At the Access Group, we have worked with many small accounting practice owners, helping them select the right accounting practice solutions to run their new business more efficiently. We supply complete accounting practice management software, including tax software, general ledger software and data management and analytics.
In this definitive guide to starting an accounting practice, we will apply all that knowledge to give you the best guidance on everything you need so you're prepared when starting an accounting practice in Australia or New Zealand.
Why should you start an accounting practice?
Whether or not you do decide to start an accounting practice comes down to one important question you'll need to ask yourself: do you feel more comfortable as a cog that forms part of a larger machine, or do you want to step outside your comfort zone and be in the driving seat?
There is no wrong answer; it purely comes down to your preference. However, if you decide to go out on your own, the main advantage of accounting firm management is that you will be profiting from your firm rather than earning a wage.
What do you need to consider before starting an accounting practice?
Starting your own accounting firm has accounting-specific requirements, which we will get into later, but first, it is essential to focus on the fact you are starting your own small business.
According to Accounting Today, these are some of the factors that aspiring accountants should think about before they take the next step towards starting their own accounting practice:
- You have the right blend of accounting skills and experience to meet client needs.
- That you have the required drive and initiative to start making business calls.
- That you have the support of your family and loved ones.
- That you have the required marketing skills to attract clients and generate revenue.
- That you can differentiate your accounting practice through an accounting specialty, which will require its own set of skills and experience.
According to Acuity Mag, there are five elements you will need to think about if you want your accounting practice to progress from a pipedream to a reality:
- Your vision for your practice and the life you want to have.
- Who your perfect client will be.
- Your ideal service offering and pricing.
- Your preferred team and the kind of workplace culture you want to have.
- Your ideal technology suite, such as your accounting practice management software.
Is starting an accounting firm worth it?
Answering this question requires a lot of unpacking, as there are many layers to launching your own accounting practice. We will break this up into two sections: the advantages and the disadvantages.
What are the advantages of starting an accounting practice?
- Autonomy: When you run your accounting practice, you will be free to make business decisions. You can even work from home if that suits your own circumstances to have greater flexibility.
- Earning potential: When you are the owner of your very own accounting practice, you can set your prices and generate revenue based on the number of clients your practice attracts and the accounting services you provide to your clients.
- Building a brand: When you start your accounting practice, you can create a brand and reputation that fits your needs.
- Control over client selection: As the owner of your accounting practice, you have the freedom to select your clients and focus on areas of accounting that align with your interests and expertise.
What are the disadvantages of starting an accounting practice?
- Startup costs: If you plan to start your accounting practice, this will require a significant upfront investment in elements such as your equipment, software for accountants, and office space for those needing one.
- It takes time: The accounting industry in Australia is highly competitive, with many established accounting firms and practices, and it can take many years to build up your practice to have a healthy business bank account balance.
- Extended hours: When you are in the throes of starting your new practice, you will find yourself working longer hours than ever before and may, for a time, struggle with work-life balance.
- Accounting practice management: Starting an accounting practice means upskilling various accounting practice management skills, including marketing, financial management, and team management. As you are finding your feet, balancing these responsibilities with providing high-quality accounting services to clients might be challenging.
What are the risks of starting an accounting practice?
Industry experts will tell you that accounting practice management will come with many new and challenging decisions. If you are new to business ownership, you might need to prepare for things that may come up in day-to-day operations.
Some common risks of starting an accounting practice for small business owners include the following:
- Recruiting and retaining quality talent: this is a common issue in the accounting industry. Suppose you are only ready to hire part of the team. In that case, developing a recruitment strategy early on is crucial for accounting firms so they are thinking about a solution for this inevitable stumbling block.
- Keeping across regulatory changes: it can be challenging to keep across regulatory changes if you are at capacity; however, finding a way to carve time to keep on top of the latest updates will help small business owners minimise the risk of potential breaches.
- Cash flow: it is becoming more challenging to operate a profitable seasonal accounting practice. You will need to think about how you will develop a year-round schedule for your accounting firm to enable long-term expansion and growth.
- Cybersecurity: accounting practices handle sensitive personal information about their clients, which means cybercriminals frequently target them. Please read our guide on cybersecurity for accounting firms and find out how to best protect your client data from cyber threats.
How to start an accounting firm in Australia
Many accountants will envision building a business from the ground up, but this may only sometimes be the most feasible venture for every business owner.
The three most popular ways to start an accounting firm are starting your own practice, a partnership and buying an accounting practice.
Starting your own practice
Starting an accounting practice from scratch is more commonly known as sole trading. You will need to determine your marketing and pricing if you want to make your business venture a successful one.
Starting a new accounting practice from the ground up can be advantageous for accountants who want to avoid dealing with a legacy of pricing, technology, or past client service issues.
