DON’T GO BANKRUPT! How CPA & Management Accountants are Very Important for Start Ups
Think about a business that you want to start …
Now think about how you are going to start this business …
Alright, now think about what kind of work you will be getting yourself into if you started up a business all by yourself…
Fast forward 1 year… Imagine that you somehow survived a whole year of running this business and you managed to rack up enough money to pay off your expenses, awesome you broke even! BUT WAIT! Suddenly, you realize… you have kids to feed, you have bills to pay, you have to buy your mom a birthday gift because her birthday is in 2 days! And guess what?! Your money that you earned for the whole year from that business, has been used for the expenses of running your business!!
What does this mean?! Well, it looks like you’re gonna have to find other ways to get additional money.
You decide to make a note of yourself, I’ll try to increase my revenues next year so I can ACTUALLY PROFIT and have money to pay for all my lifestyle expenses.
But guess what? The following year passes, your business failed, you filed bankruptcy, your wife (or husband) left you with the kids, your mom didn’t call you back, sad life isn’t it? You’re probably wondering why your business failed… Well, it’s probably because you don’t have a CPA or Management Accountant to support your startup company!
In the article provided by Samantha White and Jack Hagel in the CGMA magazine (Issue 1- 2016), called “How Management Accountants can Support Start-Ups” explains how accountants and CFOs are very beneficial and important to the survivability to a startup business.
Entrepreneurs who start up their businesses ventured into the business world to bring in new innovative creations and services to themselves wherever they can. According to CGMA magazine, 36% of businesses fail within the first two years of operation (The owners probably went through the same rough situation as the above blog post).
SOME COMMON REASONS THESE BUSINESSES FAIL
- Poorly thought out business plan
- Running out of cash
- Pricing and cost issues
The most common mistake that most startup businesses make is that they often go into the direction that will lead them to their inevitable doom to their company at a very quick rate. Additionally, they often do not realize that the direction they are heading need careful analysis.
SO… HOW ARE ACCOUNTANTS AND CPA FIRMS IMPORTANT?
Well, the answer is very obvious, you need someone who can manage your expenses, and let you know if your expenses will cause you to go into the direction of bankruptcy or not. Or, if you are currently stable, they can analyze your transactions and expenses and assess whether your business is heading into the profitable side or the bankruptcy side. With that information in your hands, you can decide what your next plan of action is for the company. Additionally, you will also have a CPA firm, or an accountant regulate your over expenditures and whatnot.
CGMA has spoke with several accountants with experience in startups. Here are some tips they have shared:
- Understand that it’s a very different job
- Be resilient
- Believe in the business
- Be curious and creative to find data and investors
- Be adaptable to change
- Know that many options and employment models are open to finance professionals
- Know that the skills you gain will always be marketable – no matter the start-up’s fate
Overall, if you do not want to end up like the introduction of this blog, it would not be a bad idea to look into speaking with an accountant or reach out to a CPA firm. You never know how much more helpful they can be for your business.
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