The ability to work independently, suppleness to select clients, and provide focussed services are certain benefits for Chartered Accountants to set-up their own firm. With more and more Chartered Accountants graduating each year, it becomes imperative to provide them with some direction to set-up and establish their own firm so as to avoid initial hiccups. Setting up a CA consultancy firm in India has recently seen an upward trend. Goods and Services Tax (GST) has turned out to be a chief service and business opening for CAs, as it requires more firms to pay taxes, and making certain they are compliant with taxation regulations, rules and laws. Before beginning to practice, it is imperative to do research and ask questions so that an individual can gain some sense of direction. Once an individual has analysed the pros and cons of beginning a CA practice the below mentioned points must be followed to establish a successful Chartered Accountancy firm

Steps to Establish Chartered Accountancy Firm Successful

step-by-step guide starting a new CA firm
  • Create a Comprehensive Business Plan

    As part of the initial steps of setting up a business, it is necessary to establish the mission, vision, and general values of the business. For instance, a Chartered Accounting firm’s mission could be – ‘To offer complete support to customers, reliability of performance and continuous innovation in dealing with problems associated to accounting’. Defining the core values of an organisation and what each value stands for, will aid in building the very unique selling proposition (USP) that sets apart a CA firm from the rest of the CA firms in the market. A pre-defined mission, vision, and values helps a business to stay focussed, work towards acquiring clients in the initial stage, and building customer relationships and creating a firm’s goodwill in the long run

    Also, a CA must decide which sector he/she is going to focus on. For instance, will a Chartered Accountancy firm deal with specific domains of accounting or will it cater to all accountancy services i.e. a general practice. In order to decide the focus area of a firm, it is imperative for a business owner to assess his/her capabilities/skills and categorise what he/she will be able to do best. Typically, these areas consist of audits (internal audit/external audit), taxation, mergers and acquisitions (M&A). Apart from this, a CA firm should also assess the addressable market, competitor analysis; it can also think about working through strategic partners or alliances

    Furthermore, once a CA firm is sure about the services it is going to offer, the subsequent step is to target the customers. The area of expertise, opted by a CA firm, will facilitate the firm to fragment the market and classify the potential clients. Once the clients have been identified, the subsequent step is to acquire them – here the business development skills of an individual comes into play. With digital platforms playing an imperative role in targeting customers, firms can opt to use e-services as a client acquisition strategy – develop a company website, use LinkedIn to build a network, use blogs, Instagram etc. to promote the business offerings. Due to increase in unified communication platforms such a Skype of business, it is estimated that virtual service providers will be able to generate 40% of their revenue from such platforms

    Once a CA firm has defined its marketing, and customer acquisition strategy it must invest time in researching the most competitive price for the services it is going to offer. A pricing strategy will define the rate of customer acquisition. It is imperative to choose how much the business will charge from a client. A chartered accountancy firm in India can select from a range of fee structures such as fixed fee structure, performance-based fee structure, or a time-based fee structure. Whatsoever option a CA firm selects, make certain that the correct fee is charged to the clients that will help to cover business costs and work in the direction of achieving the financial targets – under-quoting can result in financial distress/financial problems, whereas, over-quoting will drive customers away to the business competition. So, it is essential to set an optimum rate that will facilitate the business to earn profits, along with meeting the customer’s expectation

  • Formulate a Financial Plan

    The second most important step is to comprehend the correct financing possibilities available to a new CA firm. While beginning a practice, the firm owner must assess sourcing options for capital. If an individual is making an allowance for self-financing, by investing his/her income and gathered savings, it is sagacious to be far-sighted as he/she will also need to manage the household expenses, and retain insurance policies that he/she might have availed. On the other hand, external financing can be a more viable mode of financing – a CA firm owner can gain a greater amount of resources, make use of them as necessary and preserve their capital to counter other short-term needs. Though personal financing is appropriate, it can be dangerous to invest all funds in a business. External financing retains an individual’s personal finances distinct from the business funds and also offers access to additional money. Choosing a mix of both can also be a good option – this can reduce the interest exposure

  • Segregation of Costs

    Categorising the nature and amount of cost is important for determining the amount of capital required, and what should be the anticipated returns. Below mentioned are a few examples of business cost that should be evaluated:

    • Infrastructure, which comprises fixtures and furniture, internet connection, office equipment (scanners, photocopiers, desktops), and workstations that can either be purchased or bought on rent
    • Marketing costs such as print advertising, website development, branding, and social media campaigns etc.
    • Office space (purchasing an own office space will require a substantial cash outflow and will build a firm’s fixed asset; buying an office space on rent would involve a consistent monthly/quarterly/semi-annually expense for the firm and prove to be a secured option till a firm has permanent clients and continued income)
    • Recruiting and training employees – a firm can hire trained professionals, qualified CAs, or articled assistants, based on the offering of a firm
    • The correct software solution that enables a firm in assisting customers

  • Preparing a Cash Flow Structure

    Prepare a cash flow structure that forecasts the long-term cost-effectiveness of a CA firm and permits the firm to better plan for the subsequent years. A 5-year forecast of the cash flows, as demonstrated below, highlights the financial feasibility of a firm, helps plan regular expenses better and thereby, guaranteeing that the actual returns are in line with the estimated returns

    Particulars Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
    Operating cash 19,000.00 1,000.00 3,000.00 1,000.00 800.00 800.00
    Sources of cash 65,000.00 70,000.00 65,000.00 60,000.00 70,000.00 65,000.00
    Receivable collections 10,000.00 11,000.00 10,000.00 12,000.00 10,000.00 10,000.00
    Customer deposits              -         20,000.00 18,000.00 20,000.00 15,000.00 16,000.00
    Loans from bank              -                   -        3,000.00              -           5,000.00                 -  
    Total source of cash 94,000.00 1,02,000.00 99,000.00 93,000.00 1,00,800.00 91,800.00
    Use of cash 20,000.00 20,000.00 20,000.00 22,200.00 20,000.00 20,000.00
    Payroll, including payroll tax 18,000.00 16,000.00 18,000.00 15,000.00 17,000.00 18,000.00
    Account payable 16,000.00 16,000.00 16,000.00 16,000.00 16,000.00 16,000.00
    Other overhead, including rent 16,000.00 16,000.00 16,000.00 16,000.00 16,000.00 16,000.00
    Owners compensation 15,000.00 18,000.00 15,000.00 15,000.00 23,000.00 15,000.00
    Line of credit payments 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00
    Long-term principal payments              -                   -   5,000.00              -                   -   10,000.00
    Purchase of fixed assets              -   5,000.00              -                -                   -   10,000.00
    Estimated income tax 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
    Total use of cash 93,000.00 99,000.00 98,000.00 92,200.00 1,00,000.00 1,13,000.00
    Excess (deficit) of cash     1,000.00 3,000.00 1,000.00 800.00 800.00 -21,200.00

Focus and prioritise various tasks to avoid them turning into real problems. For instance, certain practitioners can offer excellent service but do not prefer the challenge of pursuing unpaid debts. Not surprisingly, customers may take a remarkably long time to pay the dues. Effective management of such issues is imperative for the successful working of a Chartered Accountancy firm.

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