business’s accounts and figure out their balances.
• Prepare adjusting entries at the end of the period. When you need to update entries you’ve already made, you prepare adjusting entries. For example, if a client is late on paying an invoice and you offer a 5% discount to help them pay, you would enter the discount as an adjusting entry, as opposed to changing the entry you’ve already made.
• Prepare an adjusted trial balance . After entering in adjusting entries, you’re left with an adjusted trial balance. This information is now ready to be turned into financial statements.
• Prepare financial statements. Finally, all the information you’ve collected is converted into your financial statements. This final step includes summarizing all your financial information into succinct reports for easy review.

Accounting software takes your accounting information and automates most of these rules and processes, so we’re going to skip over the gritty details of the accounting cycle and talk about the end product: financial statements.

Suggested reading: A Beginner’s Guide to The Accounting Cycle

Financial statements

Financial statements are reports that summarize how your business is doing financially.

There are three main types of financial statements: the balance sheet , income statement , and cash flow statement . Together, they tell you where your business’s money is and how it got there.

Let’s say you’re a self-employed surfing instructor who bills clients for surfing lessons. Financial statements can tell you what your most profitable months are, how much money you’ve spent on supplies, and what the total value of your business is.

Accounting software can help you generate financial statements easily, or you can have a bookkeeper do it for you.

Suggested reading: The ROI of Hiring a Bookkeeper

Generally accepted accounting principles (GAAP)

Every company is different, but in order to make accurate financial comparisons between companies, we need a common language to describe each of them. That’s what generally accepted accounting principles (GAAP) are: a series of standards and procedures that accountants at all companies must adhere to when preparing financial statements.

A non-governmental body called the Financial Accounting Standards Board sets the GAAP. While there are no laws enforcing these standards, most lenders and business partners in the United States will require that you adhere to GAAP. If you’re in Canada, you’ll use a different system called International Financial Reporting Standards, or IFRS .

Cash vs. Accrual

You can do your business accounting on a cash or accrual basis. The difference between the two comes down to timing.

Cash basis is the most basic accounting. On a cash basis, you only record transactions when money changes hands. If you receive an invoice on the 10th but don’t pay it until the 15th, the transaction is recorded on the 15th.

With accrual basis, you record transactions twice: when they occur and when they’re paid. For the invoice above, you record the expense on the 10th and the payment on the 15th as two separate transactions.

The method you use depends on what you need from your business finances. Cash basis is simpler and easier to stay on top of, while accrual offers greater insights for more detail-oriented business owners.

Most small businesses have more basic accounting needs, which means cash basis is often the right fit.

Suggested reading: Cash Basis Accounting vs. Accrual Accounting

The different types of accounting

Financial accounting.

Every year, your company will generate financial statements that people outside of your company—people like investors, lenders, government agencies, auditors, potential buyers, etc.—can use to learn more about your business’s financial health and profitability.

Preparing the company’s annual financial statements this way is called financial accounting. If you’re looking to hire a financial accountant, start with looking into how much an accountant costs .

Managerial accounting

Managerial accounting (or management accounting) is similar to financial accounting, with two important exceptions:

• The statements produced by managerial accounting are for internal use only.
• They’re generated much more frequently—often on a quarterly or monthly basis.

If your business ever grows to the point where you need to hire an accountant full-time, most of their time will be taken up by managerial accounting. You’ll be paying them to produce reports that provide regular updates on the company’s financial health and help you interpret those reports.

This is somewhat similar to the work a financial analyst might do, although a financial analyst will also look at past and current trends in the larger economy, not just your business, to inform their recommendations.

Tax accounting

Tax accounting is designed to make sure that you don’t pay more income tax than you are legally required to by the IRS. An example of this is when your accountant provides you with recommendations for how to get the most out of your tax return.

Tax accounting is regulated by the Internal Revenue Service (IRS), and the IRS legally requires that your tax accounting adhere to the Internal Revenue Code (IRC).

Cost accounting

Whenever you’re trying to figure out how to increase your margin or deciding if raising prices is a good idea, you’re doing cost accounting.

Cost accounting involves analyzing all of the costs associated with producing an output (whether it be a physical product or service) in order to make better decisions about pricing, spending, and inventory.

Cost accounting is often a prerequisite of managerial accounting because managers use cost accounting reports to make better business decisions. It also feeds into financial accounting since costing data is often required when compiling a balance sheet.

Credit accounting

Credit accounting involves analyzing all of a company’s unpaid bills and liabilities to make sure that a company’s cash isn’t constantly tied up in paying for them.

Credit accounting can be one of the most difficult kinds of accounting to do well, in part because it’s a difficult subject to be critical about. Talking about debts can be a sensitive, but necessary, conversation.

Why accounting matters for your small business

Accounting helps you plan for growth.

Every great journey begins with a roadmap. When you’re planning your company’s growth, it’s essential to set goals. What should your profits look like one year from now? How about in five years?

Keeping up with your accounting helps you stay on top of your business finances. That information is essential to assess how quickly your business is developing and guide future decision making. Without accurate reporting, you won’t have the full financial picture.

Has your cost of goods sold increased? Are margins thinner? Are your growth goals reasonable? Without financial statements, you won’t have an objective answer.

Accounting is essential for securing a loan

Up-to-date financial statements are essential if you want to fund your small business with a loan.

For instance, suppose you want to apply for a Small Business Association (SBA) loan through one of the big banks. You’ll need to provide, on average, three years of financial statements, plus a one-year cash flow projection . It’s virtually impossible to deliver any of these if you don’t have an accounting system in place.

Suggested reading: What to Prepare When Applying for a Business Loan

You need accounting to attract investors or sell your business

You may not be planning to court investors or sell your business right now, but it’s a good idea to leave your options open. And the best way to do that is to put a proper accounting system in place now.

Potential investors, stakeholders, or buyers will expect accounting records vetted by a CPA (Certified Public Accountant) that prove your business is profitable and on track for growth.

Accounting helps you get paid

When a customer owes you money, it appears as Accounts Receivable (AR) on your balance sheet , which is generated automatically by your accounting software or manually by you or your accountant.

The balance sheet tells you how much of your AR you’ve already pocketed during the month and how much is still outstanding.

By referring to your balance sheet, you can track how effectively you’re collecting payment. Then you can put in place processes—like harder payment deadlines or better follow-up with clients—to make sure you get your hands on the money you’ve earned when you need it.

Accounting helps you stay on top of your debts

If your business owes debts to a variety of sources, like credit cards, loans, and accounts payable, you’ll have to jump into multiple accounts to check what you’re left owing.

The balance sheet shows everything you owe in one place. It also shows all your bank account balances so you can reference both at the same time. It’s the perfect report to review to make sure you have the cash available to tend to your debts and plan future payments.

Accounting keeps you out of jail (or at least saves you from fines)

As your business grows, it can be difficult to keep track of all your tax information reporting obligations. What’s more, if there are mistakes in your financial reports, you run the risk of misreporting your income. Either mistake could land you in hot water with the IRS and other regulators.

Solid accounting gives you complete, accurate financial records , which reduces your risk of breaking tax laws and the chance of an audit . And, when you have an accountant filing your taxes for you, you can be sure they’ll be done accurately and on time.

Accounting helps you pay the right amount of taxes (and not a dollar more)

If you don’t pay your tax bill in full, the IRS will fine you . But they won’t give you a gold star for paying too much.

You can tell you’re paying too much in taxes if your business consistently receives large tax refunds.

Remember: a tax refund isn’t free cash from the IRS. It’s money you’ve overpaid the government that you could’ve used to invest in your business instead.

Refunds are often the result of miscalculated quarterly estimated tax payments . To calculate quarterly estimated tax payments accurately, you need to predict your income. It’s almost impossible to do so without reliable financial records produced through accurate accounting.

Suggested reading: The Top 19 Self-Employment Tax Deductions

What an accountant does

An accountant does more than just year-end tax preparation. A skilled CPA will save you time by communicating your company’s financial state to you in clear language, while anticipating your financial needs.

Accounting professionals like CPAs or tax advisors can also provide you with knowledge and insight that are simply inaccessible to non-accountants. These experts can offer guidance on tax deductions you didn’t know you qualified for, tax rules you didn’t know you were breaking, and best practices picked up while working for other companies in your industry.

If those are tips your business can benefit from right now, it might be time to hire an accountant .

Suggested reading: How to Find an Accountant

Accounting solutions

Small business accounting software has made big advancements as more people take the entrepreneurial path.

The self-service software you use is now almost equal to the accounting software used in firms all over the world. There are now a wide array of options available—which one is best for you depends on your business’s accounting needs.

Freshbooks offers integrated invoicing that makes it simple to manage your accounts receivable and your accounting in one place. Automated bank reconciliation will import all transactions from your business bank accounts, but you will have to review and categorize each one. Their time-tracking functionality also makes it easy for freelancers who bill by the hour. Freshbooks is a good fit for someone generating a lot of invoices with a low number of transactions.

Intuit makes both Quickbooks and a payroll processor, and allows you to bundle both for one monthly cost. The payroll service automates payroll taxes, checks, and all year-end forms, but the accounting platform is mostly manual. While the tool is powerful and can help a skilled user navigate multiple aspects of running a business, it takes a good amount of know-how to get the most out of it.

If you prefer a completely hands-off approach to bookkeeping and accounting, Bench might be right for you. Connect your business bank accounts to have transactions automatically imported, categorized, and reviewed by your personal bookkeeper.

Communication is quick and reliable—the Bench platform allows you to send messages straight to your bookkeeper or set up a call to go over any financial questions that might come up. Our premium package even includes tax filing, which makes all accounting tasks completely automated. Learn more about how Bench can help .

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Ownr Blog  > Magazine  > Money & Lifestyle  > Accounting, Taxes & Insurance  > How Can an Accountant Help with Small Business

How Can an Accountant Help with Small Business

Starting and running a business can be a rewarding experience with the potential for significant growth. The financial rewards can be life-changing, and seeing your business grow and thrive can be a fulfilling experience.

However, navigating the complex waters of business management presents a set of unique challenges.

Entrepreneurs are often talented technicians. From accomplished graphic designers and fashion trend-setters to skilled carpenters and contractors. However, they are also often complete novices when it comes to managing the financial and administrative aspects of a business.

And that’s okay! This is where entrepreneurs can turn to accountants; our pocket-protected, number-crunching superheroes.

An accounting professional can steer the financial helm of your business, ensuring it stays on course. Their expertise in handling the numbers and understanding your business’ nuances can provide you with the peace of mind to focus on your core business.

In this article, we’ll explore the various benefits of hiring an accountant for a small business.

• Reviewing Documents and Contracts – Ensuring that all of your paperwork is in order, and that the contracts you enter are in your best interest.
• Acting as a Remote CFO – Overseeing the financial operations, helping with strategic planning, and ensuring your business is financially healthy.
• Guiding Business Succession Planning – Facilitating a smooth transition for when it’s time to pass the baton to the next leader.
• Estate and Trust Planning – Helping safeguard the future of your business and ensuring your assets are managed effectively and tax efficiently.

Let’s dive deeper with this question: “how does accounting help small businesses?”

(And for a bit more context on what an accountant does, you can also check out our article on the difference between accountants and bookkeepers .)

• Review all documents and contracts

As a business owner, you’re probably busy promoting your business. You might be hitting the pavement making sales or creating operating procedures to support your team. This leaves little time for tedious and time-consuming paperwork.

You could certainly sit down during your evenings and weekends to tackle your growing stack of documents, but that might not be the best use of your time.

Thankfully, tedious paperwork is one of many areas that accountants shine. Plus, as an accountant myself, I can confidently say that we love this stuff!

• Understanding the Paperwork

Documentation and paperwork can sometimes be like puzzles with complex language and intricate details. Thankfully, accountants are skilled in solving these puzzles. They have the know-how to read and interpret various business documents, whether they are financial statements, receipts for expenses, tax forms, or operational procedures.

An accountant doesn’t just understand these documents; they can also translate them into plain English for you. This type of translation and communication is one of the most important skills that accountants can possess.

Think of your accountant as your personal interpreter for “business language.” They break down the crucial aspects and guide you through the necessary steps. With their expert and keen  insights, you can make informed decisions and ensure that your business complies with all of the necessary regulations.

• Keeping Things Fair and Safe

Contracts often serve as the foundation for business relationships. Whether it’s a lease for a new office, an agreement with a supplier, or a contract with a new client, it’s important to get them right.

Here’s where your accountant steps in as your guardian and protector. They have an eye for the details and can review contracts to protect your interests and ensure that the terms are fair. They can spot any hidden clauses or terms that might not be favorable to you. This way, they make sure you enter into agreements that are solid, transparent, and beneficial for your business.

In the long run, having an accountant review your contracts can save you from potential disputes or financial pitfalls.

• Saving Money and Expense Management

Next, let’s talk about one of the sweetest parts of having an accountant: saving money!

Accountants are like treasure hunters. They know where to look for hidden gems that can save you money.

They’ll dive into your accounting software to analyze business expenses and pinpoint areas where you can cut costs without hurting your business. This could be anything from finding more affordable suppliers to suggesting more cost-effective processes.

For example, at Avalon Accounting , we just did an audit of our software costs and found that we could save over $5,000 by switching to annual subscriptions and removing unused accounts.

