How to Start an Accounting Firm: A Definitive Path to Success With 12 Steps

So you've decided to start your own accounting firm? That's great news. Embarking on a new business venture is exciting. But it can also be scary. There are a lot of steps involved in making sure your business not only gets the clientele it needs to grow, but also to ensure you abide by the laws of the land.

With so much to think about, remember, and do, opening an accounting firm is always a challenge; even for the most seasoned accountant. From getting the right insurance and opening a business bank account, to writing your business plan and getting clients.

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But don't panic. And don't let the number of steps put you off your venture. Read this guide on how to start your own accounting firm and embrace the challenge.

Benefits of Starting an Accounting Firm

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First of all, with so much to consider, you might be wondering if starting an accounting firm is the right choice for you. Here are some top benefits to help you decide whether to open an accounting practice:

• Profitable: Profitability is probably one of the core benefits of starting your own accounting firm. In fact, an accounting practice is actually one of the most potentially profitable businesses you can launch at the moment.
• Flexible: Many people enjoy the flexibility of being their own boss. You can run your business how you want and provide the services that matter to you. You can be as creative as you like, and use the software and tools that you think are worth investing in.
• Small initial investment: Unlike some other businesses, an accounting practice takes a comparably small initial investment. You'll need things like software, tools, and potentially funds for marketing. Although, with a business like an accounting firm, many thrive on word of mouth recommendation from existing clients alone.

How to Start an Accounting Firm: Checklist

Before you embark on your journey, take a look at this checklist to determine if you're ready:

1. Specify your services.
2. Open a business bank account.
3. Get an EIN and tax ID number.
4. Familiarise yourself with legalities and obtain licenses.
5. Decide on your legal structure.
6. Research and buy insurance.
7. Choose your technology.
8. Write the rules, regulations, and policies for your business.
9. Figure out your start up costs.
10. Create Your accounting firm business plan.
11. Hire employees.
12. Market your accounting services.

1. Specify Your Accounting Services

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Your accounting services will depend on your expertise, the number of people in your team, and the time you'll have. To decide on these, make a list of possible services your accountancy practice could offer. These could include:

• Payroll
• Bookkeeping
• Financial planning and analysis
• Tax preparation and management
• Assurance services
• Account audits
• Tax accounting

Eliminate the ones your accounting practice definitely wont be offering. Don't be too daunted by the thought of offering a number of different services. echnology, particularly AI and automation technology, can free up your time and enable you to offer a more comprehensive service; more on that later.

It might help at this stage to look at your competitors to see what they're doing in the way of accounting services. Consider your accounting skills and what you might bring to the table that's different (and better) from your competitors.

You might also decide to cater to a specific niche. For example, eCommerce businesses, small business ventures, or non-profits. Having a speciality service might sound counterproductive because of the smaller client base. However, it could make your business more appealing for your target market and those in your niche if they know you cater specifically to them.

2. Open a Business Bank Account

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It's really important to separate your personal assets and finances from your business ones. Opening business bank accounts will help you build a credit profile for your new accounting firm that's separate from your own. It will also help keep you organised, and make it easier to automate aspects of your own bookkeeping and accounting.

When it comes to opening business bank accounts, you have loads of choices. You could go for a traditional bank account like those you find on your high street. Or, you could go for an online-only bank account which could offer more flexibility for business practices through features like accepting and making multi-currency payments, integrating with different software, and finance report generation.

Some reputable online business bank account providers include:

• Wisepay
• PayPal for Business
• Payoneer
• Revolut
• Mettle by NatWest

This is just a small selection. There are more out there offering varying services.

3. Get an EIN, Tax ID, or UTR Number

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This step involves registering your accounting firm as a business in the appropriate country to where you operate. It will enable you to pay tax, and help governmental bodies keep track of the taxes throughout the country.

The process involved with obtaining one of these numbers can vary. They can often be done online too. In the UK for example, you register for self-assessments or tax returns, and you're then given a UTR number. If you choose a limited company for your business structure, you too will need to register for self-assessments as the company director because your business is a separate legal entity to you.

