Step By Step Guide To Start A Chartered Accountant Firm

Step By Step Guide To Start A Chartered Accountant Firm

When a person has a distinguished idea and self-expression, the startup ecosystem catches his attention because the start-up gives an opportunity to generate enormous income, to pursue a passion and freedom from 9 am to 5 pm drudgery.

Nowadays, Chartered Accountants are also inclining towards the idea of setting up their startup, as the number of CAs practicing the profession is increasing.

Start-up opportunities for CA include opening a CA consultancy firm, Outsourcing CA or audit services, Tax Consultancy Services, taking a franchise of Taxation Software Company or starting an academic course for Chartered Accountancy.

However, having an own start-up is a recent idea among CA professionals and the GST regime has opened up more avenues for CAs by increasing the number of taxpayers and tax compliance requirements under GST. Moreover, the constant globalization of the Indian economy also indicates the opportunities for CAs in fields like financial reporting, auditing, and taxation.

Like other businesses, a start-up by CA also solicits a high level of patience, research, planning and final implementation. So how and from where it starts?

It starts with research work and moves on to the formulation of strategies and implementing them. Let us discuss this in detail.

Step 1: Research

Research work includes numerous questions which you need to answer to get a direction and short-term goals to achieve the ultimate objective. You can interrogate yourself with questions like Do I have enough capital to start a firm, Am I motivated enough to achieve success, Am I capable of managing business and employees and so on.

Step 2: Formulate a comprehensive business plan

  • Infer and define your practice values

It is very important to figure out and construe the firm’s mission and values before you actually start the establishment of a CA firm. The mission of a CA firm can be anything that may vary from providing holistic help to clients to integrate innovation with accounting and so on.

When a firm has a clear cut picture of its value and mission, it can easily form a USP which will distinguish it in the market, which further leads to wider client base at the very first step and boosts goodwill & healthy client relationship in the long-run.

  • Prepare a strategy to enter the market

To enter the market, you first need to dig out the field where your specialized services are most required. Identify the areas of your interest and skills such as taxation, acquisitions, audits, etc. and you also need to decide whether you want to have a startup in a partnership or you want to be the sole proprietor.

  • Create a client strategy

After identifying the area you want to cater your services to, you need to spot the audience you want to attract. The field of your proficiency allows you to classify the market and recognize your potential customers. Once it is done, you need to form a client strategy that will bring your clients to you through your business development and expansion skills.

Client strategy includes references, the mouth of the word, free services and so on. However, in today’s digital era, digital marketing- social media marketing, SEO services, feedback on websites plays an important role. This interprets the need for the development of a Accounting, Corporate & Law Firm website which will showcase the array of services you offer, the exquisite features that differentiate you in the markets, your clients’ feedback and your contact information to get in touch.

Research says that in the coming time, Virtual Service Provider will increase the income for professionals by 40%. It is also foreseen that services such as statutory audit, LLP formation, MCA, company audit, GST & legal consultation, MCA compliance will be catered virtually.

Having an online presence on social media platforms & other online CA portals is very important for CA firms to expand their network, to connect to existing & new companies and form clientele.

  • Conclude a pricing strategy:

Your pricing strategy will ascertain the rate of client acquisition. Make a list of various fees you will charge from customers and choose a fees mechanism such as performance-based fee, time-based fee or fixed fees. Conclude an optimal pricing strategy, well-considering the costs, your financial goals, client’s expectations and rules & regulations of ICAI on pricing.

Step 3: Make a financial plan

  • Choosing the most relevant financing option

Before starting the practice, a start-up planner needs to excavate different sources from which he/she can get capital. Capital can be obtained by the way of self-financing in which a person uses his income and savings as investment and external financing through which capital requirement of the large amount can be met and saving can be kept aside to meet the short-term requirements. CA can avail of a customized loan as per his needs.

In general, external finance is a greater option over self-financing because that keeps your savings safe and separate from business and allows you to get a big amount of money for investment. The combination of the two can also work well for a CA start-up.

Step4: Breakup the costs

To determine the capital requirement and return targets, it is very important to analyze the cost you need to invest in along with its nature.

Basic cost for a start-up includes the cost of office space, infrastructure cost, cost of relevant software solution, cost related to human resource management and staff training costs, marketing expenditures and so on. The break-up of costs must be prepared to figure out the capital you need to invest. A business loan has been proved to be very beneficial for CAs in meeting various costs and guarantee the smooth execution of CA practice. Let’s look at these costs a bit deeper.

  • Cost of Office space is the capital to be invested in purchasing office space & creating an asset for your firm or it can be a cost to be paid as rent for your office space.
  • Infrastructure cost includes internet, furniture, and fixtures, office machinery like scanners, desktops, etc, workstations which you purchase or rent
  • Software cost includes the cost to buy the right software solution for your clients
  • Human Resources management cost includes the cost to be incurred on hiring & training the staff, employing qualified CAs & experienced professionals.
  • Marketing costs include expenditure related to social media campaigns, branding, print publicity, and website development.

Step 5: Preparing a cash flow grid

Year Cash Outflows
Cash Inflow
Net Cash Flow
1 Furniture     ₹ 2,00,000  
Rent ₹ 1,00,000  
Staff                ₹ 30,000  
Misc. ₹ 20,000
₹ 2,00,000 ₹ (-1,50,000)
2 Rent     ₹ 1,00,000  
Staff               ₹ 40,000  
Misc. ₹ 30,000
₹ 3,50,000 ₹ 1,80,000
3 Rent ₹ 1,50,000  
Staff               ₹ 50,000  
Misc. ₹ 50,000
₹ 6,00,000 ₹ 3,50,000
4 Rent   ₹2,50,000  
Staff                ₹1,00,000
Misc. ₹ 1,00,000
₹ 10,00,000 ₹ 5,50,000
5 Rent ₹ 3,00,000  
Staff ₹ 2,00,000  
Misc. ₹ 1,00,000
₹ 15,00,000 ₹ 9,00,000  

A cash flow grid predetermines the profitability potential of a firm in the long-run and also allows better planning for the coming period. An example of the same is given below:

In the above example, a 5 years cash flow grid is indicating the financial graph of the firm which in turn helps a businessman plan his capital and expenses in such an optimal manner that guarantees alignment of actual returns with projected returns.

CA loan in a Flexi pattern allows a CA to burrow fund when the need emerges and pay back the borrowed amount before the due dates in case of availability of additional funds.

CA startups are mushrooming in abundant numbers in India. Besides, incorporating the innovation and ideas in accounting & taxation, they are also offering job platforms to many people from diversified domains.

CAs with an idea to have their start-up work for themselves instead of others, they maintain harmony between work & life and accomplish their dreams.

Opportunities for them are also rising as the Indian taxation system has been utterly remodeled which germinated a need for CA consultancy firms, GST consultants and accounting & taxation software companies like SAG Infotech which develops software for CA, CS professionals; among the clients.

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