• Minimize Taxes in Your Business

Taxes can be tricky, but accountants are masters of tax laws and regulations.

They can identify tax deductions and credits that you might not be aware of. By strategically planning your taxes, they help ensure that you’re not paying more than you should.

In a nutshell, an accountant can help to optimize your expenses and make the most of tax savings. The end result is that you get to keep more coins in the company coffers.

• Be the remote CFO of your company

Stepping up the game, let’s discuss a vital role in the business – the Chief Financial Officer, or CFO for short.

Imagine a ship sailing across the ocean; the CFO is like the ship’s navigator, ensuring that it sails smoothly and reaches its destination. However, having a full-time financial navigator on board can be costly for small businesses.

Enter the remote CFO, sometimes also called a “fractional CFO.”

The remote CFO is a relatively new concept where accountants can work with business owners remotely and on a part-time basis. They can help to manage cash flow, create forecasts and budgets, prepare financial reports, set goals, and help business owners make well-informed decisions.

• Budgeting and Cash Management

Sailing without a map? That’s a no-go. Similarly, running a business without a budget or financial plan is just as risky.

Your budget is your financial map, guiding you through the sea of expenses and revenues. It’s a crucial tool to ensure your business ship doesn’t run out of fuel – that’s cash, in business terms.

Your accountant, acting as a remote CFO, can help you build this budget. They can work with you to forecast revenues, plan expenses, and set financial goals.

Your accountant will help your business maintain healthy cash flow by closely monitoring how the business is performing compared to the budget. With a well-planned budget, you know where to allocate resources efficiently, ensuring your ship doesn’t run aground.

• Reporting and Analysis

Carrying on with our nautical theme from the last section, how do you know if your ship is in good shape?

Well, with regular check-ups and maintenance. In the business world, these check-ups come in the form of financial reports.

Your accountant can compile and interpret financial statements, such as income statements, balance sheets, and cash flow statements. These reports act as a health check for your business, reflecting its financial condition.

Your accountant can also analyze these reports to provide you with important insights. They can spot trends, identify potential issues, and suggest corrective actions. These insights are your ship’s telescope, helping you see far into the distance and navigate through potential storms.

• Making Smart Decisions

Now that you have your map and a telescope, you need a wise navigator. As a remote CFO, your accountant is this navigator, guiding you through important financial decisions.

Whether it’s deciding on an investment, negotiating a deal, or evaluating a business opportunity, your accountant provides you with data-driven insights and advice.

They bring a wealth of experience and expertise to the table, helping you make informed decisions that bolster the strength and sustainability of your business.

By donning the hat of a remote CFO, your accountant becomes an essential ally in your voyage towards business success. They not only help keep the ship steady but also ensure it’s sailing full steam ahead in the right direction.

• Guide business succession planning

Alright, so you’ve captained your business ship through both calm and stormy seas. But what happens when it’s time for you to hang up your captain’s hat?

Here, business succession planning is your compass. It ensures that your ship continues to sail smoothly even when you’re not at the helm.

• Finding the Next Leader

Every ship needs a captain, and every business needs a leader. Your accountant is like your trusty first mate who helps you scout for the best person to take over the wheel when you’re ready to step back or move on.

It could be a family member who’s grown up watching you steer the business, or a loyal team member who has been instrumental in the business’ growth. Your accountant can assist in selecting the new leader and then move on to showing them the ropes.

• Training New Business Leaders

When the time comes for a new leader to take the helm of your business, it’s vital that they’re well-prepared to navigate the challenges ahead.

Your accountant can assist in this process by ensuring that the new leader is well-trained and understands the intricacies of the business. This includes understanding the financial aspects of the business, operational procedures, and strategic planning.

The objective is to equip your successor with the tools and knowledge necessary to navigate the complexities of running the business.

• Handling Taxes and Paperwork

If your business succession planning involves the addition of new owners or a change in ownership, your accountant can also manage the taxes and paperwork.

Your accountant can make sure that all the tax implications are addressed, and that the necessary documentation is properly filed. This includes understanding estate taxes, valuation of the business, and regulatory requirements.

The expertise of an accountant is critical in ensuring a smooth and compliant transition.

• Help with estate and trust planning

As an entrepreneur, it’s also important to cast your sights on the future. You’ve worked hard to build your business, and naturally, you want to ensure it continues to thrive even when you’re ready to take a step back.

• Planning for the Future

Estate planning is like building a blueprint for the future of your business. It involves deciding how your business assets will be distributed and managed when you retire or if you’re no longer around.

Your accountant can be an invaluable guide in this process. They can work with you to determine the value of your business, consider tax implications, and help make a plan that aligns with your wishes.

This involves liaising with other professionals to create a will and set up life insurance policies. The goal is to make sure that the business continues to operate smoothly for the next generation.

Your accountant’s support with estate planning ensures that the business you’ve nurtured continues to grow and support the ones you love into the future.

• Creating Trusts

Trusts are a powerful tool in estate planning. They’re a little bit like safety deposit boxes that keep your business assets secure so you can direct the funds to exactly where you want them.

Your accountant can help you establish a trust to help minimize estate taxes and ensure a smoother transition of assets. This is especially important to make certain that your family or other beneficiaries receive the fruits of your labor without any unnecessary hassles.

Trusts can offer protection against creditors and legal claims. They help to ensure that your hard-earned assets are shielded in the event of litigation.

Creating trusts can help you to secure your business’s future and also make sure it continues to be a source of support and growth for the ones you hold dear.

It’s clear that accountants are much more than just number crunchers. They are essential supporters in the growth and success of small businesses.

Accountants take on many important roles within small businesses. From reviewing contracts to reducing expenses, accountants are there to help.

In addition to keeping an eye on the finances, they’re also strategic advisors. Accountants help plan for the future, whether it’s passing the business on to the next generation or securing its assets.

Accountants have the knowledge to make sense of complex financial matters. They can also help you to navigate the rules and regulations that come with running a business. With their guidance, you can spot opportunities, avoid potential problems, and make smart decisions based on solid data.

If you’re not yet convinced of the benefits accountants can bring to your business, please also check out our article on why accounting is important for your business .

If you’re interested in working with accountants who solely work with small businesses, please have a look at Avalon Accounting’s website . Our mission is to help small businesses thrive, and this article outlines just a few ways that Avalon can do that.

This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.

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What Does an Accountant Do for a Business?

In the realm of business management and financial stability, accountants play a pivotal role. They are the guardians of financial health and the navigators through the complexities of financial data and records. But what exactly does an accountant do for a business? Let’s delve into the depths of their responsibilities and the significance they hold in ensuring the success of a business.

Understanding the Role of an Accountant

Basic Functions and Responsibilities

Accountants are professionals trained in the art of financial management. They are adept at handling financial transactions, maintaining financial records, and analyzing financial data to provide insights crucial for decision-making. Their primary responsibilities include:

• Financial Record-Keeping: Accountants meticulously maintain financial records to ensure accuracy and compliance with government regulations.
• Financial Reporting : They prepare and present financial statements that offer a snapshot of a business’s financial health.
• Tax Preparation and Compliance: Accountants navigate the intricate landscape of tax law to prepare and file tax returns accurately, ensuring compliance with government regulations.
• Budgeting and Forecasting: They assist in developing financial strategies by creating budgets and forecasts based on financial data analysis.
• Auditing: Certified public accountant conducts audits to verify the accuracy of financial information and ensure compliance with accounting standards.

Specializations in Accounting

Certified public accountants (cpas).

Certified Public Accountants (CPAs) are licensed professionals who have passed the rigorous CPA exam and fulfill state licensing requirements. They offer a wide range of financial services, including tax planning, auditing, and consulting.

Certified Management Accountant

Management Accountants focus on providing financial insights to aid business strategy and decision-making. They analyze financial data to identify trends, assess business processes, and recommend improvements to enhance operational efficiency.

Tax Accountants

Tax Accountants specialize in tax planning and compliance. They keep abreast of ever-changing tax laws to minimize tax liabilities while ensuring adherence to regulatory requirements.

How Accountants Help Small Businesses

Accountants are invaluable assets to small businesses seeking to navigate the intricacies of financial management. Here are some ways they contribute to the success of small businesses:

1. Financial Advice and Guidance

Accountants offer personalized financial advice tailored to the unique needs of small businesses. They help business owners set and achieve financial goals, providing guidance on budgeting, cash flow management, and investment decisions.

2. Compliance and Risk Management

Accountants ensure small businesses comply with tax regulations and financial reporting standards, minimizing the risk of non-compliance and penalties. They also assist in risk management, identifying potential financial risks and implementing strategies to mitigate them.

3. Business Decision Support

By analyzing financial data and preparing financial reports, accountants empower small business owners to make informed business decisions. They provide insights into profitability, cost control, and resource allocation, enabling business owners to optimize business performance.

4. Streamlining Financial Processes

Accountants streamline financial processes through automation and optimization. They leverage accounting software and technology to streamline data entry and reporting, saving time and reducing operational costs.

5. Facilitating Growth

As small businesses grow, accountants play a crucial role in managing financial growth. They provide financial analysis and forecasting to support expansion plans, ensuring sustainable growth and financial stability.

What Additional Services Might Your Business Require?

While we’ve touched upon bookkeeping and tax-related matters, there exists a plethora of services that an accountant can offer.

One particularly advantageous service is the preparation of financial reports, which encompass management accounts. Financial reports typically manifest in three primary forms: cash flow summaries, profit and loss statements, and balance sheets.

It’s imperative for small business proprietors to routinely review financial statements to maintain an updated overview of revenue inflows and outflows. These reports prove invaluable during tax season and enable identification of variances and trends that may impact business profitability.

Engaging an accountant also affords the benefit of regular cash flow analysis, providing insights into the liquidity of the business at specific intervals and facilitating informed decisions regarding withdrawals or reinvestments.

Furthermore, a balance sheet, another indispensable tool provided by accountants, offers a snapshot of the company’s assets and liabilities at a given moment, aiding in gauging overall business performance.

Beyond these financial services, accountants can provide invaluable counsel on matters such as the necessity for additional business bank accounts, enhancing payroll procedures, boosting sales figures, sustaining financial growth, ensuring compliance with regulatory bodies like HMRC, data analysis, and much more.

Our firm offers a comprehensive suite of services, ensuring that our accountants are not merely bookkeepers but strategic partners invested in the ongoing success of your business.

Is Accounting Essential for Managing Cash Flow?

Engaging an accountant can yield cost savings for a business, notwithstanding the initial expense of their services. Whether you operate a small business, function as a sole trader, or fall anywhere in between, an accountant well-versed in your business operations enables you, as the business owner, to concentrate on core business activities.

Bookkeeping often proves to be a task that impedes business development and client expansion. By delegating bookkeeping responsibilities to an accountant, you liberate valuable time and ensure the meticulous organization of your financial records. Additionally, entrusting this task to an accountant ensures the maintenance of comprehensive accounting records, crucial in the event of an HMRC audit.

Indeed, precise and proficient accounting is indispensable for small businesses seeking to gain insight into all facets of their cash flow. The accounting process holds such significance for overall business prosperity that absolute accuracy, down to the minutest detail regarding profits and losses, is imperative.

The cash flow of a small business is subject to rapid fluctuations, and having a skilled and inquisitive accountant on board allows for a thorough understanding of these changes and offers guidance on navigating them effectively.

While anyone can input data into accounting software systems, it takes a specialized accountant to conduct meaningful analysis and contextualize the numbers within the specific dynamics of the business.

The Importance of Choosing the Right Accountant

In today’s competitive business landscape, selecting the right accountant is paramount. A good accountant can be a trusted advisor and a strategic partner, guiding business through financial challenges and opportunities. When choosing an accountant, business owners should consider factors such as experience, credentials, and compatibility with their business needs.

In conclusion, accountants play a key role in the success of a business. From maintaining financial records to providing strategic insights, they are indispensable allies in financial management. Whether it’s navigating tax season, optimizing business processes, or making informed decisions, accountants are the guardians of financial health and the architects of business success.

In a world where financial stability is paramount, accountants stand as sentinels, ensuring that businesses thrive and prosper in the face of financial challenges and uncertainties. As businesses evolve and financial landscapes shift, the role of the accountant remains ever-essential, guiding businesses towards growth and success.

FAQs about Accountants for Businesses:

1. What does an accountant do for a business?

Accountants handle financial transactions, maintain records, prepare reports, ensure tax compliance, and provide financial insights crucial for decision-making.

2. What specializations do accountants have?

Accountants may specialize as CPAs, management accountants, or tax accountants, offering services like tax planning, auditing, financial analysis, and compliance.

3. How do accountants help small businesses?

They offer financial advice, ensure compliance, provide decision support, streamline processes, and facilitate growth through strategic financial management.

4. What additional services can accountants offer?

Beyond bookkeeping and taxes, they provide financial reporting, cash flow analysis, balance sheets, regulatory compliance, data analysis, and strategic counsel for business growth.

5. Is accounting essential for managing cash flow?

Yes, precise accounting is crucial for understanding cash flow fluctuations, maintaining records, and gaining insights into business profitability, enabling informed decision-making and compliance.

Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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6 Ways Accountants Help Business Owners Make Smarter Business Decisions

There are many benefits of hiring an accountant for your business. Accountants have a deep understanding of what the numbers on financial statements represent and what problems they could be indicating. Having an accountant on the team will improve a business’ ability to make decisions, because accountants are able to see beyond the numbers on financial statements. Below are 6 ways accountants can help your business.

How do accountants help businesses?

Start-Up Process

One of the ways accountants help business owners is by using their financial knowledge to help set the business up for success. An accountant can help chose the correct business structure (LLC, partnership, etc.). To stay organized and in compliance with government regulations from the start, an accountant will set up the correct accounting processes when they first start.

Working with an accountant can help grow a business. When companies are experiencing growth or trying to achieve growth, accountants can help by giving business managers insight into  cash flow management , inventory management, and business financing. They can also create forecasts and budgets to help guide a business and ensure it is in line with the goals of that business. If facing any mergers, acquisitions, or sale of a business, the accountant will ensure for a smooth transition.

Accountants help businesses with regular operations by providing monthly preparation and analysis of financial statements. The analysis will help managers make informed decisions with the most up-to-date data. Accountants can also help by overseeing payroll and estimating tax payments throughout the year.

Regulatory & Reporting Compliance

Accountants ensure business owners are following government regulations. They’ll make sure important deadlines are met — such as tax filings and W2 submissions. Business accountants can also help a company through an audit by providing the auditor with the correct company data. Having an accountant from the beginning ensures this process will go smoothly because the data with be organized and available.

External Financial Relationships

Businesses usually work with many different financial organizations. Accountants can manage the relationships and handle the work that must be done by CPA firms for tax filings, banks, or other lenders.

Prevent Accounting Mistakes

Accountants help businesses from preventing financial mistakes that could cost a business money. An accountant will prevent both small and large mistakes — like overdrafts to bank accounts, or missing a tax deadline that could result in huge penalties.

Hire a part-time accountant for your business

Having an accountant on a business team will give valuable insight into that business to help drive good business decisions. Delegating this work to a part-time accountant will give managers and owners more time to focus on the operations of the business.

Pro Back Office (PBO) is a cost effective solution to business accounting services. PBO provides  outsourced accounting  that’s hourly, onsite or remote, and part-time. To learn more about the benefits of having a part-time accountant, call PBO at 877-868-6164 or use the  online contact form .

PBO has offices located in San Diego and Phoenix and serve clients throughout the Pacific Southwest. Find the right accountant for your business by contacting Pro Back Office.

• What Does an Accountant Do?

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 08, 2023

Get Any Financial Question Answered

Table of contents.

An accountant is a critical cog in the financial machinery of any business, small or large.

Their primary responsibility includes maintaining accurate financial records, preparing and filing taxes , ensuring compliance with regulations, and providing strategic financial advice .

Accountants handle everything from payroll processing and bookkeeping to financial forecasting and auditing.

They analyze financial data to identify trends and make future predictions, assisting in strategic business decisions.

Furthermore, with their expert knowledge of tax law, accountants are adept at minimizing tax liability and identifying potential tax deductions .

As trusted advisors, they provide financial clarity, facilitate regulatory compliance, and support informed decision-making, playing a pivotal role in business growth and profitability.

Roles of an Accountant

Manages financial data.

Accountants handle large volumes of financial data daily. From sales revenue, expenses, and payroll to investments , accountants are proficient in collecting, organizing, and interpreting this information.

They ensure that financial transactions are correctly recorded and classified in the company's books, providing a clear financial picture for stakeholders .

Execution of Audits

Internal and external audits are another significant aspect of an accountant's work. They are experts in examining a company's financial statements to ascertain their accuracy and compliance with regulations.

Additionally, audits carried out by accountants can highlight potential areas of improvement in the company's financial management.

Financial Plan and Analysis

Beyond the day-to-day operations, accountants also assist in strategic financial planning. They analyze financial data to forecast trends, identify opportunities for increased profitability, and recommend measures to reduce costs.

Tax Preparation and Filing

Tax preparation and filing is a critical duty for accountants. They use their expert knowledge of tax law to ensure accurate tax filings, identify deductions, and provide advice on tax-related decisions.

By doing so, accountants help individuals and companies minimize their tax liability.

Skills and Qualifications of an Accountant

Educational background.

A bachelor's degree in accounting or a related field is typically the minimum requirement for an accountant. Some positions may require a master's degree or specific certification.

Essential Skills

Accountants need a range of skills, including attention to detail, analytical skills, proficiency with financial software, and strong communication skills.

Professional Certifications

Certifications like Certified Public Accountant (CPA) or Certified Management Accountant (CMA) are valuable in advancing an accountant's career.

Different Types of Accountants

Public accountants.

Public accountants provide a variety of accounting services to individuals, businesses, and government agencies.

Management Accountants

Management accountants, or corporate accountants, work within a company and focus on internal financial documents.

Government Accountants

Government accountants maintain and examine records of government agencies and audit private businesses or individuals for compliance with government regulations.

Forensic Accountants

Forensic accountants investigate financial crimes such as embezzlement, fraud, and other complex financial disputes.

Auditors can be internal or external, and they review financial statements for accuracy and regulatory compliance.

• Benefits of Having an Accountant

Ensures Regulatory Compliance

Having an accountant ensures a business stays compliant with the various regulations, saving the company from penalties and maintaining its reputation.

Provides Financial Clarity

Accountants provide financial clarity to business owners and managers by keeping accurate records and presenting them in an understandable manner.

Helps in Decision Making

Accountants aid in decision-making by providing well-analyzed financial data, helping to formulate strategic business plans.

Offers Strategic Tax Plan

Accountants offer strategic tax planning, helping businesses leverage tax laws for their benefit, thereby saving money.

Manages Risks through Audit

Accountants manage risk by conducting internal audits, identifying areas of weakness, and suggesting improvements.

Drawbacks of Having an Accountant

Cost of services.

Hiring an accountant can be expensive, especially for small businesses or startups operating on a tight budget .

Dependence on the Accountant's Expertise and Integrity

Companies heavily rely on their accountant's expertise and integrity. A less skilled or unethical accountant can harm the business.

Potential Errors and Mistakes

Despite their expertise, accountants are humans and can make errors, leading to financial losses or regulatory issues.

Accountants play a pivotal role in the financial management of businesses, offering indispensable services that contribute to growth and profitability.

Their responsibilities encompass maintaining accurate financial records, preparing taxes, ensuring compliance, and providing strategic financial advice.

Accountants possess essential skills, such as attention to detail, analytical acumen, proficiency with financial software, and effective communication. Professional certifications like CPA or CMA enhance their career prospects.

There are various types of accountants, including public accountants, management accountants, government accountants, forensic accountants, and auditors, each serving different needs.

The benefits of having an accountant are numerous, ranging from ensuring regulatory compliance and providing financial clarity to aiding in decision-making and offering strategic tax planning.

However, there are drawbacks as well, such as the cost of services, dependence on the accountant's expertise and integrity, and the potential for human errors.

Despite these drawbacks, the expertise and insights provided by accountants make them indispensable assets for any business seeking financial success and stability.

What Does an Accountant Do? FAQs

What does an accountant do in a business.

An accountant in a small business manages a wide range of financial tasks, including bookkeeping, payroll processing, tax preparation and filing, regulatory compliance, and financial reporting. They also provide strategic financial advice to help the business grow and become more profitable.

Does an accountant only work with numbers?

While managing and interpreting numerical financial data is a significant part of an accountant's role, they do much more than that. An accountant also ensures regulatory compliance, assists in strategic financial planning, conducts audits, and offers expert advice on tax-related matters.

What qualifications are required for someone to work as an accountant?

A bachelor's degree in accounting or a related field is typically the minimum requirement. However, for career advancement or to specialize in a particular area, further qualifications may be necessary, such as a master's degree in accounting or certifications like Certified Public Accountant (CPA) or Certified Management Accountant (CMA).

How does an accountant assist with decision-making in a business?

An accountant assists with decision-making by providing well-analyzed financial data, identifying trends, and forecasting future financial scenarios. This information is invaluable when making strategic business decisions such as expansion, investment, or cost-cutting.

What does the future look like for accountants with the rise of technology and automation?

The rise of technology and automation is changing the landscape of accounting. While some basic tasks can be automated, this shift allows accountants to focus more on strategic roles, such as analysis, advisory services, and decision-making support. As a result, accountants will need to adapt, enhancing their technical skills and focusing more on value-added services.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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How To Start A Business In 11 Steps (2024 Guide)

Updated: Apr 7, 2024, 1:44pm

Table of Contents

Before you begin: get in the right mindset, 1. determine your business concept, 2. research your competitors and market, 3. create your business plan, 4. choose your business structure, 5. register your business and get licenses, 6. get your finances in order, 7. fund your business, 8. apply for business insurance, 9. get the right business tools, 10. market your business, 11. scale your business, what are the best states to start a business, bottom line, frequently asked questions (faqs).

Starting a business is one of the most exciting and rewarding experiences you can have. But where do you begin? There are several ways to approach creating a business, along with many important considerations. To help take the guesswork out of the process and improve your chances of success, follow our comprehensive guide on how to start a business. We’ll walk you through each step of the process, from defining your business idea to registering, launching and growing your business .

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The public often hears about overnight successes because they make for a great headline. However, it’s rarely that simple—they don’t see the years of dreaming, building and positioning before a big public launch. For this reason, remember to focus on your business journey and don’t measure your success against someone else’s.

Consistency Is Key

New business owners tend to feed off their motivation initially but get frustrated when that motivation wanes. This is why it’s essential to create habits and follow routines that power you through when motivation goes away.

Take the Next Step

Some business owners dive in headfirst without looking and make things up as they go along. Then, there are business owners who stay stuck in analysis paralysis and never start. Perhaps you’re a mixture of the two—and that’s right where you need to be. The best way to accomplish any business or personal goal is to write out every possible step it takes to achieve the goal. Then, order those steps by what needs to happen first. Some steps may take minutes while others take a long time. The point is to always take the next step.

Most business advice tells you to monetize what you love, but it misses two other very important elements: it needs to be profitable and something you’re good at. For example, you may love music, but how viable is your business idea if you’re not a great singer or songwriter? Maybe you love making soap and want to open a soap shop in your small town that already has three close by—it won’t be easy to corner the market when you’re creating the same product as other nearby stores.

If you don’t have a firm idea of what your business will entail, ask yourself the following questions:

• What do you love to do?
• What do you hate to do?
• Can you think of something that would make those things easier?
• What are you good at?
• What do others come to you for advice about?
• If you were given ten minutes to give a five-minute speech on any topic, what would it be?
• What’s something you’ve always wanted to do, but lacked resources for?

These questions can lead you to an idea for your business. If you already have an idea, they might help you expand it. Once you have your idea, measure it against whether you’re good at it and if it’s profitable.

Your business idea also doesn’t have to be the next Scrub Daddy or Squatty Potty. Instead, you can take an existing product and improve upon it. You can also sell a digital product so there’s little overhead.

What Kind of Business Should You Start?

Before you choose the type of business to start, there are some key things to consider:

• What type of funding do you have?
• How much time do you have to invest in your business?
• Do you prefer to work from home or at an office or workshop?
• What interests and passions do you have?
• Can you sell information (such as a course), rather than a product?
• What skills or expertise do you have?
• How fast do you need to scale your business?
• What kind of support do you have to start your business?
• Are you partnering with someone else?
• Does the franchise model make more sense to you?

Consider Popular Business Ideas

Not sure what business to start? Consider one of these popular business ideas:

• Start a Franchise
• Start a Blog
• Start an Online Store
• Start a Dropshipping Business
• Start a Cleaning Business
• Start a Bookkeeping Business
• Start a Clothing Business
• Start a Landscaping Business
• Start a Consulting Business
• Start a Photography Business
• Start a Vending Machine Business

Most entrepreneurs spend more time on their products than they do getting to know the competition. If you ever apply for outside funding, the potential lender or partner wants to know: what sets you (or your business idea) apart? If market analysis indicates your product or service is saturated in your area, see if you can think of a different approach. Take housekeeping, for example—rather than general cleaning services, you might specialize in homes with pets or focus on garage cleanups.

Primary Research

The first stage of any competition study is primary research, which entails obtaining data directly from potential customers rather than basing your conclusions on past data. You can use questionnaires, surveys and interviews to learn what consumers want. Surveying friends and family isn’t recommended unless they’re your target market. People who say they’d buy something and people who do are very different. The last thing you want is to take so much stock in what they say, create the product and flop when you try to sell it because all of the people who said they’d buy it don’t because the product isn’t something they’d buy.

Secondary Research

Utilize existing sources of information, such as census data, to gather information when you do secondary research. The current data may be studied, compiled and analyzed in various ways that are appropriate for your needs but it may not be as detailed as primary research.

Conduct a SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities and threats. Conducting a SWOT analysis allows you to look at the facts about how your product or idea might perform if taken to market, and it can also help you make decisions about the direction of your idea. Your business idea might have some weaknesses that you hadn’t considered or there may be some opportunities to improve on a competitor’s product.

Asking pertinent questions during a SWOT analysis can help you identify and address weaknesses before they tank your new business.

