Starting an accounting firm can be lucrative and exciting, but you may not know what type of firm you want to open. You want to make the right choice because starting the wrong business could be a waste if you realize it’s not fulfilling. So keep reading to learn about the six common types of accounting practice firms and how to choose a path for your business.
1. Tax firms
Tax firms help people and businesses plan, prepare, and file taxes. They’re busiest during tax season and often work long grueling hours. Typically, it would be best if you were a CPA (or hire CPAs) to run a tax firm. Additionally, you’ll need to keep up with the ever-changing tax laws to ensure compliance.
2. Audit firms
Audit firms specialize in auditing an individual’s or company’s finances to ensure compliance. In addition, they have to make sure the books balance out, check for fraudulent activity, and report their findings when necessary.
3. Forensic accounting firms
Similar to audit firms, forensic accountants investigate a company’s finances when there is suspected fraud, money laundering, or other illegal activity. They generally work directly with law enforcement and government officials. However, there are times when forensic accounting firms are called upon to investigate the government (at any level) to ensure compliance.
4. Outsourced accounting firms
Many small and medium-sized businesses don’t need an entire accounting department, so they outsource to a firm to cut costs. This is becoming a common practice nowadays because of the increased need for efficiency and various accounting services. Many outsourced accounting firms are either specialized or full-service, depending on the size.
5. Bookkeeping firms
Bookkeepers have no educational requirements, so the services are much cheaper, making them ideal for small businesses. Typically, bookkeeping firms are small businesses themselves, so they can better relate to other companies their size.
Bookkeepers often provide reconciliation services to track income and expenses. They may help with payroll, financial statements, tax preparation, and loan applications. You can start as a bookkeeper while continuing your education to offer more expensive services.
6. Full-service Accounting Firm
A full-service accounting firm typically offers all or most accounting services, so they’re usually large businesses with hundreds or thousands of employees. Some of these services include tax preparation, auditing, and making recommendations to business owners for cost savings.
While some may specialize in a particular niche, more prominent firms often accommodate every type of business. So there is more flexibility when running a full-service accounting firm. However, managing the client base can be overwhelming. So it’s best to use a reliable CPA practice management software to help you track work and ensure everything gets turned in on time.
Additional information
Some foundational things often get overlooked – we dive into this below.
What is a CPA?
A CPA is a Certified Public Accountant, and it’s a license required to offer accounting services to the public. However, not all accountants are CPAs, so you need to check the licensing of your employees if you’re opening a public firm. Once you meet the requirements, you’ll obtain your license from the Board of Accountancy in your state. Additionally, you’ll need to ensure you’re continuing your education throughout your career to keep up with tax laws and the Generally Accepted Accounting Principles as they change.
The educational requirements to obtain a CPA license may include (check with your state):
- Bachelors’ degree in accounting, business, or finance;
- Passing the Uniform CPA Exam;
- At least two years of accounting experience.
The importance of accounting
The demand for accountants will probably never subside, as they’re necessary for ensuring that people and businesses are managing their money wisely and legally. In addition, there are extensive educational requirements, including keeping yourself updated with the industry. It is a challenging, time-consuming job, and accountants can take a significant burden off of those who don’t have the necessary resources to do it themselves.
Deciding which path to choose
Choosing the type of accounting practice firm you want to open can be challenging. There are several types of firms, and most of them require specialized training to ensure quality and compliance. So it’s best to choose the most exciting path for you. Without that passion, you won’t be driven to bring your business to its fullest potential. Additionally, it would help if you tried working for another firm before starting yours to learn the ropes and get some experience.
Conclusion
Accounting is a lucrative industry, and there are various paths you can take within it. Choosing the one for you is challenging, so conducting proper research is necessary before rushing into a decision. Plus, starting a new business can get expensive, so you shouldn’t make a choice you’ll regret later.
