When Should You Hire An Accountant For Your Startup?

Out of nowhere, here is a small starter for you before the main course. Don’t worry, it’s on the house. Savour!

Did you know ‘Kushim’ might be the first recorded name in the entire human history and the question is who was Kushim? He was an accountant in Sumer, one of the earliest known civilization in the historical region of southern Mesopotamia, modern-day southern Iraq. Startling, right? It was the name of an accountant who recorded taxes and inventory. The next big question is why it had to be the name of an accountant when there were other much more reputable people and professions? 

Here is an excerpt from Dr Yuval Noah Harari’s book Sapiens: A Brief History of Humankind that shall quench your curiosity. The author of the book refers to the period when complex societies began to appear in the wake of the Agricultural Revolution of about 11 000 years ago. 

The author writes, “up until then, foragers were never obliged to handle large amounts of mathematical data and thus human brains did not adapt to storing and processing numbers.”

“Yet in order to maintain a large kingdom, mathematical data was vital. It was never enough to legislate laws and tell stories about guardian gods. One also had to collect taxes. In order to tax hundreds of thousands of people, it was imperative to collect data about people’s incomes and possessions; data about payments made; data about arrears, debts and fines; data about discounts and exemptions. This added up to millions of data bits, which had to be stored and processed. Without this capacity, the state would never know what resources it had and what further resources it could tap.”

What did you understand from the above excerpt? Accountants were not needed up until the number of entities was small and it was not a complex system to manage. Similarly, the requirement of an accountant in any startup depends on where the startup is in its life cycle and the type of business you’re starting. 

Let’s dig deeper to understand what is a startup life cycle and how ‘type of business’ shall determine when you should hire an accountant. 

You may not need an accountant if your startup is a sole proprietorship and the numbers to crunch are very small. Later when you switch to a private limited company to raise funds you will need an accountant. Do you ask why? Ask yourself, if you were an investor wouldn’t you want to see a clear picture of how your investment will reap? Later when your team grows, you will need a CFO. Until then you can use accounting systems like Tally ERP 9, ProfitBooks and Marg that can help you with accounting management, tax compliance, HR & Payroll and purchase & sales management. 

And if you don’t feel comfortable using accounting software by yourself, you can go for a part-time accountant who can take care of your accounting twice a month and advice you on subjects like tax strategies and cash-flow issues. 

Now, when you understand why accounting is important for your startup to be successful, taking the Sumerian civilization corollary into account, you also have a fairly good idea when you need one. Dig deeper, read more about it and meet like-minded people who can enrich you on the subject.