A business plan is a dynamic document that serves as a roadmap for establishing a new business. This document makes it simple for potential investors, financial institutions and company management to understand and absorb. Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems. When writing a well-rounded business plan, include the following sections:

• Executive summary: The executive summary should be the first item in the business plan, but it should be written last. It describes the proposed new business and highlights the goals of the company and the methods to achieve them.
• Company description: The company description covers what problems your product or service solves and why your business or idea is best. For example, maybe your background is in molecular engineering, and you’ve used that background to create a new type of athletic wear—you have the proper credentials to make the best material.
• Market analysis: This section of the business plan analyzes how well a company is positioned against its competitors. The market analysis should include target market, segmentation analysis, market size, growth rate, trends and a competitive environment assessment.
• Organization and structure: Write about the type of business organization you expect, what risk management strategies you propose and who will staff the management team. What are their qualifications? Will your business be a single-member limited liability company (LLC) or a corporation ?
• Mission and goals: This section should contain a brief mission statement and detail what the business wishes to accomplish and the steps to get there. These goals should be SMART (specific, measurable, action-orientated, realistic and time-bound).
• Products or services: This section describes how your business will operate. It includes what products you’ll offer to consumers at the beginning of the business, how they compare to existing competitors, how much your products cost, who will be responsible for creating the products, how you’ll source materials and how much they cost to make.
• Background summary: This portion of the business plan is the most time-consuming to write. Compile and summarize any data, articles and research studies on trends that could positively and negatively affect your business or industry.
• Marketing plan: The marketing plan identifies the characteristics of your product or service, summarizes the SWOT analysis and analyzes competitors. It also discusses how you’ll promote your business, how much money will be spent on marketing and how long the campaign is expected to last.
• Financial plan: The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with projected financial statements, such as an income statement, a balance sheet and a statement of cash flows. Usually, five years of projected financial statements are acceptable. This section is also where you should include your funding request if you’re looking for outside funding.

Learn more: Download our free simple business plan template .

Come Up With an Exit Strategy

An exit strategy is important for any business that is seeking funding because it outlines how you’ll sell the company or transfer ownership if you decide to retire or move on to other projects. An exit strategy also allows you to get the most value out of your business when it’s time to sell. There are a few different options for exiting a business, and the best option for you depends on your goals and circumstances.

The most common exit strategies are:

• Selling the business to another party
• Passing the business down to family members
• Liquidating the business assets
• Closing the doors and walking away

Develop a Scalable Business Model

As your small business grows, it’s important to have a scalable business model so that you can accommodate additional customers without incurring additional costs. A scalable business model is one that can be replicated easily to serve more customers without a significant increase in expenses.

Some common scalable business models are:

• Subscription-based businesses
• Businesses that sell digital products
• Franchise businesses
• Network marketing businesses

Start Planning for Taxes

One of the most important things to do when starting a small business is to start planning for taxes. Taxes can be complex, and there are several different types of taxes you may be liable for, including income tax, self-employment tax, sales tax and property tax. Depending on the type of business you’re operating, you may also be required to pay other taxes, such as payroll tax or unemployment tax.

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When structuring your business, it’s essential to consider how each structure impacts the amount of taxes you owe, daily operations and whether your personal assets are at risk.

An LLC limits your personal liability for business debts. LLCs can be owned by one or more people or companies and must include a registered agent . These owners are referred to as members.

• LLCs offer liability protection for the owners
• They’re one of the easiest business entities to set up
• You can have a single-member LLC
• You may be required to file additional paperwork with your state on a regular basis
• LLCs can’t issue stock
• You’ll need to pay annual filing fees to your state

Limited Liability Partnership (LLP)

An LLP is similar to an LLC but is typically used for licensed business professionals such as an attorney or accountant. These arrangements require a partnership agreement.

• Partners have limited liability for the debts and actions of the LLP
• LLPs are easy to form and don’t require much paperwork
• There’s no limit to the number of partners in an LLP
• Partners are required to actively take part in the business
• LLPs can’t issue stock
• All partners are personally liable for any malpractice claims against the business

Sole Proprietorship

If you start a solo business, you might consider a sole proprietorship . The company and the owner, for legal and tax purposes, are considered the same. The business owner assumes liability for the business. So, if the business fails, the owner is personally and financially responsible for all business debts.

• Sole proprietorships are easy to form
• There’s no need to file additional paperwork with your state
• You’re in complete control of the business
• You’re personally liable for all business debts
• It can be difficult to raise money for a sole proprietorship
• The business may have a limited lifespan

Corporation

A corporation limits your personal liability for business debts just as an LLC does. A corporation can be taxed as a C corporation (C-corp) or an S corporation (S-corp). S-corp status offers pass-through taxation to small corporations that meet certain IRS requirements. Larger companies and startups hoping to attract venture capital are usually taxed as C-corps.

• Corporations offer liability protection for the owners
• The life span of a corporation is not limited
• A corporation can have an unlimited number of shareholders
• Corporations are subject to double taxation
• They’re more expensive and complicated to set up than other business structures
• The shareholders may have limited liability

Before you decide on a business structure, discuss your situation with a small business accountant and possibly an attorney, as each business type has different tax treatments that could affect your bottom line.

Helpful Resources

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There are several legal issues to address when starting a business after choosing the business structure. The following is a good checklist of items to consider when establishing your business:

Choose Your Business Name

Make it memorable but not too difficult. Choose the same domain name, if available, to establish your internet presence. A business name cannot be the same as another registered company in your state, nor can it infringe on another trademark or service mark that is already registered with the United States Patent and Trademark Office (USPTO).

Business Name vs. DBA

There are business names, and then there are fictitious business names known as “Doing Business As” or DBA. You may need to file a DBA if you’re operating under a name that’s different from the legal name of your business. For example, “Mike’s Bike Shop” is doing business as “Mike’s Bikes.” The legal name of the business is “Mike’s Bike Shop,” and “Mike’s Bikes” is the DBA.

You may need to file a DBA with your state, county or city government offices. The benefits of a DBA include:

• It can help you open a business bank account under your business name
• A DBA can be used as a “trade name” to brand your products or services
• A DBA can be used to get a business license

Register Your Business and Obtain an EIN

You’ll officially create a corporation, LLC or other business entity by filing forms with your state’s business agency―usually the Secretary of State. As part of this process, you’ll need to choose a registered agent to accept legal documents on behalf of your business. You’ll also pay a filing fee. The state will send you a certificate that you can use to apply for licenses, a tax identification number (TIN) and business bank accounts.

Next, apply for an employer identification number (EIN) . All businesses, other than sole proprietorships with no employees, must have a federal employer identification number. Submit your application to the IRS and you’ll typically receive your number in minutes.

Get Appropriate Licenses and Permits

Legal requirements are determined by your industry and jurisdiction. Most businesses need a mixture of local, state and federal licenses to operate. Check with your local government office (and even an attorney) for licensing information tailored to your area.

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Open a Business Bank Account

Keep your business and personal finances separate. Here’s how to choose a business checking account —and why separate business accounts are essential. When you open a business bank account, you’ll need to provide your business name and your business tax identification number (EIN). This business bank account can be used for your business transactions, such as paying suppliers or invoicing customers. Most times, a bank will require a separate business bank account to issue a business loan or line of credit.

Hire a Bookkeeper or Get Accounting Software

If you sell a product, you need an inventory function in your accounting software to manage and track inventory. The software should have ledger and journal entries and the ability to generate financial statements.

Some software programs double as bookkeeping tools. These often include features such as check writing and managing receivables and payables. You can also use this software to track your income and expenses, generate invoices, run reports and calculate taxes.

There are many bookkeeping services available that can do all of this for you, and more. These services can be accessed online from any computer or mobile device and often include features such as bank reconciliation and invoicing. Check out the best accounting software for small business, or see if you want to handle the bookkeeping yourself.

Determine Your Break-Even Point

Before you fund your business, you must get an idea of your startup costs. To determine these, make a list of all the physical supplies you need, estimate the cost of any professional services you will require, determine the price of any licenses or permits required to operate and calculate the cost of office space or other real estate. Add in the costs of payroll and benefits, if applicable.

Businesses can take years to turn a profit, so it’s better to overestimate the startup costs and have too much money than too little. Many experts recommend having enough cash on hand to cover six months of operating expenses.

When you know how much you need to get started with your business, you need to know the point at which your business makes money. This figure is your break-even point.

In contrast, the contribution margin = total sales revenue – cost to make product

For example, let’s say you’re starting a small business that sells miniature birdhouses for fairy gardens. You have determined that it will cost you $500 in startup costs. Your variable costs are $0.40 per birdhouse produced, and you sell them for $1.50 each.

Let’s write these out so it’s easy to follow:

This means that you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in your first month, you will make a profit.

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There are many different ways to fund your business—some require considerable effort, while others are easier to obtain. Two categories of funding exist: internal and external.

Internal funding includes:

• Personal savings
• Credit cards
• Funds from friends and family

If you finance the business with your own funds or with credit cards, you have to pay the debt on the credit cards and you’ve lost a chunk of your wealth if the business fails. By allowing your family members or friends to invest in your business, you are risking hard feelings and strained relationships if the company goes under. Business owners who want to minimize these risks may consider external funding.

External funding includes:

• Small business loans
• Small business grants
• Angel investors
• Venture capital
• Crowdfunding

Small businesses may have to use a combination of several sources of capital. Consider how much money is needed, how long it will take before the company can repay it and how risk-tolerant you are. No matter which source you use, plan for profit. It’s far better to take home six figures than make seven figures and only keep $80,000 of it.

Funding ideas include:

• Invoice factoring: With invoice factoring , you can sell your unpaid invoices to a third party at a discount.
• Business lines of credit: Apply for a business line of credit , which is similar to a personal line of credit. The credit limit and interest rate will be based on your business’s revenue, credit score and financial history.
• Equipment financing: If you need to purchase expensive equipment for your business, you can finance it with a loan or lease.
• Small Business Administration (SBA) microloans: Microloans are up to $50,000 loans that can be used for working capital, inventory or supplies and machinery or equipment.
• Grants: The federal government offers grants for businesses that promote innovation, export growth or are located in historically disadvantaged areas. You can also find grants through local and regional organizations.
• Crowdfunding: With crowdfunding , you can raise money from a large group of people by soliciting donations or selling equity in your company.

Choose the right funding source for your business by considering the amount of money you need, the time frame for repayment and your tolerance for risk.

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You need to have insurance for your business , even if it’s a home-based business or you don’t have any employees. The type of insurance you need depends on your business model and what risks you face. You might need more than one type of policy, and you might need additional coverage as your business grows. In most states, workers’ compensation insurance is required by law if you have employees.

Work With an Agent To Get Insured

An insurance agent can help determine what coverages are appropriate for your business and find policies from insurers that offer the best rates. An independent insurance agent represents several different insurers, so they can shop around for the best rates and coverage options.

Basic Types of Business Insurance Coverage

• Liability insurance protects your business against third-party claims of bodily injury, property damage and personal injury such as defamation or false advertising.
• Property insurance covers the physical assets of your business, including your office space, equipment and inventory.
• Business interruption insurance pays for the loss of income if your business is forced to close temporarily due to a covered event such as a natural disaster.
• Product liability insurance protects against claims that your products caused bodily injury or property damage.
• Employee practices liability insurance covers claims from employees alleging discrimination, sexual harassment or other wrongful termination.
• Workers’ compensation insurance covers medical expenses and income replacement for employees who are injured on the job.
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Business tools can help make your life easier and make your business run more smoothly. The right tools can help you save time, automate tasks and make better decisions.

Consider the following tools in your arsenal:

• Accounting software : Track your business income and expenses, prepare financial statements and file taxes. Examples include QuickBooks and FreshBooks.
• Customer relationship management (CRM) software : This will help you manage your customer relationships, track sales and marketing data and automate tasks like customer service and follow-ups. Examples include Zoho CRM and monday.com.
• Project management software : Plan, execute and track projects. It can also be used to manage employee tasks and allocate resources. Examples include Airtable and ClickUp.
• Credit card processor : This will allow you to accept credit card payments from customers. Examples include Stripe and PayPal.
• Point of sale (POS) : A system that allows you to process customer payments. Some accounting software and CRM software have POS features built-in. Examples include Clover and Lightspeed.
• Virtual private network (VPN) : Provides a secure, private connection between your computer and the internet. This is important for businesses that handle sensitive data. Examples include NordVPN and ExpressVPN.
• Merchant services : When customers make a purchase, the money is deposited into your business account. You can also use merchant services to set up recurring billing or subscription payments. Examples include Square and Stripe.
• Email hosting : This allows you to create a professional email address with your own domain name. Examples include G Suite and Microsoft Office 365.

Many business owners spend so much money creating their products that there isn’t a marketing budget by the time they’ve launched. Alternatively, they’ve spent so much time developing the product that marketing is an afterthought.

Create a Website

Even if you’re a brick-and-mortar business, a web presence is essential. Creating a website doesn’t take long, either—you can have one done in as little as a weekend. You can make a standard informational website or an e-commerce site where you sell products online. If you sell products or services offline, include a page on your site where customers can find your locations and hours. Other pages to add include an “About Us” page, product or service pages, frequently asked questions (FAQs), a blog and contact information.

Optimize Your Site for SEO

After getting a website or e-commerce store, focus on optimizing it for search engines (SEO). This way, when a potential customer searches for specific keywords for your products, the search engine can point them to your site. SEO is a long-term strategy, so don’t expect a ton of traffic from search engines initially—even if you’re using all the right keywords.

