When you're running a startup and your main priority is to scale and expand, explore when it makes sense to hire a financial controller and other options you may consider.
Thursday, April 16, 2020
Do-it-yourself bookkeeping and accounting can help you through the early days of getting your business off the ground.
The problem with business leaders spending time on accounting is that it takes away from other revenue-focused duties of the job, and doing just enough to get by isn't exactly best practices for setting your business up for long-term financial success. After all, your business lives and dies by your finances.
At Zeni, we believe businesses of any size and stage benefit from expert accounting, which is why we created Zeni in the first place — more on that later. So, in our minds, if you're thinking about outsourcing your accounting, there is no time like the present.
That said, it's vital to hire the right accounting professional for the job.
This article will cover how to find qualified accounting candidates, questions to ask during the interview process to determine the candidate’s abilities and potential fit for your business, and an overview of Zeni's bookkeeping and accounting solution for startups.
Three tried and true methods to building a short-list of firms, services or individuals to evaluate as potential accounting partners include:
If you're not sure what to ask or how to evaluate one accounting partner compared to another, making a choice can be overwhelming.
Accountants skilled in managing startup finances will understand how to design a chart of accounts that can scale with startups’ businesses, the best tools to support startups as their needs evolve, and have a solid understanding of relevant finance functions such as cash flow analysis and pre-revenue operations. Additionally, and importantly, they'll be well-versed in helping generate financial reports for board meetings including burn rate, runway, revenue, COGS, unit economics and other growth metrics.
But this experience alone is not enough, as different types of startups across verticals have different accounting requirements. Ecommerce startups require experience with inventory management, while SaaS startups require an understanding of revenue recognition, B2B startups require the ability to produce and manage detailed invoices in high volumes, and so on.
Ask the accounting firm or individual you're interviewing what their experience is with your type of business. From a tax and accounting standpoint, it's essential to hire a firm that understands your specific field and the tax laws that come with it to ensure you remain compliant.
If the accountant doesn't have past experience working with a startup in your vertical, they might not be a good fit.
The Zeni Finance Team consists of fully-certified bookkeepers and accountants, CPAs (certified public accountants) and tax advisors, and data analysts who've worked with companies ranging in size from seed-stage startups to public companies. We've worked through every type of business financial scenario — mergers and acquisitions, different fundraise processes, IPOs and more — bringing more than 100 years of collective experience to your business.
One of the most important factors to understand about your potential accounting partner is how they communicate and level of responsiveness to ensure it's a good fit for your communications style.
Explicitly ask how quickly you should expect a response to a request, so you can set the tone for your relationship going forward. Be mindful that they have other clients, but make it clear you are looking for is consistency and dependability. Hiring someone who makes themselves accessible when necessary will ensure that your business isn't losing out in any way.
Further, discuss their preferred communication methods. Some will happily connect with you across multiple platforms, be it email, phone calls, Slack, online chat or video conferencing; others will prefer to stick to email.
For accounting firms and services, specifically, be clear about what methods of communication are included in the level of service you are paying for. Some offer different levels of support based on the plan you are subscribed to, which may not include phone calls or immediate responses to questions.
There's nothing wrong with how one professional chooses how to communicate over another; the important thing is that your communication strategy lines up with one another.
All Zeni customers have access to a dedicated finance concierge where all questions and requests are directed, powered by our team of certified finance experts. Connect via email, or schedule phone or video calls, with our team to discuss anything related to your accounts.
Accountants are good for a lot more than just bookkeeping, monthly closes and generating financial reports. Your accountant could help you with everything from bookkeeping tasks to bill pay and invoicing, payroll administration to receipt management. They can also help in the future planning for your business by working on financial projections and modeling, waterfall charts, budgeting, and more (introductions to potential investors, recommendations for cost-saving initiatives or cash flow analysis).
Any reputable accountant will be excited to discuss other services they offer, so don't be afraid to ask what they do offer and, perhaps more importantly, what they will NOT do on your behalf.
Depending on the current team and structure of your business, you may want a full-service solution that manages all of the financial functions on your behalf. Or perhaps you only need an expert to help with financial projections and tax initiatives. Either way, be upfront and clear about what you are looking for in this position, and how their capabilities do or do not fit the bill.
Zeni offers a full-service finance management solution for startups. It is a fast, cost-effective way to automate all of your startup's financial functions, including daily bookkeeping, bill pay and invoicing, yearly taxes, expense and receipt management, financial projections and budgeting, reporting and cash flow management.
It's important to verify the team or individual you are speaking to can not only talk the talk, but walk the walk.
Ask them to describe how they work through specific scenarios that directly relate to your business; come to the meeting with a few real-life examples of challenges or scenarios you've encountered in your business accounting, and see how they describe the process or solution.
Further, ask them to speak to future accounting-related matters on the horizon for your business, such as:
In addition to understanding specific examples of how they work, request references of companies similar to yours to get a sense of their working style, depth of expertise and responsiveness. If you don't feel synergy between what they're able to share and the support you're looking for, don't force it. There are many startup accounting professionals, firms and services to choose from.