A partnership
Going into a partnership with another accountant is a decision you must consider from all angles.
On the plus side, you can offer your clients a more comprehensive range of accounting services and attract broader client needs. You will also be able to leverage your partner's knowledge and collaborate on decisions that can make your practice stronger. You'll also share costs and have more work-life balance than if you were going solo, as you and your partner can cover one another's holiday periods and sickness.
However, for this venture to succeed, you and your partner will need to make compromises for the sake of the practice, such as time frames or objectives. There may also be different levels of competence or motivation between you which could be a source of frustration or even conflict if not correctly handled.
Buying an accounting practice
Buying an established accounting or bookkeeping firm is an alternative to sole trading or a partnership. You can buy a business outright, enter a partnership, or merge your current practice with another one.
Buying an accounting practice will mean you will benefit by inheriting the previous owner's client base and other assets; however, the option will incur the most upfront costs.
It may seem straightforward, but the demand for practice buyers can outweigh the number of sellers. Those looking to sell their accounting practice will have an opportunity to choose the buyer with the most experience because they want to protect the interest of their firm's existing client base.
As Chartered Accountants Australia highlights, when purchasing an existing accounting or bookkeeping firm, you should also do due diligence when considering the following:
- The firm structure.
- What your status or title in the business will be once you have taken over.
- Are any succession plans in place?
- How leave is covered for you and any employees you may have.
- Leasing and finance agreements may be in place.
- The financials include cash flow and funding, debtors, and any work in progress.
- Whether there are any existing or legal or insurance claims.
What are the services provided by accounting firms?
When starting an accounting firm, you must determine the accounting and bookkeeping services you will provide your clients.
There are various accounting services you can specialise in, which will depend on your background and credentials. These include, but are not limited to:
- Tax preparation and lodgment
- Compliance
- Auditing
- Bookkeeping services
- Payroll services
- Business advisory services
You can use these services in combination with additional data work requested by your clients. It is a good idea to look into data management and analytics software and how this can help you provide better advice to your clients. To understand how you can use client data to its full potential, look at our article on the top data challenges facing Australian accounting practices.
The choices you make regarding the accounting services your accounting firm will offer are entirely up to you. Remember, there is a degree of timing and seasonality for certain services.
The seven steps to starting an accounting practice
- Check your qualifications, accreditations, and licences.
Before starting your accounting practice, it is paramount to make sure that you have the necessary qualifications, accreditations, and licences.
In Australia, you must hold a recognised accounting degree or qualification to practice as a certified public accountant. A bachelor's degree in accounting will take 3 or 4 years of full-time study, depending on the institution you choose, and will cost approximately $11,000 per year. You can also opt for a two-year Master of Professional Accounting if you already have an undergraduate degree.
You will also need to become a member of a professional accounting body to be a certified public accountant, such as the CPA Australia or Chartered Accountants Australia. These accreditations will add an extra level of depth and quality to your accountancy knowledge, but to apply for entry for CPA Australia or Chartered Accountants Australia accreditation, you must already have a Bachelor of Accounting degree.
You will need a Professional Practice Certificate (PPC) before you start offering accounting services to the public, which you can apply for through the board you register with. Still, you will need professional indemnity insurance to do so.
- Decide on your business structure.
You will need to decide on the structure of your accounting practice. Do you want to practice as a sole trader or partnership or buy an existing accounting business?
Each accounting business structure has advantages and disadvantages, so it is essential to research and understand the options to determine the best fit for your accounting firm.
- Write your business plan for your accounting firm.
A business plan is the most important document to set your accounting practice benchmarks. It is a roadmap that outlines your business goals, strategies, financial projections, and services you will offer. It also acts as a pitch to secure financing for your new business.
A business plan will also help you stay focused and on track as you start your own firm.
Your business plan should include the following information:
- The strategic goals of your practice
- The business structure of your practice
- Any capital requirements and sources (including startup costs and monthly operating costs)
- Your marketing, pricing strategy and target market, based on the services you are going to offer
- Your office location, personal assets, the technology you will use (such as your accounting practice management software) and staffing.
- Register your accounting business.
Before starting your accounting practice, you must register your accounting business as a legal entity with the Australian Securities and Investments Commission (ASIC).
You must also obtain an Australian Business Number (ABN) for your accounting business and register for Goods and Services Tax (GST) if you expect to earn more than $75,000 annually.
- Choose your working method.
You can work from home when your practice is in its infancy. This brings greater flexibility to small businesses while they are figuring things out.
Remote and hybrid working has become the new norm for many employees who were previously office bound; check out our article on this topic: Flexible working arrangements for accounting practices.
If you choose to operate from an office, consider leasing commercial space in a convenient location. If this is your preferred method, you will want to consider accessibility, visibility, and affordability.