Create Relevant Content

Provide quality digital content on your site that makes it easy for customers to find the correct answers to their questions. Content marketing ideas include videos, customer testimonials, blog posts and demos. Consider content marketing one of the most critical tasks on your daily to-do list. This is used in conjunction with posting on social media.

Get Listed in Online Directories

Customers use online directories like Yelp, Google My Business and Facebook to find local businesses. Some city halls and chambers of commerce have business directories too. Include your business in as many relevant directories as possible. You can also create listings for your business on specific directories that focus on your industry.

Develop a Social Media Strategy

Your potential customers are using social media every day—you need to be there too. Post content that’s interesting and relevant to your audience. Use social media to drive traffic back to your website where customers can learn more about what you do and buy your products or services.

You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram because they offer e-commerce features that allow you to sell directly from your social media accounts. Both of these platforms have free ad training to help you market your business.

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To scale your business, you need to grow your customer base and revenue. This can be done by expanding your marketing efforts, improving your product or service, collaborating with other creators or adding new products or services that complement what you already offer.

Think about ways you can automate or outsource certain tasks so you can focus on scaling the business. For example, if social media marketing is taking up too much of your time, consider using a platform such as Hootsuite to help you manage your accounts more efficiently. You can also consider outsourcing the time-consumer completely.

You can also use technology to automate certain business processes, including accounting, email marketing and lead generation. Doing this will give you more time to focus on other aspects of your business.

When scaling your business, it’s important to keep an eye on your finances and make sure you’re still profitable. If you’re not making enough money to cover your costs, you need to either reduce your expenses or find ways to increase your revenue.

Build a Team

As your business grows, you’ll need to delegate tasks and put together a team of people who can help you run the day-to-day operations. This might include hiring additional staff, contractors or freelancers.

Resources for building a team include:

• Hiring platforms: To find the right candidates, hiring platforms, such as Indeed and Glassdoor, can help you post job descriptions, screen résumés and conduct video interviews.
• Job boards: Job boards such as Craigslist and Indeed allow you to post open positions for free.
• Social media: You can also use social media platforms such as LinkedIn and Facebook to find potential employees.
• Freelance platforms: Using Upwork, Freelancer and Fiverr can help you find talented freelancers for one-time or short-term projects. You can also outsource certain tasks, such as customer service, social media marketing or bookkeeping.

You might also consider partnering with other businesses in your industry. For example, if you’re a wedding planner, you could partner with a florist, photographer, catering company or venue. This way, you can offer your customers a one-stop shop for all their wedding needs. Another example is an e-commerce store that partners with a fulfillment center. This type of partnership can help you save money on shipping and storage costs, and it can also help you get your products to your customers faster.

To find potential partnerships, search for businesses in your industry that complement what you do. For example, if you’re a web designer, you could partner with a digital marketing agency.

You can also search for businesses that serve the same target market as you but offer different products or services. For example, if you sell women’s clothing, you could partner with a jewelry store or a hair salon.

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To rank the best states to start a business in 2024, Forbes Advisor analyzed 18 key metrics across five categories to determine which states are the best and worst to start a business in. Our ranking takes into consideration factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce and financial accessibility in each state. Check out the full report .

Starting a small business takes time, effort and perseverance. But if you’re willing to put in the work, it can be a great way to achieve your dreams and goals. Be sure to do your research, create a solid business plan and pivot along the way. Once you’re operational, don’t forget to stay focused and organized so you can continue to grow your business.

How do I start a small business with no money?

There are several funding sources for brand-new businesses and most require a business plan to secure it. These include the SBA , private grants, angel investors, crowdfunding and venture capital.

What is the best business structure?

The best business structure for your business will depend entirely on what kind of company you form, your industry and what you want to accomplish. But any successful business structure will be one that will help your company set realistic goals and follow through on set tasks.

Do I need a business credit card?

You don’t need one, but a business credit card can be helpful for new small businesses. It allows you to start building business credit, which can help you down the road when you need to take out a loan or line of credit. Additionally, business credit cards often come with rewards and perks that can save you money on business expenses.

Do I need a special license or permit to start a small business?

The answer to this question will depend on the type of business you want to start and where you’re located. Some businesses, such as restaurants, will require a special permit or license to operate. Others, such as home daycare providers, may need to register with the state.

How much does it cost to create a business?

The cost of starting a business will vary depending on the size and type of company you want to create. For example, a home-based business will be less expensive to start than a brick-and-mortar store. Additionally, the cost of starting a business will increase if you need to rent or buy commercial space, hire employees or purchase inventory. You could potentially get started for free by dropshipping or selling digital goods.

How do I get a loan for a new business?

The best way to get a loan for a new business is to approach banks or other financial institutions and provide them with a business plan and your financial history. You can also look into government-backed loans, such as those offered by the SBA. Startups may also be able to get loans from alternative lenders, including online platforms such as Kiva.

Do I need a business degree to start a business?

No, you don’t need a business degree to start a business. However, acquiring a degree in business or a related field can provide you with the understanding and ability to run an effective company. Additionally, you may want to consider taking some business courses if you don’t have a degree to learn more about starting and running a business. You can find these online and at your local Small Business Administration office.

What are some easy businesses to start?

One of the easiest businesses to start also has the lowest overhead: selling digital goods. This can include items such as e-books, online courses, audio files or software. If you have expertise in a particular area or niche, this is a great option for you. Dropshipping is also a great option because you don’t have to keep inventory. You could also buy wholesale products or create your own. Once you create your product, you can sell it through your own website or third-party platforms such as Amazon or Etsy.

What is the most profitable type of business?

There is no one answer to this question because the most profitable type of business will vary depending on a number of factors, such as your industry, location, target market and business model. However, some businesses tend to be more profitable than others, such as luxury goods, high-end services, business-to-business companies and subscription-based businesses. If you’re not sure what type of business to start, consider your strengths and interests, as well as the needs of your target market, to help you choose a profitable business idea.

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Katherine Haan is a small business owner with nearly two decades of experience helping other business owners increase their incomes.

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Best Accounting Software for Small Businesses of 2024

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Accounting software helps you track how money moves in and out of your small business. The best accounting software makes it easy to keep a detailed financial record so that you’re ready come tax season. It also includes tools for streamlining accounting tasks, like the invoice process, and gaining insight into your business’s financial health.

To choose the right option for you, think about the present and future versions of your business — your accounting software should be able to support both. Right now, check that it’s within your budget and is compatible with your point-of-sale and/or payroll software, as well as your accountant’s system. Based on how much you expect your small business to grow, keep an eye on scalability, too.

Accounting software is like a database for all of your business’s financial transactions. It helps you follow basic accounting principles so that you can keep your books up to date and in order, which is especially important come tax season. Most software uses double-entry accounting , meaning it factors in assets, liabilities and equity, in addition to revenue and expenses.

Most accounting software goes beyond these tasks with additional built-in modules for invoicing and billing as well as inventory management , among other functions. The more your accounting software becomes a one-stop shop for these financial chores, the fewer integrations you need to consider.

» Learn more about accounting: What is accounting?

Here are NerdWallet’s picks for the best small-business accounting software, including why we selected each product, monthly price details and features checklists for easy product comparisons. We've also included a couple of solutions that nearly made our list and a few products you can skip.

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Objective and comprehensive business accounting software ratings rubric. ( Learn more about our star ratings .)

NerdWallet's small-business software content, including ratings, recommendations and reviews, is overseen by a team of writers and editors who specialize in business software, including payroll, accounting and payment processing. Their work has appeared in The Associated Press, The Washington Post, Nasdaq, Entrepreneur, ABC News, Yahoo Finance and other national and local media outlets. Each writer and editor follows NerdWallet's strict guidelines for editorial integrity to ensure accuracy and fairness in our coverage.

Best Accounting Software for Small Businesses

• QuickBooks Online

Additional pricing tiers (per month): $60, $90, $200.  

$30 per month for the Simple Start plan.

$60 per month for the Essentials plan.

$90 per month for the Plus plan.

$200 per month for the Advanced plan.

» MORE: Explore all QuickBooks plans and pricing

QuickBooks Online is an industry leader in the accounting field, thanks to its strong feature set and scalability. In addition to core accounting capabilities, it has robust reporting and transaction tracking tools, invoicing capabilities, inventory management features and mobile app functionality.

In particular, entrepreneurs trying to measure performance in different segments of their business will like QuickBooks’ granular transaction tracking tools that let you group transactions by department or location, among other categories. Reporting capabilities increase with each plan, but even the least expensive Simple Start plan includes more than 50 reports.

Easy to share information with your accountant and to find QuickBooks experts and online resources if needed.

More than 750 app integrations, including live, in-house bookkeeping.

Robust feature set includes thorough record-keeping, comprehensive reporting, excellent invoicing and inventory management, plus a capable mobile app.

Daily phone support and 24/7 chat support in all plans.

Lacks industry-specific features.

Limited account users with each plan.

» MORE: Best alternatives to QuickBooks

Many of the household accounting software names, such as QuickBooks, Xero and Zoho Books, can be classified as integrated accounting software solutions. This means that in addition to maintaining a general ledger and assisting with day-to-day bookkeeping, the software includes functions for tracking accounts receivable and accounts payable , reconciling bank transactions (often with some level of automation for convenience and time-saving), managing inventory and purchase orders and handling the billing process.

Additional pricing tiers (per month): $42, $78.  

$15 per month for the Early plan.

$42 per month for the Growing plan.

$78 per month for the Established plan.

Xero is another reliable product when it comes to standard accounting capabilities. It also has excellent reporting features and a capable mobile app as well as a customizable dashboard that lets each user rearrange or hide panels according to their preferences.

Xero allows an unlimited number of users on a single account at each plan level, a valuable feature in situations where several users need some level of access to the system. And you can assign them different permission levels: For example, one user might only be able to create invoice drafts and submit time entries, while another can view reports but not edit transactions. Competitors’ plans limit how many users you can add, or they charge an additional monthly fee for each user, which can add up quickly. Xero offers a large number of integrations, too.

Unlimited users in all pricing plans.

Integrates with more than 1,000 third-party apps.

Feature set includes an excellent mobile app and suite of reports, capable invoicing features, plus automated bill and receipt capture through Hubdoc.

Simple layout and easy to use.

No phone number for customer support listed.

Entry-level plan limits bills and invoices to five and 20 per month, respectively.

» MORE: Best alternatives to Xero

Additional pricing tiers (per month): $20, $50, $70, $150, $275.  

$0 per month for the Free plan.

$20 per month for the Standard plan.

$50 per month for the Professional plan.

$70 per month for the Premium plan.

$150 per month for the Elite plan.

$275 per month for the Ultimate plan.

Unlike some competitors, none of Zoho Books’ plans put a limit on billable clients, and even its free plan lets you send up to 1,000 invoices per year. On top of that, the free option offers a customer portal, automatic payment reminders, mileage tracking and the ability to schedule reports. Higher-tier plans let users automate workflows and track project profitability, and give access to advanced inventory and analytics tools.

The software’s mobile-first features — such as the ability to send invoices by iMessage or add widgets to your phone’s home screen to easily access timers and overdue invoices — really help set it apart, though. There’s also an Apple Watch app that lets you track time, send payment reminders and review outstanding invoices.

Less expensive than some competitors; free plan available for businesses with less than $50k in annual revenue.

Email support in free plan; phone and chat support in paid plans.

Rich feature set includes excellent invoicing, inventory management, workflow rules and a capable mobile app.

Add accounting widgets to your phone’s home screen; track time using your Apple Watch.

Fewer third-party integrations and reports than some competitors.

No plan includes more than 15 users (can add additional users for a fee).

» MORE: Best Zoho Books alternatives

To find startup accounting software that will best serve your business at any stage, consider scalability as well as strong customer support. You will also want to choose software that uses the accrual basis accounting method for recording transactions. It’s a more detailed (and therefore more involved) method of accounting, but for many businesses — especially those tracking a large amount of inventory and those in need of a business loan — it’s the preferred method.

Additional pricing tiers (per month): $33, $60, custom.  

$19 per month for the Lite plan.

$33 per month for the Plus plan.

$60 per month for the Premium plan.

Custom pricing for the Select plan.

With standout invoicing features and client management resources, FreshBooks is a great accounting solution for freelancers, particularly if you have 50 or fewer total clients and can therefore opt for the Lite or Plus plan. Your clients can even choose to create their own accounts. This lets them save and comment on invoices, save their payment information, invite others to access the account and collaborate on projects they’ve been invited to view.

Unlike some competitors that require you to pay extra for a time-tracking module, all FreshBooks plans come with unlimited time tracking. You can start a timer from within the mobile app to log hours spent on a particular project or sync data from tools like Asana and Trello.

Stay in touch with clients through the FreshBooks mobile app and get notified when invoices have been viewed or become overdue.

Intuitive, customizable invoicing capabilities compete with those of more robust accounting solutions.

Track time and add billable hours to invoices in all plans.

Weekday phone support in all plans.

Lacks features that quickly growing companies need, like audit trails for accountants to review.

Highest-tier Select plan only comes with two users (additional users add $11 per month) and lower-tier plans put limits on billable clients.

Least expensive plan lacks double-entry accounting reports, bank reconciliation and accountant access.

