By CPA Kipkoech Victor
When you decide to venture into private practice as an accountant or advocate, you realize that there
are limited resource materials that can teach you how to start a firm, manage the firm, source for clients or
most importantly educate you on business negotiation skills. Our education system lays emphasis on imparting knowledge on how to work for an existing business but does not prepare one to start and run a business or a firm.
The dream of most accountants in private practice is to start their own small or medium size audit firm. These accountants have the necessary skills, knowledge and experience to handle clients. But all this does not guarantee success in your private practice. However, setting up even the smallest of practices is not something that should be taken lightly. In fact, there are many pitfalls and accountancy and bookkeeping firms are just as likely to fail as any other business.
Despite the global economic turmoil of the last few years, the number of business start-ups has been rising steadily in the country with some small and medium size companies reporting record figures in profits. This is very good news for small and medium size audit firms as they provide the best prospective clients. Most of the small and medium size businesses, cannot afford to employ a fulltime competent accountant.
Neither can they afford the services of the large audit firms which are mostly located in Nairobi. Because of this, the accountancy profession has seen a rise in the number of small and medium size practices. This is a big opportunity for those nearing qualification and those thinking of going into private practice. So, before you start buying furniture for your new office, make sure you understand exactly what working for yourself means.
First of all, you must comply with all the rules and regulations required for opening and running an accountancy practice, including being fully licensed to take on this sort of work. ICPAK requires any member who is in audit and accountancy practice to hold a practicing certificate, even if one is a member of the institute in good standing.
ICPAK’s definition of public practice work extends beyond auditing to incorporate all types of work generally associated with assurance and accountancy services offered to the public. You also need to fully understand and comply with other industry standard guidelines and legal requirements such as confidentiality and data protection, anticorruption and anti-money laundering regulations. Audit and Assurance is a service industry with risk that can never be zero.
In such a risky and high pressure field of accountancy even the most organised firms can make mistakes, all holders of practicing certificates should obtain professional indemnity insurance cover against claims for professional negligence. On top of this, everyday business insurance to protect against theft or damage to your office property, or personal injury around the office, makes good business sense. Professional advice Accountants often act as advisers for business owners, directors and investors.
However, that doesn’t mean CPAs don’t need their own set of advisers. When opening your own firm, develop a team of advisers who can give you advice and steer you in the right direction with your business. Potential advisers could include other practitioners, small business owners, information technology (IT) professionals, bankers and lawyers. Realize which areas you excel in and which areas you could use professional guidance, then seek out those resources.
Your employees are an incredibly integral ingredient to the success or failure of your business. Employees should share your common goal and vision, work hard, and believe in the future of your firm. Whether it’s a secretary or college intern, selecting the right employee is crucial. The key to a good hire is having a large pool of potential candidates. You can never over-advertise a job opening; the more good candidates who apply, the better chance you stand of finding a suitable employee. Be picky and analyze candidates’ résumés, handshakes, clothing, communication skills and handwriting.
Type of practice
Most commonly, self-employed accountants maintain very small firms, mostly a sole partner and one or two administrative staff. These firms often cater to individuals for tax preparation or to small businesses for basic accounting and tax filing services. However, your own expertise and past experience in accounting may lead you to establish a different type of business.
•If you have consulting experience, for example, you could establish an accounting consultancy firm. Your business could offer clients solutions for streamlining their accounting process and tightening their internal controls. This might include software training and staffing recommendations.
•Entering a specific area of accounting can define your firm’s core competencies and set you out from your competitors. However, trying to enter too narrow a niche may keep you from getting enough clients to get off the ground. In the early years of your accounting practice, try to remain open to any opportunities for new clients.
The business plan is a formalized document that covers all the mechanics of your business, as well as defining its vision, mission, and core values. The business plan is crucial when trying to obtain financing
from lenders, and it can also help you make sure you’ve planned everything well.
•Defining your firm’s vision, mission and values will be key to carving out your practice’s niche and giving it direction. A vision represents your broadest view of your firm’s place in the world, while a mission represents the more concrete method you will use to realize that vision.
•Structuring your business is another important part of a business plan. Limited liability companies and partnerships are very popular structures for small accounting firms. Companies and Partnerships are ideal if you plan to expand your business widely, and sole proprietorships work well in accounting because insurance considerations are generally low.
•A business plan should also cover major areas such as marketing strategy and projected costs and revenues. Overall, the plan should demonstrate that you understand your target market and have plans in place to manage the administrative and financial aspects of your accounting firm.
Taking the plunge of starting a business can be approached in several ways. Starting from scratch is an attractive option, but picking up part-time clients, partnering with an established practitioner or buying
an existing firm are also options.
•Starting an accounting practice from scratch gives you the most control. You won’t have to deal with existing baggage like debts, poor employee culture and prior services issues. However, this option
makes it most difficult to attract start-up capital and to market your business to those first few clients.
•Starting a part-time accounting practice is a good way to hedge your bets. Working with clients on the side of your full-time job allows you to test the waters of starting a practice without the huge financial risk.
Establishing relationships with these clients will also smooth the transition into running your practice full-time.
•Partnering with an established accounting professional can help you get a business off the ground. Working with a partner means more industry connections, more capital, and more potential client relationships.
•Buying an existing CPA firm will keep you from having to deal with many startup issues, but it reduces your level of control and can cost a fortune up front. In addition, it takes time to shop around for firms that are selling
ICPAK requires any member who is in audit and accountancy practice to hold a practicing certificate, even if one is a member of the institute in good standing. ICPAK’s definition of public practice work extends beyond auditing, to incorporate all types of work generally associated with assurance and accountancy services offered to the public.
Market your practice
After you have consulted your business plan and decided on an entry strategy, a business structure, and a marketing strategy, you are ready to begin your practice. Incorporating your practice, buying supplies, and
renting out office space are relatively straightforward tasks. You will also need business cards, a website and a memorable logo. Attracting your initial clients often proves to be the most challenging aspect of
starting your accounting business.
•Rely on past connections to help attract clients. If you have established enduring relationships with clients at a previous employer, you may be able to attract those clients to your new business.
•Marketing is largely about establishing= a presence and an image. It has become increasingly crucial to maintain a website for your firm; because this is often the first thing potential clients will search for. In
addition, list your business with the local phone book and consider taking out print and television ads.
When the going gets tough
When people start to work for themselves they are keen not to turn any work down but this in itself can be problematic. If you over commit your time and fail to meet deadlines, you may lose clients. Difficulties with clients and money will give you sleepless nights. Money is everything when you start your own business. The profit margins are tight and you will have good months and bad, but never give up keep going forward at all times because that’s the only thing that will keep you afloat when the going gets tough.