- Develop a marketing strategy.
Developing a marketing strategy is essential to attracting your first few clients and developing some accounting practice benchmarks to help you grow.
Some popular techniques small businesses can use to reach your target market include social media, networking events, and digital marketing to help reach their ideal target market.
It would help if you also thought about building a new website for your accounting practice so that potential clients can find you.
Here is an article about marketing for accountants: How to market an accounting practice.
- Work on your soft skills.
Soft skills are essential in building the professional competence of accountants looking to start their own accounting business.
According to Linkedin, "Soft skills are the essential interpersonal skills that make or break our ability to get things done. We consider them foundational, and every professional should work to build them."
There are plenty of professional development courses that can help you develop your professional behaviour when you meet clients .
Soft skills for accountants can help you excel in your customer service, communicate effectively, and be responsive to your client's needs. To help build and maintain strong and lasting relationships with your new clients, we have put together a blog on this topic: Master client relationships for accounting practices.
Creative thinking is also critical in accounting, as it is intrinsic to developing innovative solutions to your problems. For further reading, check out our blog on how accountants can use creative thinking at work.
How to decide on a pricing structure for your accounting practice?
When you begin setting rates for your new accounting practice, it is essential to think about billing that will work best for you and add the most value.
If you are still trying to figure out where to start, you can always call other firms, ask for some quotes, and then calculate the average of the quotes you have obtained. That will help you to determine a fair and competitive price for your services.
The three most common billing methods for accounting practitioners are flat fees, billable hours, and retainers.
When starting an accounting practice, you may use any of these billing methods alone or a combination, depending on what is comfortable for your clients.
What is a flat fee?
A flat fee is where you send a quote to your client on a price for a job, and once the client approves, the price is set.
The flat fee billing method will be easier for your cash flow projections, giving you a great idea of where your money comes from every month without tracking your time.
A disadvantage of the flat fee option is that your job takes longer than expected and incurs additional costs, which may cause frustration for your client. To minimise this risk, including a maximum number of hours upfront within your project quote to your client.
What are billable hours?
This is quite self-explanatory; it is where you decide to bill your clients by the hour. The best way to calculate your hourly fee is to set a number to how much you want to make each year and then work out the number of hours you are willing to work to make this a reality.
When billing by the hour, it is essential to keep records of the time you spend on each of your projects to itemise your bills for clients accurately.
When working with multiple team members, you can bill differently based on each accountant's experience or expertise.
What is a retainer?
A retainer is where an accounting firm charges its clients a regular fee, whether quarterly, monthly, fortnightly, or weekly.
When using this price structure, you should first determine which of your accounting services the retainer covers.
Before you quote your retainer price, meeting with clients to determine the level of service they require and how often you will expect to interact with your client's books is a good idea. As with the flat fee, you must assess how much work will be involved for each client.
How do I hire accounting staff?
As your fledgling accounting practice grows, consider how you will resource your accounting practice to assist with your day-to-day operations.
There are a handful of ways that small accounting practices can do this: recruiting staff in-house, outsourcing to a professional agency or offshoring recruitment.
How easy is it to recruit staff in-house?
If you can recruit new accounting staff in-house, you will be searching for a new team through Seek, LinkedIn or recruitment agencies. You will likely be looking at a particular skill set, relevant experience, and a personality that aligns with your values.
It would help to consider whether you are in a position with a competitive salary, remote or hybrid working models, room for growth and other job aspects that will motivate your new employee.
Recruiting staff in-house has been the most significant ongoing challenge for accounting practices in Australia after the COVID-19 pandemic. As Jason Crimmins, APAC Business Manager for The Access Group, explains:
"Having worked in the recruitment industry for over 17 years and now leading our recruitment team at The Access Group, in my experience, there has never been a more challenging time for accounting practices looking to attract and hire staff."
“At the moment, the unemployment rate in Australia is the lowest it has been since 2008. Couple this with a skills shortage, inflated salaries, counteroffers, lack of technology, limited talent funnelling, and the reluctance for accounting practices to hire inexperienced but educated candidates; it is no secret that when it comes to hiring, practices are under-prepared and inevitably get it wrong."
These challenges have caused an acceleration in the two other most common recruitment solutions for small accounting practices: offshoring and outsourcing.
What is outsourced accounting?
Outsourced accounting is where you delegate responsibilities to an external service provider.
This is an attractive prospect for small accounting practices in Australia to help them get through peak demand seasons, which include: tax returns at the end of a financial year, end-of-year reporting, monthly and quarterly activity statements, and audits.
Outsourcing your accounting services can be a significant advantage for new accounting practices looking to increase their resources without spending precious hours recruiting fresh staff members. It is also a solution that offers more value for money and certainty around cost compared to recruiting staff in-house.