» MORE: Best alternatives to FreshBooks

• Sage 50 Accounting

Additional pricing tiers (per month): $101.92, $172.  

$58.92 per month, for 1 user, for the Pro Accounting plan.

$101.92 per month, for 1 user, for the Premium Accounting plan.

$172 per month, for 1 user, for the Quantum Accounting plan.

Prices increase with each additional user.

Sage 50 Accounting, unlike some of its competitors, offers inventory management and job costing features at all plan levels. Also included with every plan is Sage’s own cybersecurity offering, which will keep tabs on your business credit score and monitor for data breaches. Business owners working in construction or manufacturing may be especially drawn to Sage 50’s advanced inventory, job costing, reporting and budgeting capabilities.

Sage 50 Accounting advertises “cloud-connected capabilities,” which refers to a few features of the software that reach beyond typical desktop software functionality: bank feeds, which flow all your business transactions into the software to assist with the reconciliation process; data backups in the cloud for safeguarding your important financial information; and remote data access so you, your team and your accountant can securely access your data from devices other than the machine the software is locally installed on (though perhaps not simultaneously or seamlessly).

Advanced inventory tracking and job costing features.

Industry-specific features for construction, retail and professional services businesses.

Phone and chat support, plus a dedicated account representative in all plans.

Lowest-tier plan doesn’t include audit trails.

Pricier than many other solutions on this list.

Also sometimes called on-premise software, desktop accounting software must be locally installed on a specific computer and can only be accessed from that one device or location. For some small-business owners, this type of program feels more secure than online accounting software from a data protection perspective, though regular manual backups are necessary to protect against total loss of data in the event of a technology failure.

• Wave Accounting

Additional pricing tiers (per month): $16  

$0 for the Starter plan.

$16 per month for the Pro plan.

Wave is a simple solution for very small businesses that need a place to consolidate bookkeeping records and invoices, but don’t have to log more than a handful of transactions each day. The free version of the accounting software lets you track income and expenses, send unlimited invoices and automatically send reminders for late online payments. It also gives you access to more than a dozen pre-built financial reports, including a profit and loss statement and balance sheet.

If you don’t want to manually enter transactions into Wave, you can opt for the Pro plan to link an unlimited number of bank and credit card accounts for automated reconciliation. The paid plan offers more competitive online payment processing rates, too (starting at 2.9% per transaction vs. the free plan’s 2.9% + $0.60 per transaction).

Free plan available.

Lacks features that quickly growing companies need, like audit trails.

Must subscribe to Wave’s Pro plan or other paid services (payroll, payments, advisor, etc.) to receive customer support from a human

No third-party integrations, mileage tracking feature or ability to accept in-person card payments.

» MORE : Best free accounting software

• QuickBooks Enterprise

Additional pricing tiers (per year): $1,922; $2,363; $4,668. Adding users or cloud access costs extra.  

$1,481 per year for the Silver plan.

$1,922 per year for the Gold plan.

$2,363 per year for the Platinum plan.

$4,668 per year for the Diamond plan.

With QuickBooks Enterprise, business owners can set up volume discounts and customize pricing rules according to sales rep, item category or customer in the Platinum plan and up. The same plans help speed up the inventory count process by allowing businesses to use mobile devices as barcode scanners. And unlike some competitors that only track single inventory items, QuickBooks Enterprise lets you track inventory parts plus assemblies. You can also track the cost of goods sold and adjust inventory for loss or shrinkage.

It is possible to purchase cloud access so your team can better collaborate and access the software and its data from anywhere, but costs add up quickly with an additional monthly charge per user.

Strong feature set includes thorough record-keeping, invoicing and advanced inventory management and pricing rules.

More than 200 reports, including industry-specific options for various industries.

24/7 phone and chat support.

Limited direct, third-party software integrations.

Annual subscriptions are expensive; each additional user license and cloud access costs extra.

Per user. Additional pricing tiers per user (per month): $70.  

$35 per month per user for the Standard plan.

$70 per month per user for the Enterprise plan.

With Striven’s integrated accounting software, you have access not only to your general ledger and standard reports like profit and loss but also to tools for accounts receivable and accounts payable plus billing, order management and more. Striven’s accounting software will also help ensure your business is operating in a tax-compliant manner by automating tax calculations and giving you access to various tax reports.

Striven has designed accounting solutions tailored to a dozen industries. Its retail solution, for example, includes CRM, inventory management and marketing features to integrate with its accounting platform. But its nonprofit solution includes tools for managing records and scheduling events and even includes a donation portal. And because it’s a cloud-based system, you’ll be able to access your real-time accounting and other business data on the go from anywhere.

Offers industry-specific features for consulting businesses, nonprofits, manufacturing companies, professional services and more.

Tools to ensure tax compliance.

Other features include inventory tracking, reporting, invoicing, project management tools and the ability to categorize transactions using classes.

Customer support available by phone and live chat.

Monthly costs could add up quickly if you require multiple users.

No mobile app.

Limited third-party integrations available; no POS or payroll integrations.

• Additional accounting software to consider

In our review of more than a dozen accounting software products, NerdWallet determined a couple of products are strong contenders that may be worth consideration for certain businesses. Consider one of the following solutions if those on our list above don’t suit your small business accounting needs.

Odoo: Good for an all-in-one business management app

Consider Odoo for your business if you:

Run a small, medium or enterprise business.

Need access for an unlimited number of users.

Have a monthly accounting software budget of $0-$46.70.

Require multiple software integrations (Odoo’s open-source software has dozens of its own apps for a variety of business needs plus thousands of third-party integrations).

$0 per month for use of a single app.

$38.90 per user per month for access to all apps.

$58.40 per user per month for access to all apps across multiple companies plus Odoo’s external API.

Like its name suggests, open-source software is open to the public, meaning anyone can access and tweak its code. This makes it more customizable than typical closed-source, or proprietary, software that you purchase, download and work with as-is. Open-source products, like Odoo, are ideal for business owners who know how to code and want to play a hands-on role in customizing the product to fit their business needs.

» MORE: Best business software

ZarMoney: Good for inventory management features

Consider ZarMoney for your business if you:

Need access for one to 30 users.

Have a monthly accounting software budget of $20-$350.

Require few or no software integrations (ZarMoney has only a handful).

$15 per month for the Entrepreneur plan.

$20 per month for the Small Business plan.

$350 per month for the Enterprise plan.

» MORE: Best inventory management software

• Accounting software you can skip

These few accounting products fell short in our ratings rubric on a number of fronts. We recommend skipping them in your exploration of the best accounting software for small businesses, unless you can live without some key features these products lack and their price tag feels worth it to you.

TrulySmall Accounting: Truly lacking some important features

Where it falls short: Considering its entry price point of $20 per month, we would expect TrulySmall Accounting to come with standard accounting features such as audit trails and the ability to switch between cash and accrual accounting . The software also lacks inventory tracking tools as well as integrations with any third-party software.

$20 per month for the Accounting plan.

TrulySmall also offers standalone Invoices and Expenses plans for businesses that opt out of the Accounting plan. They cost $8.99 per month each.

» MORE: Best online bookkeeping services

ZipBooks: Zip past this one while shopping

Where it falls short: When considered through the lens of free accounting software, ZipBooks is worth a gander, (although Wave and Zoho Books both offer free accounting plans with a heavier dose of useful features). But ZipBooks comes up short on mobile app features (receipt capture only), lacks inventory tracking, doesn’t offer support from an actual human (help library only) and has no direct integrations with other software.

$0 per month for the Starter plan.

$15 per month for the Smarter plan.

$35 per month for the Sophisticated plan.

Akaunting: Don’t be fooled by “free” software

Where it falls short: Akaunting advertises its “free” accounting software, but in fact, only the base plan for its desktop (on-premise) software is free. That free version of the software must be downloaded to a single machine, which means it is not accessible from any device anywhere via the cloud, and it won’t even fetch you standard accounting software features such as bank connections (for easy and automated transaction reconciliation), a chart of accounts or a general ledger. The lowest-tier on-premise plan essentially operates as invoicing software. But with plenty of strong free invoicing software products on the market — all of the options that make our list are cloud-based — you can skip right over Akaunting.

$0-$684 per year for an on-premise plan.

$12-$218 per month for a cloud plan.

• How we determined the best accounting software

NerdWallet independently reviews accounting software products before determining our top picks. We collect the data for our software ratings from products’ public-facing websites and from company representatives. Information is gathered on a regular basis and reviewed by our editorial team for consistency and accuracy.

NerdWallet’s accounting software ratings favor products that are easy to use, reasonably priced, have a robust feature set and can grow with your business. The best accounting software received top marks when evaluated across 10 categories and more than 30 subcategories. Learn more about how we rate small-business accounting software .

These ratings are meant to provide clarity in the decision-making process, but what’s best for your business will depend on its size, growth trajectory and which features you need most. We encourage you to research and compare multiple accounting software products before choosing one.NerdWallet does not receive compensation for any reviews. Read our editorial guidelines .

• How to choose accounting software

Ideally, your accounting software will make your day-to-day routine easier through automation. Here are some key factors to consider when researching and choosing the best accounting software for your small business.

Accessibility: Cloud-based software enables access through any device with an internet connection. This generally allows for easier collaboration with accountants and seamless integration with other business software. Desktop-based software, however, can only be accessed from a single computer.

Scalability: Take a look at products’ plan offerings, including how many employees and users the software can support, to make sure you can upgrade to a more robust version of the software as your business grows. If you anticipate rapid or high growth, consider accounting software for medium-sized businesses . 

Y our budget: Determine how much your business can afford to spend monthly on accounting software in conjunction with other recurring costs, like utilities, rent and additional software subscriptions for a POS system or payroll, for example. If you’re a solopreneur and want to keep costs down, check out our list of best accounting software for freelancers and the self-employed .

Ease of use: Accounting software that isn’t intuitive and user-friendly can take up an unnecessary amount of your time or discourage you from using it as often as you should to keep your finances in order. Test out free trials of accounting software, request a demo and watch tutorial videos to get a feel for navigating the software. 

Integrations: Think about the other types of software you already use or plan to use, and check to see if direct integrations are available between those products and the accounting software you’re considering. If not, you may need to pay for an indirect integration or manually transfer data from one product to another. 

Customer support: Think about what time of the day you’re most likely to reach out for assistance and how you’d like to communicate with customer service representatives. Free accounting software options typically offer less robust customer support solutions than paid products do. 

Sharing with your accountant: If you’re working with an outside accountant, take note of how easy (or not) a product makes it for you to share your financial details and reports with your accountant. Many popular accounting software products allow you to easily share access, but some require upgrades to costlier plans for this access and some products only enable you to export data to be sent to your accountant.

How much does accounting software cost?

If you’d like to shop by industry, check out NerdWallet’s picks for:

Best church accounting software .

Best construction accounting software .

Best consultant accounting software.

Best e-commerce accounting software .

Best farm accounting software .

Best hotel accounting software .

Best law firm accounting software .

Best manufacturing accounting software .

Best nonprofit accounting software .

Best property management accounting software.

Best accounting software for restaurants .

Best accounting software for retailers .

Best accounting software for SaaS businesses .

Best trucking accounting software .

• Compare NerdWallet’s top accounting software picks by features

To help determine which accounting software is best for your business, start by comparing each product’s maximum user limit, invoicing capabilities, time-tracking tools, inventory tracking features and phone support availability.

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How to start an accounting firm: Your checklist for successfully starting a firm

So, you're thinking of starting an accounting firm.

That's great. No doubt you have plenty of questions about how to set up a new firm and get off to a great start.

Thomson Reuters spoke with some of our industry experts to get answers to the big questions you may have.

Here's what they told us.    

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Starting your own accounting business sounds like a lot of work. Why would I want to start an accounting firm?   

Starting an accounting firm is like starting any small business – it requires a lot of work. However, industry and consulting firms list accounting firms as one of the single most profitable small businesses a person can start right now.

Here are a few questions to consider when starting a firm:

• Do you want to be a cog in the machine or own a firm? Frankly, there isn’t a wrong answer to this question, but rather a preference. However, going out on your own comes with one significant benefit: you’re getting the profit from the firm, not just your wages. You go from employee to owner.
• What’s my business purpose? While perhaps a bit esoteric, defining your business’s purpose is crucial. Why am I doing this? What’s my goal behind this? It’s not just a philosophical exercise. Knowing why you’re starting a firm can help you define your target market, whether it’s helping small businesses, real estate, or another service area.
• Do you want to be nimble and cutting edge? Small firms tend to be much more agile and have a greater ability to do new things. From adopting new technology to discovering and implementing new software or other efficiency creating tools, running your own firm lets you make the decisions about what makes your business unique—and profitable.
• Should you start a legal entity? For some, a sole proprietorship won’t require incorporation – especially if the work is centered around less complex tasks such as basic tax preparation. However, there are certain liability protections by becoming an LLC, including limiting risk for your business. Assets become owned by your business and are distinguished from personal assets. When a business is not incorporated, it becomes harder to draw that line and the entire enterprise becomes at risk.

What are the requirements to open an accounting firm? What do I need?

Starting an accounting firm is no different from starting any other small business. And while there are accounting-specific requirements, it’s important to remember that you’re starting a business first.