Once you have this, you can manage your taxes online.

Being an accountant though, you'll probably know the ins an outs of this in your country.

4. Familiarise Yourself With Legalities and Obtain Licenses

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You must make sure you understand the legalities of running your own accounting firm. Obviously, these will differ depending on where you operate.

Since you're here, I'm going to assume you already have the correct qualifications to enable you to practice accounting for potential clients. But, you must also ensure you're registered with the appropriate professional bodies, such as FCA or ICAEW. And, obtain the correct licenses that'll enable you to practice and run your own firm.

When starting an accounting firm, the general areas of law that certified public accountants should familiarise themselves with are:

• Employment law
• Legal status of your company
• Health and safety
• Anti-money laundering
• Insurance cover

5. Decide on Your Legal Structure

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The legal structure of your accounting business is a pretty important consideration. Accounting firms need to establish which structure to go with. For example:

• Sole trader: This is for individuals who are self-employed. You are responsible for completing your self assessments. While you can keep your profits, you're also responsible for any debt you incur. You can, as a sole trader, employ people to work with you too.
• Partnership: This is where you go into business with another person and obtain joint responsibility for debts, taxes, and profits. In this context, a 'partner' doesn't have to be an individual person. It could, for example, be a limited company.
• Limited Liability Company: A Ltd. company is a separate legal entity to yourself. The company is made up of shareholders and company directors; at least one of each. A shareholder can also be a director. The shareholder's liability is limited to what they invested in the business. And, the director of accounting firms would normally pay themselves a wage.

6. Research and Buy Insurance

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This step is pretty self-explanatory. You must research the legal insurance requirements and the optional extras your firm might benefit from. Professional bodies like ACCA and ICAEW also have their own requirements if you're a member of their organisation.

These are some insurance types to consider for your new business:

• Professional indemnity insurance: This type of insurance covers you for any costs that come with client disputes. It covers you in the event of being sued, and having to pay court costs and compensation. This is normally an essential requirement for members of professional bodies.
• Employers liability insurance: This type of insurance covers you for disputes with your employees. For example, if they are injured due to your supposed negligence, the insurance will cover court and compensation expenses. Employers liability insurance is often a legal requirement in the UK.
• Public liability insurance: This is another requirement for most UK businesses, although not a legal one. Public liability insurance protects you financially if a member of the public is injured, or has damage to their property, as a result of your business or its activities. For example, someone slipping on your wet floor.
• Contents insurance: This is another optional extra. However, it's definitely worth considering. When you have contents insurance, the equipment and furniture inside your building is covered in the event of fire, flood, and theft (depending on your policy).

Without the correct insurance in place, dealing with any of the above circumstances will be very costly for your business. It might even be too much to recover from.

7. Choose Your Technology

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Now comes the fun part; choosing what technology your accounting firm will use. Technology can enhance your services and your business. It can boost efficiency and productivity within your firm, and maximise your potential as an accountant.

Here are some types of technology to consider:

Accounting Software

This really is a must for an accounting firm. Accounting software like QuickBooks and Xero comes with a myriad of tools to help manage your clients' data. It can also connect with other software and tools so you can create a streamlined accounting process.

Bookkeeping Automation

Link My Books is a bookkeeping automation software for eCommerce accountants, bookkeepers, and businesses. It automatically transfers financial data, like sales, refunds, and taxes, to accounting software. This saves you 6 hours every month per client. Link My Books is a must-have for anyone completing bookkeeping services for eCommerce clients.

Practice Management

Practice management and workflow software for accountants takes over some essential aspects of running your accounting business. Xero's solution, for example, allows you to track time spent on projects and clients, and allocate jobs to staff. You can also create reports about your clients and invoice them correctly according to your pricing structure.

Tax Management

This type of software can calculate taxes and help you manage data to prepare tax returns. Some software ensures your accounting business keeps compliant with local laws and regulations. And, allows you to file your returns directly through it.