This question may seem a little inside-baseball, but its an important distinction to understand early in the discussion.
Accrual accounting gives you a more accurate overview of your business’s financial health and allows you to continue making strategic business decisions. Therefore, accountants well-versed in accrual accounting method are going to be a better strategic, long-term partner for your business.
Because startups are (theoretically, at least) built to scale, we recommend using accrual accounting method from day one to avoid the timely (and potentially costly!) transition from cash accounting. Plus, the IRS requires any business earning $5 million a year in revenue to use accrual accounting.
The cash accounting method may have been the easy option while you, the business owner, were managing the company's accounts, however, the best path forward is partnering with a competent accounting partner well-versed in the accrual accounting method.
For startups, setting and adhering to budgets is an important element of cash flow management and keeping your startup in the green zone. Having expert involvement in the practice of setting and tracking budgets for your business could be game-changing.
It's vital that your accountant knows how to manage cash burn, too. The right accountant for your business should not only be able to quickly assess the rate at which the company is burning up cash reserves, but also make projections for the future and suggestions for ways to better manage your runway while working toward your goals.
Even though you've decided to hire an accountant, it doesn't mean you won't still be involved in providing access to (and, of course, paying for) software for bookkeeping and other financial functions of your business, including bill pay, invoicing and expense management.
It's likely you'll have a preexisting set of finance tools in place already and want to confirm your accounting partner knows and understands these tools. You may also want your accountant's expert guidance on the best tools for your business as well. After all, you are hiring them for their expertise.
This reinforces the importance of questions number one and two, about the person or organization's experience in your industry and vertical. The finance toolkit for an e-commerce business will look different than a SaaS business; and new tools are being introduced on a regular basis that are worthwhile keeping tabs on.
Zeni features out-of-box integrations with several finance software and services including bank accounts, credit cards, accounting software like QuickBooks Online, payroll systems like Gusto, Trinet, Justworks, etc., payment processors like Stripe, Paypal, Chargebee, etc., and expense management services like Expensify, and more.
See Also: 8 Best Accounting Tools for Startups
It's not uncommon for an interviewer to ask a potential employee what they'd do to improve a specific aspect of a business. The same rules apply when interviewing a potential self-employed accountant or finance firm.
Two important things will occur when you ask this question. First, if your prospective accountant has already taken the time to look into your business, you'll know right then and there. Second, if the accountant can point out potential areas for improvement or how to get you started on the right foot, this is the moment when you can ask them to share with you.
Maybe your inventory procedures could be automated. Maybe your Chart of Accounts is not setup properly. Perhaps your expense management workflow is overcomplicated. Perhaps they're worried about your cash burn and runway.
Whatever it is that they see could use improvement, this is an excellent opportunity to find out how proactive they are and get a sense of how they think about solving problems for your business.
Because Zeni records and tracks daily transactions in real-time, we're able to offer Zeni Insights. Zeni Insights are proactive messages driven by artificial intelligence to help our customers identify and take action on changes to their finances as quickly as possible. Learn more about Zeni's powerful AI-powered finance management service here.
Most accountants and finance firms use the hourly billing model, whereas others have adopted value pricing or flat fees. It's important to know in advance what to expect and to determine which method works better for you.
Flat fees typically come with a subscription model that involves a monthly payment structure (usually automatic), whereas hourly billing is exactly that (though you'll likely be given an estimated monthly cost range).
Depending on your team structure, the decision to use a service or individual who bills hourly versus flat monthly rate could be the difference of hundreds or even thousands of dollars in fees.
Considerations for determining the best payment structure for you include:
Zeni charges a set monthly fee based on your company's total monthly expenses, starting at $99/month, with annual taxes starting at $2000/year. Our fees are typically 2-5x less expensive than that of a typical finance firm. No hourly billing, no surprises.
This question could be a perfect end to the most informative discussion. While it might catch some people off guard, it's an excellent opportunity to get to see where they shine.
This question will allow the accountant to address anything they feel is relevant but didn't get a chance to cover during your discussion. Anything they deem as essential in their client relationship should be their focus here. Plus, by asking them a broad question, you'll get a better sense of how approachable and personable they are.
In a way, it puts the accountant under fire, but it gives them the opportunity to demonstrate their quick-thinking ability and concern for your new business relationship.
You don't want just to hire a number cruncher. You want to hire another expert to add to your growing team.
Hiring an accountant is exciting. Really! The process might seem daunting at first, but once you get a grasp on what to look for and find a good accounting solution for your business, it's exciting. When you have an expert at your disposal to take on the bulk of your company's finance management, you'll inevitably get to spend more time on other aspects of your entrepreneurial role.
More time for you means more revenue, better customer satisfaction, and better control over your business as a whole.
Are you unsure of what services your business could benefit from? At Zeni, we offer a team of finance experts working seamlessly with powerful artificial intelligence — both dedicated to managing every financial function for your business with speed and accuracy. We offer best-in-class service and pricing for monthly bookkeeping and accounting services, plus a flat fee of $2,000 to complete our customers' annual taxes. Learn more and try Zeni today.
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