Start by figuring out your purpose, goal, and market. This will influence many other decisions, including the function of the services you provide, whether you want a physical or virtual location, your target demographic, and the location of your business.

Once you’ve selected a location and determined your goals, it’s time to consider the nuts and bolts of owning a business.

You’ll need to:

• Obtain Employer Identification Number (EIN) and Tax ID number
• Investigate employment laws
• Determine startup costs
• Develop a pricing structure for services
• Decide on the legal structure of your business (S-Corp, L-Corp, LLC, Partnership, LLP )
• Look at business insurance
• Create a business bank account
• Develop internal policies and rules
• Hire employees

Additionally, you’ll have to think about the day-to-day needs of running a business, including managing risk, basic administrative tasks, and general questions of how and where you will meet clients. 

Will I need to get a new EIN from the federal government ?

In most cases, owning and running an accounting firm necessitates an Employer Identification Number (EIN). However, the IRS website provides an in-depth explanation of who is required to have an EIN and when. A good rule of thumb is: if you plan on hiring employees – or plan to in the future – you’ll probably need an EIN.

That said, even if you don’t think you need one – or the website says it isn’t a requirement– most businesses are probably better off acquiring an EIN.

Luckily, the online process is fast, easy, and free. 

If I’m not a Certified Public Accountant, do I need a CPA to open an accounting firm ?

It depends.

While all CPAs are accountants, not all accountants are CPAs. There are differences between the two, including education, experience, and certain opportunities. However, the answer goes back to the question, “What services do you want to offer?”

An accounting firm can do almost everything a CPA firm can do with one exception – audits and assurance services. So, if that is a part of your goals or your target market, then it’s probably wise to think about the steps needed to become a CPA.

However, if you are looking to focus on the multitude of other services accounting firms provide, it’s likely not a necessary credential to start. And while there are certain state-by-state exceptions about what can and cannot be undertaken by a CPA, they are not a requirement for starting an accounting firm.

However, if you want to call yourself a “CPA firm” – you will need a CPA.

Can accountants work from home ?

One of the benefits of starting an accounting firm is flexibility. So, the simple answer to the question is, yes—many accountants can and do work from a home office.

All the regulations that apply to a physical location also apply to virtual or home offices. So not having a physical office does not put an accounting firm at a disadvantage.

In fact, working from home is even easier with modern technology and software solutions that help bring vital aspects of your daily workflow into one dedicated (and usually online) space. For instance, Thomson Reuters makes its CS Professional Suite of tax and accounting software available as hosted online solutions and designed its Onvio products to run entirely in the cloud.

It’s important to note: an accounting firm must have a dedicated EFIN (Electronic Filing Identification Number) for every separate location where they perform work. So, if you have a physical location and do work in a home office, you’ll need to investigate whether you’ll need a separate EFIN for home office.

The answer largely depends on how much – and the extent of the work – you do from home. Check with the IRS for further guidance. 

If I’d prefer a home-based accounting business, what should I know about starting an accounting firm from home ?

Luckily, accounting firms don’t need a physical space to operate successfully. And like the traditional brick and mortar approach, having a home-based or virtual business brings both opportunities and challenges that are unique to that approach. When considering a home-based business, it’s important to think about the unique challenges and opportunities involved.

These include:

• Shared work locations. There are many co-working locations across the country, many of which include both space for professionals to perform their tasks, as well as providing a professional, on-demand space to meet with clients. While there is usually a monthly fee to use these spaces, the benefits they provide are often worth the cost (and are significantly cheaper than leasing or purchasing office space).
• Low costs. New businesses often struggle with overhead. As you build your client list, keeping costs low is a priority. Not only does it allow you to see a profit early, but it also allows you to adjust your service menu to attract clients with lower-than-normal prices.
• Liability issues. If you choose to meet clients in your home, liability and zoning can be an issue. If a client gets hurt inside your home office, or falls outside of it, it’s important to know the laws surrounding liability.
• Zoning laws. Most cities and counties have zoning regulations. Make sure you investigate and comply with any laws to ensure your home-based business isn’t operating illegally.
• Turn limitations into unique opportunities. While not having a physical space can be challenging at times, it can also be an advantage. Consider visiting clients onsite. Not only does it solve space concerns, it communicates a message to the client—you offer a higher level of service.    

What are the key services offered by accounting firm s? 

In many ways, this question can be answered by once again looking at your goals and target market. What are the key services needed by that population? How can you serve them better? Still, while many services will be dictated by the specifics of your clients and their business, there are a few standards most accounting firms offer, including:

• Assurance services
• Bookkeeping

While these are typically the core offerings – and the ones that will provide consistent business in most accounting firms – it’s also important to investigate emerging and buzz-worthy services that are attracting bigger and more progressive accounting businesses.

From consulting and advising to outsourced CFO services (serving as the embedded strategic financial decision-maker for a client), taking a cue from the bigger firms – and anticipating what trends might trickle down to smaller and independent businesses – can increase the clients you serve and put you steps ahead of your competition. 

What should I know about running an accounting firm ?

Starting a business is filled with new and challenging decisions. However, once the business is up and running, it’s common to be unprepared for typical day-to-day operations. Anticipating (and planning for) these concerns helps make sure you’re working as efficiently as possible.

Common questions and concerns include:

• Talent acquisition and development. Frankly, finding and keeping staff is a significant challenge, which is why hiring always leads industry surveys about common needs and concerns. Even if you aren’t ready to hire a team, it’s wise to start developing a strategy early.
• Going beyond the seasonal business . Every year it gets harder and harder to operate a seasonal accounting business, especially if you’re looking to offer a variety of services. Unless you’re doing just cookie-cutter tax prep – and you avoid complex returns – you won’t be able to operate on a seasonal basis. That said, prioritizing the season and maximizing your efficiency (and your profits) during the heavy times is critical to finding success.
• Keep on top of regulatory changes. Keeping up with major regulatory changes can be a challenge – especially if you add staff. Finding a solution that helps minimize the burden and risk that otherwise exists will help stave off the constant onslaught of new information.
• Rethink the traditional role of the accounting firm. Traditional accounting firms used to meet with clients just once a year to do their tax return. More progressive firms are moving to a year-round schedule, which not only allows them to expand services for current and future clients but implies a partnership relationship that goes beyond the “one touchpoint” per year model. 

How much should an accountant charge per hour? Or should accountants charge a fixed fee ?

This, in many ways, is an unanswerable question because the only reliable advice that can be given is, “It depends.” Every context is different and is swayed by factors such as competition, location, service offerings, and level of expertise.

However, even though there isn’t a standard fee, most accounting firms are moving away from an hourly fee structure and choosing to institute to a fixed fee model that allows for better value for clients, a more manageable business plan, and eventually an increase in earnings.

Again, every context is unique, and there are certain situations when an hourly fee structure is best. These include:

• When you’re gathering information to develop a fee structure
• Gauging profitability in a newer firm and trying to determine the hours you need to work and remain profitable
• Early in your career when you need more time to complete basic tasks

Outside of those circumstances, a fixed fee is recommended and preferred. As your skill and expertise grow, so will your abilities to complete tasks quickly. With an hourly fee, this means having to take on more clients to maintain (and hopefully increase) your profits.

A fixed fee structure is about value. The expertise and skill you bring to service are of more importance than just an hour of work for clients. Pricing your abilities based on knowledge is not only good for your business but is ultimately valuable for your clients as well.

How should I price accounting and bookkeeping services ?

While there is still a debate surrounding hourly versus fixed fees in some aspects of the business, accounting and bookkeeping is not one of them.

Accounting and bookkeeping services (as well as other service lines, such as simple tax preparations) are almost universally charged as a fixed fee, and there is a market expectation for that pricing structure.

When determining a fee structure, many accountants call other firms and ask for quotes. They use the average of those quotes to determine a fair and competitive price for their services.

Another resource is local and national affiliations and associations. Many of the larger ones (such as the National Association of Tax Preparers) will distribute recommended price structures and other useful information. 

How much should a CPA charge for taxes?

While you do not have to be a CPA to prepare or file taxes, the training and expertise it requires to gain that credential matters. Simply put, you’re a CPA, and you deserve a premium for your services.

When trying to structure fees, it’s important to set a minimum job value. By setting a minimum job value at, say, $500, you won’t get mired in lower-level work that you likely don’t want to take on. Plus, that work can take up time and pull you away from more valuable work that you’d rather be doing.

Knowing what you want to charge and identifying the value you bring to your clients is critical. You are providing a service to your clients, but you’re also giving them a value based on your credentials and experience. So, it’s up to you to set the standards and have them choose between lower costs (them doing it their self) versus the value of having a CPA prepare your taxes.

That said, there’s a balance.

Many CPAs make a practice of “writing down” certain services because they know their hourly rate for larger projects can quickly become untenable for a client. Not only is this seen as a discount by the client, but it also allows you to create a fixed-fee structure for your services and show the clients the savings and value they receive.

If they need more staff, what do accounting firms look for when hiring?

When hiring, accounting firms are like many businesses and are looking for a combination of credentials, experience, and the ability to perform the necessary tasks. However, in an increasingly competitive hiring market, many firms are beginning to look at soft skills as valuable for new hires.

For decades, accounting firms have focused primarily on credentials. However, more and more, it’s less and less about certification and more about aptitude. For the most part, it’s easier to train accounting knowledge than it is to build customer service skills. When hiring, it’s important to look at the qualities a candidate can bring into a firm – not necessarily just credentials.

Of course, experience and credentials do matter. Especially when the experience sets for an accountant is specific and narrow. What types of tax returns have you prepared? What specializations do you carry? And credentials such as CPA, EA, attorneys, and state certifications (when required) are all still attractive to firms looking to hire.

How much does it cost to start an accounting firm?

Start-up costs can range from $2,500 to $25,000. Your location and your goals will determine cost in several ways, including whether you want to start a traditional brick and mortar firm or are looking to create a virtual office environment.

It’s important to remember that, besides physical (or virtual) space, accounting firms need to find and install the necessary equipment and technology to help their practice run more efficiently. That, in many ways, is the first step for a new entrepreneur. Once they’ve found a tax solution that can help them achieve their goals, they’ll be able to begin tackling the other day-to-day tasks and questions of running a business.

What’s the best business structure for accounting firms?

Finding the best business structure for your accounting firm is a critical part of not only ensuring success but helping to minimize both your tax burden and your risk.

While the circumstances of what your incorporation looks like will depend on your approach, it is considered a best practice to become incorporated right off the bat due to the legal protections it provides.

Popular options include:

• Partnership

If you’re running a solo firm, you’re likely going to be looking at an S-Corp, which allows you to pay yourself as an employee. However, if you are working with other partners, a partnership might be more preferential, as it provides a little more flexibility with payment. You are permitted to take draws or distributions, and it doesn’t necessarily require a payroll department because it’s not considered “wages” per se.

Whichever structure you choose at the beginning, know that it will likely evolve throughout the maturity of your firm. For instance, a firm might accept the risk and start as unincorporated to avoid the incorporation fees. Then they might transition to S-Corp. Over time, as additional owners move into the entity structure, the firm can add additional shareholders or can reorganize as a partnership.

It’s better to have a separate legal entity than to not and better to have separate federal filing than to not.

How do I get accounting clients?

The consensus is word of mouth. However, while a strong work ethic, exceptional service, and competitive pricing will undoubtedly attract clients, a successful business always requires more than just good luck.

Here are a few tips on how to increase your client base:

• Be a business owner, not just an accountant. This means focusing on solid business practices and looking for ways to ensure both stability and growth.
• Market yourself . This goes beyond starting a business and hoping people show up. Look for ways to partner with other companies and firms, as well as networking opportunities in the community. The local chamber of commerce is an excellent resource.
• Don’t forget about friends and family. While they won’t be able to maintain your business over the long haul, friends and family are a great starting place not only for initial clients but also for referrals.
• Take advantage of easy and cheap technology . Google Ads can be capped at $20 and make for productive investments to help drive local searches for accounting firm.
• Be in the community. Look for professional speaking engagements that you can offer to local groups for free. Create thought leadership presentations, teach community education classes and provide a venue to show your skills and knowledge.

You’ll find other ideas in our blog post on finding new clients .

How about social media and online presence for accountants – is it worth the effort?

Websites, social media, and various other online presences are a great way to establish credibility in the market.

For the most part, a simple online presence is relatively easy to start with minimal start-up costs. And while an online presence won’t guarantee an increase in exposure, not having one can have a negative impact and can discredit you to a potential client. In many cases, website and social media become an augmentation to your word of mouth referrals. Most people won’t simply call a number without the opportunity to do some basic online research.

However, there is a difference between a website presence and social media. In most cases, a website is static and allows businesses to transmit basic, evergreen information such as phone number, services provided, and credentials. Social media, on the other hand, can drive business in a longer and more indirect fashion.

Auto-posting any relevant story or information can help create a brand on social media – one where you’re seen as an authority on tax and accounting subjects. Posting constant content can help with visibility and, ultimately, increasing your customer base.  

If you think you may need help with this, take a look at our social media and other digital marketing solutions for accounting firms .

Some firms focus on a specific accounting specialization. Should I consider a niche accounting service?

Put simply, the more specialized you are, the more profitable you are. However, it’s not as much a question of “should you” but “can you.”