Expense Management

Managing your team's expenses could get complicated. Expense management software will help you keep on top of employee expenses with tools like receipt data capturing. You can also get payment cards specifically for expenses and set your own limits.

Things to Consider When Choosing Technology

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Here are some things to keep in mind when you're choosing what technology to use for your accounting firm:

• Scalability: You want the technology you use to grow as your firm grows so you don't need to migrate to accommodate an increased demand.
• Integrations: Integrating multiple technologies together will allow you to streamline your processes into a unified system. For example, connecting your practice management software to your accounting software, and then connecting that to your bookkeeping automation software.
• Cost: Technology often (but not always) comes at a cost so you need to determine your budget before subscribing to a software or tool.
• Usability: Take into account how easy it is to learn how to use, and continue to use, a new software. Read reviews and book demos to try it out.
• Support: Consider how you can get in touch with a software team, how responsive they are, and what resources they have available to support you.

8. Write Rules, Regulations, and Policies for Your Business

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Your rules, regulations, and policies will help you maintain transparency and clarify certain areas of your business. They will also help keep you compliant with laws and regulations. And, give clients and employees peace of mind knowing what to expect from you.

Here are some to consider:

• Financial statements: Have clear policies as to how your company creates and manages financial statements.
• Data protection policy: Policies detailing how you gather, manage, store, and use client and employee data. This should also specify how long you keep the data for and the measures you take to protect it.
• Terms of service: These policies clarify the terms and conditions of using your various accounting services. You can include them in each accounting contract for your new clients.
• Complaints procedure: This specifies how you will deal with complaints from both clients and employees.
• Health and safety: How you plan to maintain health and safety within the working environment. For example, using wet floor signs.
• Disciplinary procedures: The ways in which you will discipline employees if needed and the reasons why you would do so.
• Employee conduct: How you expect employees to conduct themselves both inside and outside the working environment.

Be sure to research what rules, regulations, and policies you need to have in place by law. And, according to the rules of the appropriate professional bodies.

Clients and employees should be made aware of the policies that impact them. For example, employee conduct could be written into employee contracts.

9. Figure Out Your Start up Costs

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This step is relatively straightforward. Determine your start up costs, along with your capital. For example:

• Renting office space
• Software
• Wages
• Computers
• Advertising
• Insurance
• License fees

If your initial investment does not cover all the necessary costs, consider ways to raise capital. Such as obtaining loans and investments. You might also decide to partner with another accountant.

10. Create Your Accounting Firm Business Plan

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An accounting firm business plan will serve as a definitive plan for your accounting practice that'll outline your objectives, plans, and finances, and keep you on track. If you want to secure funding from a third party, you'll often need a business plan to show you have a solid strategy in place and understand your industry.

A business plan also helps you to identify potential risks involved with opening your own accounting practice and establish ways to overcome challenges. You'll look critically at your business and uncover potential pitfalls so you can minimise risks.

A business plan is made up of different sections. While these can vary according to your business and preferences, a good plan consists of:

• Executive summary: This briefly introduces and summarises the business, and explains core details like who runs it and your plans for the future. It also outlines your services, vision, and mission.
• Company description: This goes into more detail about the company such as when it was founded. Also include roles and responsibilities within the company.
• SWOT analysis: This stands for strengths, weaknesses, opportunities, and threats. You must identify points for each of these based on your research and analysis.
• Market analysis: Analyse your market by looking at aspects like trends, customer segments, and competitors. Write about who your target market is and why.
• Marketing and sales strategy: This section of your business plan details how you'll market your accounting practice to potential customers and achieve sales.
• Financial plan and operations: Your final section will include financial projections for up to five years in advance. This shows potential investors whether your business is financially sound.

If you want to dive deeper into how to create a business plan when you're starting an accounting firm, take a look at this post that gives a step-by-step guide on creating a winning accounting business plan.