With outsourced accounting, there are some risks you will need to mitigate, such as the sensitive and valuable personal data of your clients will be transferred outside your accounting practice, making it more vulnerable to cybercriminals. Please read our guide on this topic: Cybersecurity and accounting firms.
For more information on outsourced accounting and how it compares to recruiting staff in-house, read our article on hiring an accountant vs. accounting outsourcing: what does your practice truly need?
What is offshoring in accounting?
Offshore accounting services are where some of your accounting tasks are performed overseas by a third-party service provider with a talent pool of accounting professionals.
It is a popular method for small accounting practices looking to find ways to hit the ground running in ways they may not be able to when relying on in-house accounting services due to the expense of hiring and training new employees. In this way, it increases profitability for a new accounting practice.
There are some obstacles that you may need to overcome. Neil Copp is the Co-Founder and Director of The Sphere Group, which delegate some of its accounting tasks to an offshore provider. He explains:
"Outsourcing is where you get the result with a company with no intellectual ownership, but offshoring is where they're an extension of your business. You need to understand that managing the staff can be difficult."
"Offshoring part of your business means investing time wisely; during the first year of offshoring, we did not necessarily understand the relationship. Over time, we have implemented initiatives, including cultural meetings, as if they were sitting right before you to get past some cultural barriers. English will be a second language, which can be a barrier as the offshore staff are finding ways to interpret what you are saying in their native language before they respond to you."
Do I need accounting practice management software?
Accounting practice management software is a powerful all-in-one solution to manage every aspect of your accounting practice behind-the-scenes.
When starting an accounting practice, it is one of the most essential tools you can have under your belt to run your new practice effectively.
A reliable all-in-one practice management solution with all the necessary features will give you a handle on everything from day one of your new accounting practice, from managing clients, automating work tasks, and maintaining internal workflows, to using data to make better decisions for your practice.
Accounting software can offer several benefits for those starting an accounting practice, for example:
- With accounting client management software for accounting practices, you can gain access to all your client information from one centralised location, enabling you to connect with your clients.
- It will save you valuable time with accounting practice automation through workflow software for accounting practices that you can configure to suit how you want to work.
- It will give you complete visibility of your accounting practice's performance through intuitive data-driven accounting practice reports and insights.
- You'll be able to work more efficiently with the potential for greater focus on your staff, jobs, and time management with time and billing software for accountants.
Start your journey to accounting practice ownership
To summarise, when starting your accounting practice in Australia, you must have dedication, effort, and a thorough understanding of the industry and market.
Getting off the ground will take some time, patience, and planning. However, by following your professional and personal passions, you can start an accounting practice successfully, and all that effort you put in will be worthwhile once you see the results.
When you are ready to learn more about how our accounting practice management software can help you start your accounting practice, talk to a specialist or book a demo today.
Starting an accounting practice FAQs
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What are the costs of starting an accounting firm? |
There are many variables to this question, such as your goals and your location. Are you planning to start up a traditional brick and mortar accounting practice or are you looking to create a virtual office environment? Those looking to take on an office location will have to consider the costs of taking on a building lease. When budgeting for your new accounting firm, you will also need to remember that you will need to source and install the necessary equipment and software that will help you to efficiently run your practice. Some essential costs will include:
Remember it is important to ensure you have a financial buffer before setting up your accounting firm. You can also consider financing your business through a personal loan or small business loan, have a read of this article by Finder for more information about loan providers. |
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How much is an accountancy practice worth? |
Any prospective accounting practice owner who is wondering how much their practice will be worth post-setup may be disappointed. There is no one size fits all response to that question. Every single accounting practice in Australia is unique. As this article by Bookept details, how much your new accounting practice will be worth depends on several variables, such as:
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What software do accounting practices use?
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Although every new accounting practice will be unique, most of them will use the following accounting practice solutions:
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How do I get accounting clients? |
If you are a startup accounting firm, you may be asking yourself: how do I develop a client base? You can have the best work ethic, offer exceptional accounting services and competitive pricing, but the consensus is that unless you reinforce positive word of mouth about your practice your growth may be hindered. Here are some tips to take your client base to the next level:
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How do I sell myself as an accountant? |
There are many great ways you can make your mark on the industry, but the best of these would be to establish an online presence, in the form of a website or social media channels. Selling yourself as an accountant is made much simpler with an online presence, and the benefit is that it is easy to start your own social media channels with minimal start-up costs. Marketing your new accounting practice online won’t guarantee an increase in exposure, but in contrast if you don’t market your practice online this can have a negative impact and can discredit you to a potential client, as websites and social media will be the best place for any word-of-mouth referrals, and for clients to do their research on whether you’re the right fit for their needs. For more information on this topic, read our article: Marketing and growing your accounting practice. |