Many – if not most – firms will start as generalists and then slowly make their way a more niche practice. Sometimes a firm will intentionally build clients in one area. Others realize they have, say, many construction clients and then move to the particular niche.

If moving toward a niche practice, consider:

• What’s your timeline? When should you plan to transition to a specialized practice? When is the right time to stop chasing general clients?
• Partnering with more generalist firms can help take on other needs from clients while you take only the niche side of their business.
• Gaining professional affiliations is important. They can help distinguish you in a competitive market and further signal your niche work.

What’s the most popular accounting niche?

Niches, like many things, are often dependent on location, interest, and understanding where there is a need across different businesses. However, some of the most successful niches are the ones serving fellow professionals such as doctors, dentists, attorneys.

Services based niches as opposed to manufacturing-based are also on the rise. For example, real estate professionals, landscapers, and farming clients are becoming a more prosperous and unique way to do business.

However, it’s important to remember that you have to target businesses where you have the right location and the right skills. Again, farming has particular needs and goals. If you can fill them, then you have a specialization that is highly valuable to that market.

What do prospective clients consider when deciding how to choose an accountant? What do they look for in a CPA?

What are the things that are most likely to influence a client’s perception of you in the little amount of information they’re able to get from a flyer, website, or social media? While the idea that “first impressions matter” may seem a little cliché, they still matter to your clients. As a result, making sure your communication is direct, pleasing, and engaging is critical to your success.

Some important deciding factors include:

• Aesthetics. What’s the aesthetic of your website? Is it mobile compliant? Does it seem modern? Do your documents use color and seem to be professionally designed? Take care to control the new prospective client’s perception of you and what they think they see in you.
• Have a professional place to meet. Whether you operate a brick-and-mortar business or a virtual one, having a professional place to meet with clients is essential.
• Clients want comfort and assurance . Clients want the assurance that, if the IRS or another regulatory authority comes after them, that you be my defender and stand between them and the organization? Extending that sense of comfort is going to help influence them.
• Know your target market . Know what your market is looking for and make it very clear that’s what you can provide them.    

Thanks to our subject matter experts Jordan Kleinsmith and Mo Arbas for their input into this article.

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Can I import my data from other accounting apps like Quickbooks?

Yes, switching from other accounting apps or products to Wave is easy! See our step-by-step guide on how to import bookkeeping data into Wave here .

Can I set different account privileges for employees or my accountant?

Yes! Wave makes it easy to invite additional users to your account to help with your accounting. You can grant access to a trusted individual—an accountant, bookkeeper, tax preparer, or business partner, for example—by inviting that person to be a collaborator. See our step-by-step guide on how to invite collaborators to your Wave account .

Does Wave’s accounting tool work with my bank?

With a Pro Plan subscription, you can connect your bank account with Wave and automatically import your transactions. This can help you make bookkeeping a breeze.

Why should I use accounting software for my business?

The right small business accounting software can take the stress out of balancing your business's books, separating your business and personal expenses , and prepping your business for tax season . Ditching spreadsheets for business accounting software can help you organize your financial documents and statements, reduce headaches during tax season, and remove unnecessary manual work. When equipped with the right accounting software, you can do more than just basic bookkeeping. You can effectively analyze the financial health of your business, find ways to generate more profit , and move forward with your business plan .

How does accounting software work?

Accounting software helps business owners understand how money flows in and out of their businesses. It replaces the time-consuming method of collecting receipts in a drawer and manually tracking revenue and expenses in a spreadsheet or with pen and paper. The right software helps business owners quickly categorize transactions and generate financial statements. These include cash flow reports , balance sheets , profit and loss statements, and expense breakdowns. Accounting software like Wave can also seamlessly connect with your bank accounts so you can automate tasks like recording transactions and generating reports. This can help you save time and make financial decisions quickly.

*We use Plaid to facilitate bank connections. Not all financial institutions are supported so we can’t guarantee that you will be able to connect an account. Check Plaid's troubleshooting guide for more information or learn more about how bank connections work at Wave.

Is Wave's software something I need to install?

Wave's tools are web-based, so you just need an Internet connection and browser—no installation is necessary for our online software!

If you're looking for an on-the-go solution, you can install our mobile app to help you manage invoices and payments. Download our mobile app on iOS and Android today!

What if I just want to try Wave to see if it works for my business?

Sign up for the Starter Plan to take the bookkeeping and invoicing basics for a spin. Then, whenever you’re ready, upgrade to the Pro Plan to unlock even more money management features. Our plans are built for small business owners at every stage!

Can I change plans easily?

You bet! To upgrade to the Pro Plan, sign into Wave. Visit your dashboard or use your invoicing or accounting features, and click the “Upgrade now” button. Learn more about changing subscription periods and plan types in our Help Center.

Is my data secure when I use Wave?

Completely. Our servers are protected physically and electronically. Any connections between you, your bank accounts, and Wave are protected by 256-bit SSL encryption. Wave is a PCI-DSS Level 1 Service Provider.

Do you provide customer support?

We provide different levels of support, depending on the plan and/or the add-on features you choose. Learn more about how Wave support works here .

Is it easy to cancel for any reason after I subscribe?

Yes, you can unsubscribe at any time! The cancellation of your subscription will take effect at the end of the billing period in which you cancel. Learn how to cancel your subscription in our Help Center.

What features should I look for in an accounting tool?

Some accounting features you should look out for include the ability to:

- Track income and expenses

- Measure accounts payable and accounts receivable

- Capture and organize receipts

- Automate basic accounting tasks

- Run basic bookkeeping reports

- Generate financial statements

- Calculate cash flow for your business

- Track sales and sales tax

- Add multiple users, such as your bookkeeper or accountant

Why should I switch from my current accounting solution to Wave?

Wave has all the key features you need to keep your books accurate and run your business smoothly. Our double-entry accounting software is trusted by over 2 million small business owners. With Wave, you'll also have an entire suite of money management features at your fingertips, including invoicing, payroll, and online payment processing. Send invoices to clients, get paid, and manage your books, all in one convenient platform. Wave is truly one-stop money management for small business owners like you!

How Much Does it Cost to Start a Business?

8 min. read

Updated April 25, 2024

What will it cost to start your business? This is a key question for anyone thinking about starting out on their own. You’ll want to spend some time figuring this out so you know how much money you need to raise and whether you can afford to get your business off the ground.

Most importantly, you’ll want to figure out how much cash you’re going to need in the bank to keep your business afloat as you grow your sales during the early days of your business. 

Typical startup costs can vary depending on whether you’re operating a  brick-and-mortar store, online store, or service operation . However, a common theme is that launching a successful business requires preparation.

And while you may not know exactly what those expenses will be, you can and should begin researching and estimating what it will cost to start your business.

• How to determine your startup costs

Like when developing your  business plan , or  forecasting  your initial sales, it’s a mixture of  market research ,  testing , and informed guessing. Looking at your competitors is a good starting point. Once you feel your initial estimates are in the ballpark, you can start to get more specific by making these three simple lists.

1. Startup expenses

These are expenses that happen before you launch and start bringing in any revenue. Here are some examples:

• Permits and Licenses: Every business needs a license to operate, just like a driver needs one to drive. Costs vary depending on industry and location.
• Legal Fees: Getting your business structure set up (sole proprietorship, LLC, etc.) might involve consulting a lawyer and at least will involve the basic business formation fees.
• Insurance: Accidents happen, and insurance protects your business from unforeseen bumps.
• Marketing and Branding: The ways to spread the word about your product or service. They could involve creating a website, creating business cards, or promoting social media.
• Office Supplies : Pens, paperclips, that all-important stapler – the essentials to keep your business humming.
• Rent/Lease: If you need to rent space for your business before you start selling, include those expenses in your list as well.

2. Startup assets

Next, calculate the total you need to spend on assets to get your business off the ground. Assets are larger purchases that have long-term value. They’re typically significant items that you could resell later if you needed or wanted to.

Here are a few examples:

• Equipment:  Think ovens for a bakery, cameras for a photography business, or computers for a tech startup.
• Inventory:  If you’re selling products, you’ll need to stock up before opening your doors (or your online store).
• Furniture and Decorations:  Desks, chairs, that comfy couch in the waiting room – creating a functional and inviting workspace might involve some upfront investment.
• Vehicles: If your business requires a vehicle to deliver your product or service, be sure to account for that purchase here.

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Why separate assets and expenses?

There’s a reason that you should separate costs into assets and expenses. Expenses are deductible against income, so they reduce taxable income. Assets, on the other hand, are not deductible against income.

By initially separating the two, you potentially save yourself money on taxes. Additionally, by accurately accounting for expenses, you can avoid overstating your assets on the balance sheet. While typically having more assets is a better look, having assets that are useless or unfounded only bloats your books and potentially makes them inaccurate. 

Listing these out separately is good practice when  starting a business  and leads into the final piece to consider when determining startup costs. 

3. Operating Expenses

Finally, figure out what it’s going to cost to keep your doors open until sales can cover expenses. Create a list that estimates monthly expenses, such as:

• Payroll (including your own salary)
• Marketing and advertising
• Loan payments
• Insurance premiums
• Office supplies
• Professional services
• Travel costs
• Shipping and distribution

Then, based on your revenue forecasts , calculate how many months it will take before your sales can cover all those monthly expenses. Multiply that number of months by your monthly operating expenses to determine how much you’re going to need to cover operating expenses as your business starts.

This number is often called “ cash runway ” and is a critical number – you need enough cash to fund those early red ink months. This number is how much cash you need to have in your checking account when you open your doors for business.

Calculating how much startup cash you need

To figure out how much money you need to start your business, add the asset purchases, startup expenses, and operating expenses over your cash runway period. This is your total startup costs, and it’s better to overestimate than underestimate these costs.

It often makes sense to invest the time to build a slightly more detailed starting costs calculation. Assuming you start making some sales and those sales grow over time, your revenue will be able to help pay for some of your operating expenses. Ideally, your sales contribute more and more over time until you become profitable.

To do a more detailed calculation, you’ll want to invest the time in a detailed financial forecast where you can experiment with different scenarios. If you do this, you’ll be able to see how much it will cost to start your business with different revenue growth rates. You’ll also be able to experiment with different funding scenarios and what your business would look like with different types of loans.

• Funding Starting Costs

You can cover starting costs on your own, or through a combination of loans and investments.

Many entrepreneurs decide they want to raise more cash than they need so they’ll have money left over for contingencies. While that makes good sense when you can do it, it is difficult to explain that to investors. Outside investors don’t want to give you more money than you need, because it’s their money.

You may see experts who recommend having anywhere from six months to a year’s worth of expenses covered, with your starting cash. That’s nice in concept and would be great for peace of mind, but it’s rarely practical. And it interferes with your estimates and dilutes their value.

Of course, startup financing isn’t technically part of the starting costs estimate. But in the real world, to get started, you need to estimate the starting costs and determine what startup financing will be necessary to cover them. The type of financing you pursue may alter your startup or ongoing costs in a given period, so it’s important to consider this upfront.

Here are common financing options to consider:

• Investment : What you or someone else puts into the company. It ends up as paid-in capital in the  balance sheet . This is the classic concept of business investment, taking ownership in a company, risking money in the hope of gaining money later.
• Accounts payable : Debts that are outstanding or need to be paid after a certain time according to your balance sheet. Generally, this means credit-card debt. This number becomes the starting balance of your balance sheet.
• Current borrowing : Standard debt, borrowing from banks,  Small Business Administration , or other current borrowing.
• Other current liabilities : Additional liabilities that don’t have interest charges. This is where you put loans from founders, family members, or friends. We aren’t recommending interest-free loans for financing, by the way, but when they happen, this is where they go.
• Long-term liabilities : Long-term debt or long-term loans.
• Other considerations for estimating startup costs

Pre-launch versus normal operations

With our definition of starting costs, the launch date is the defining point. Rent and payroll expenses before launch are considered startup expenses. The same expenses after launch are considered operating or ongoing expenses.

Many companies also incur some payroll expenses before launch because they need to hire people to train before launch, develop their website, stock shelves, and so forth.

Further Reading: How to calculate the hourly cost of an employee

The same defining point affects assets as well. For example, amounts in inventory purchased before launch and available at launch are included in starting assets. Inventory purchased after launch will affect  cash flow , and the balance sheet; but isn’t considered part of the starting costs.

So, be sure to accurately define the cutoff for startup costs and operating expenses. Again, by outlining everything within specific categories, this transition should be simple and easy to keep track of.

Your launch month will likely be the start of your business’s fiscal year

The establishment of a standard fiscal year plays a role in your analysis. U.S. tax code allows most businesses to manage taxes based on a fiscal year, which can be any series of 12 months, not necessarily January through December.

It can be convenient to establish the fiscal year as starting the same month that the business launches. In this case, the startup costs and startup funding match the fiscal year—and they happen in the time before the launch and beginning of the first operational fiscal year. The pre-launch transactions are reported as a separate tax year, even if they occur in just a few months, or even one month. So the last month of the pre-launch period is also the last month of the fiscal year.

• Aim for long-term success by estimating startup costs

Make sure you’ve considered every aspect of your business and included related costs. You’ll have a better chance at securing loans, attracting investors, estimating profits, and understanding the cash runway of your business.

The more accurately you layout startup costs and make adjustments as you incur them, the more accurate vision you’ll have for the immediate future of your business. 

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

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