11. Hire Employees

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You might not need to do this at first while your business and your client base are still very small. Hiring staff is costly and it comes with additional responsibilities and compliance rules, such as getting an employer identification number for each employee and abiding by holiday and sick pay laws.

However, if you're going to grow as an accounting business, at some point you'll probably need to take on some staff.

You might take on another certified public accountant to help expand your services. Or, get an admin assistant or receptionist on board to free up your time. You might also think about hiring bookkeepers or people who are currently studying to become an accountant. Upskilling and training people can be very rewarding and cost effective for accounting companies.  

At the end of the day, only you'll know when you need staff and when you'll be able to afford to hire them. If you think it's essential but you don't have the funds in place, consider looking into additional funding sources to help you with those initial and ongoing costs.

12. Market Your Accounting and Bookkeeping Services

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Once (or even before!) you've got all the practicalities out of the way, you can work on marketing your accounting business and its services. You'll put the sales and marketing strategies you outlined in your business plan into practice.

Word of mouth recommendation will be a big asset when it comes to getting your name out there. But, it'll serve you well to cover multiple bases for marketing, particularly at the beginning.

Website

It should go without saying that in this age of digitalisation, a business needs an online presence for gaining new clients and keeping existing clients informed. Part of this is a website where you can tell the world about yourself, your services, and your accounting business in general. You must also include a way to contact you.

And, a blog would also be a good way of sharing your knowledge and expertise with your audience. There are options out there to build free websites, as well as paid ones.

SEO

If you have a website, you'll need to optimise it for search engines. There are loads of aspects involved in Google's algorithm for ranking websites. You might want to work with a professional to help your business rank highly in search engines.

Alternatively, think about keywords, backlinks, internal links, image optimisation, and meta descriptions, to name a few aspects. Ensure your content is kept up to date and details like contact phone numbers are consistent across the web.

Google Business Profile

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Google Business Profile is a must-have tool for businesses offering local services. It'll help potential clients identify and locate you. Your accounting business will show up in a relevant Google search, in addition to Google Maps.

You can include some photos, branding elements, contact details, and opening hours, amongst other details. Clients may also review your accounting practice, which could enhance credibility.

Social Media

Although you can get a social media presence organically, it has become trickier to do so as the years have gone on. You might, therefore, want to consider a blend of paid ads and organic content. Pick two or three channels and post regular content. You should also mix up the type of content that you post, such as how-tos, industry news, and blog content updates. Be active on social media by responding to comments.

Local Magazines, Directories, and Newspapers

Despite those in the physical world being engrossed in the digital world, people do still read printed materials about their community. Perhaps your community has a monthly magazine filled with local events, advertisements, and services. Or perhaps there is a local directory or newspaper you can get listed in. You might even be able to display an advert on your local post office's tv screen. Have a look at what your community has to offer.

Online Accounting Directories

Lots of accounting software has directories that connect accounting firms with businesses that need their accounting and tax services. Xero and QuickBooks are both good examples of this. You could get listed for free if you use their software and/or complete a course about using their software.

Link My Books also has a directory of expert accountants and bookkeepers. Businesses will find eCommerce accountants and bookkeepers that meet your requirements. They can also fill in a short form and leave it to us to find them the perfect accountant.

Start an Accounting Business and Get it off the Ground

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Starting your own accounting business is exciting. It's challenging, rewarding, and could earn you a strong, sustainable income. However, before starting an accounting firm, you need to take a lot of things into consideration. And, make sure everything is in place to help your business run smoothly.

From understanding your business structure and separating your personal assets from your business one's, to creating a business plan and marketing your business, there's a lot to do before starting your own firm.

Another essential consideration for accounting firms is what technology to incorporate into your accounting practice. Accounting, practice management, tax management, and expense management software are all worthy solutions for helping accounting firms thrive.

But one of the most useful types of software for eCommerce businesses is bookkeeping automation software like Link My Books. Link My Books enables you to dedicate your accounting practice to helping small business owners and large, expand and scale. Grab your free trial today.

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