Accountants and financial advisers exist to provide expert advice regarding business finances. Knowing who to approach for specific concerns is essential to running a startup. The best way to do that is by understanding the unique functions they handle at different stages of an organization’s growth. Explore the differences between these professionals to help you decide how your business could benefit from their services.
Distinct Roles and Responsibilities
Although there are overlaps in what they do, financial advisers and accountants serve different purposes.
The term “financial adviser” describes the multitude of licensed professionals qualified to advise on a range of matters, including investments, insurance and estate planning. These experts offer personalized guidance to help individuals and businesses set goals, develop strategies and monitor progress over time.
From a startup perspective, their job is to help you manage your money, create wealth and preserve capital over the long term. Some advisers also help with debt reduction, revisiting and adjusting strategies as circumstances change.
Accountants primarily work within the confines of bookkeeping and compliance requirements. This includes maintaining accurate financial records, calculating monthly tax returns, conducting internal audits and other similar tasks. They also provide valuable business advisory services, including insights into business formation, payroll management and financial forecasting.
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Required Educational Qualifications
Considering the vast scope of financial services, advisers can have different certifications and licenses. That said, most of these professionals hold a minimum certified financial planner (CFP) qualification. This designation means they’ve undergone 4,000-6,000 hours of apprenticeship or professional experience and have passed the CFP exam.
While most CFPs call themselves financial advisers, the reverse is not the case. The general recommendation is to prioritize working with CFPs over those without the title because of the attached fiduciary responsibilities. This means the adviser must always act in your best interest and maintain integrity in every aspect of the service rendered.
Mirroring the CFP in the accounting world is the CPA—a certified public accountant. A CPA is a licensed professional who adheres to more stringent standards in performing their duties. Obtaining this qualification requires accountants to acquire at least 150 credit hours of study plus any other requirements mandated by the state’s accountancy board.
Fiduciary standards also govern CPAs, whereas an uncertified accountant is not under such obligations as they don’t have a license to lose.
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Remuneration Structure
How you retain a financial adviser’s services differs from how you would retain an accountant’s. Many advisers favor a commission-based model, which involves basing their rate as a percentage of asset value under their management (AUM). For example, if the person charges a 0.4% commission, they’d earn $400 for every $100,000 in AUM.
You can also pay subscription fees for robo-advisers — AI-driven algorithms that can handle various financial management functions, including portfolio management, automated trading and tailored investment recommendations. This option has gained popularity in recent years, with 37% of Americans expressing interest in letting AI manage their finances.
Accountants typically work on a fee-based or salary structure. They might charge an hourly rate or a fixed amount upfront, whether monthly or per project. Ultimately, there’s no hard and fast rule on compensating financial advisers or accountants. It comes down to the terms of your service agreement.
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Who to Consult at Different Business Stages
Knowing when to consult a financial adviser or accountant is essential to entrepreneurship. Both will help set you up for success, minimize risk exposure and help optimize your fiscal health.
Prelaunch
Before launching your startup, it’s a good idea to run it past a financial adviser. They can help you explore financing options, such as loans, venture capital funding or angel investments, to get you started. They can also help you establish a clear distinction between your personal and business finances, which is essential for long-term success.
Either an accountant or a financial adviser can help you decide on the structure of your business, whether that’s a sole proprietorship, partnership, limited liability company or corporation.
Business Launch
Upon launching your startup, you’ll need the services of an accountant to set up the books—general ledgers, sales journals, cash receipt records and budget statements. They’ll also help you select an accounting method and set up your chart of accounts, which categorizes all the money flowing in and out of your business based on whether it’s assets, liabilities, revenues, expenses or equity. These categories will likely expand further as the enterprise grows.
Accountants, especially CPAs, can help set up your startup’s tax affairs, ensuring all the paperwork is properly filled out and filed with the IRS and other appropriate authorities. These professionals are essential to ensuring you stay compliant with regulations from the start.
Day to Day Management
Depending on the nature of your business, you may need an in-house accountant to handle everyday financial recordkeeping and reconciliations.
Based on this information, they can advise you on areas where you can make changes to improve your company’s financial posture. For example, an accountant might recommend changing your invoicing process to improve cash flow. They can also help with payroll calculations and disbursements, especially regarding tax withholding for your employees.
Even if you do your own bookkeeping, you’ll most likely need to consult an accountant come tax season. They’ll help provide insights into your personal and corporate tax obligations, including ways to lower your payments so your business has more money to spend afterward.
Strategic Planning
A financial adviser provides a big-picture perspective on strategic decisions like planning for your retirement and diversifying business investments. Their expertise will also be valuable during significant developments like acquiring new assets, managing debts or expanding into a new market.
An accountant is likely to play a role here, though primarily related to whether your business has the financial resources to implement these changes. They can also help with addressing the tax implications of certain decisions. For example, they’ll be responsible for updating your books of accounts after successful mergers and changes to your business structure.
Business Closure
Unfortunately, 90% of new startups fail across all industries for any number of reasons. Consulting a financial adviser and accountant can be beneficial if you find yourself at this stage.
Both professionals can help you plan the next steps. For instance, advisers can tap into their estate planning resources to provide counseling and grief remediation during such a trying period. They can also ensure your business closure has minimal effect on your personal financial situation, allowing you to mitigate potential losses.
On the other hand, an accountant can help prepare the necessary paperwork to legally close the enterprise. This includes filing dissolution documents, canceling registrations, closing bank accounts and maintaining all tax documentation.
Startups Need Financial Advisers and Accountants
Running a successful startup means knowing when to consult professionals to optimize financial health and drive growth. Having a financial adviser and an accountant on your team can help you make informed decisions at every stage of your business.
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