2 min read
2 April 2023

Having your freedom at work, choosing your clients, and providing services in your area of specialisation are a few reasons to start your chartered accountancy practice. In a scenario where more and more CAs are entering into practice, it is opportune for you to fulfil your aspirations of establishing your firm.

GST has become a significant service and business opportunity for CAs. Qualified accounting professionals are setting up one’s practice or consultancy in India as more and more enterprises need help with tax management. The accountancy firms can help these enterprises to pay relevant taxes and ensure compliance with taxation laws, rules, and regulations.

The steady globalisation of the Indian economy offers continuous opportunities in practice for CAs in various areas. These areas include knowledge process outsourcing, IFRS compliance, and forensic accounting. The traditional areas of practice include financial reporting, taxation, audit expertise, and insurance advisory.

As immense as the opportunities for CAs to grow and excel in practice are, the idea of establishing one is daunting. Starting a business requires patience, planning, and process. So, where do you start?

Before starting your practice, it is essential to do your research and ask yourself questions to gain a sense of direction and purpose.

Additional Read: How chartered accountants can protect their practice against cyber security threats

Some things that you should ponder over include:

  • Do I have the experience to handle a business and employees?
  • Do I have the capital needed to start a firm?
  • Do I have a clear vision for my accounting business?
  • Do I have the motivation required to succeed?
  • Do I have support from family members?
  • How will I set my practice apart from those of other entrepreneurs like me?

Once you answer these questions, you will be able to know that you are starting an accounting firm for all the right reasons. Then, you can follow this simple step-by-step guide.

Step 1: Create a detailed business plan

Define your practice values

Before starting a CA firm, it is important to establish the mission of your firm and its overall values. For example, a CA firm’s mission could be to provide end-to-end support to clients. In addition, there would be integrity of performance and constant innovation in tackling matters related to accounting. Laying down the core values of your firm and what it stands for will help build the very USP that differentiates you in the market. This helps your firm in client acquisition in the starting phase, and in the long run, builds client relationships and establishes your firm’s goodwill.

Have an entry strategy

When entering the industry, you will have to decide on which sector your firm will specialise in. For example, will your CA firm deal with specialised areas of accounting, or will it be a general practice? You need to examine your skills and identify what you will be able to do best. Usually, these areas include taxation, audits or mergers and acquisitions. Apart from this, your entry strategy should also involve deciding whether to start your own practice or to take over another practice. You can also merge with a practice or enter a partnership.

Additional Read: Tips to expand your CA firm

Create a client strategy

Once you are sure of the services that your firm would provide, the next step is to target your audience. Your area of expertise enables you to segment the market and identify your prospective clients. Then comes the dynamic process of acquiring them, where you need to put in your business development skills.

Yes, word of mouth and references would help grow your business. However, in the digital age, e-Service is the next big thing. This requires you to develop your firm’s website, market your services, and have potential clients post queries to get in touch with you.

Embracing the concept of a virtual service provider can also contribute to the overall income of accounting professionals. In the coming years, services like LLP formation, statutory audit, company audit, MCA compliance, GST, and legal consultation will be provided virtually, end to end.

It will help if you build an online presence of your firm on social media and other online CA portals. You can connect with new and emerging enterprises by building this presence. Once you get your networking right, you are on track in building your initial clientele.

Draw up a pricing strategy

A pricing strategy will determine the rate of client acquisition. It is important to decide how you will charge your client. You can choose from a variety of fee systems like a time-based fee, performance-based fee, or a fixed fee. Whatever option you choose, ensure that you charge the client the correct price that helps you cover your costs and work towards your financial targets. Bear in mind that while under-quoting will cause financial problems, over-quoting will drive clients away to your competition. So, it is important to set an optimal rate. A rate that will enable you to earn profits while matching the client’s expectations. Following ICAI norms on the pricing of assignments could help you achieve this.

Step 2: Prepare a financial plan

Understanding the right financing option

While starting your practice, you need to evaluate sourcing options for your capital. Say, you are considering self-financing by investing your income and accumulated savings. In that case, it is wise to be prudent as you need to take care of your household expenses and retain insurance cover that you may have availed.

External financing, on the other hand, can be a better mode of financing your practice. You can get a greater amount of funds. Utilise these funds as required and preserve your capital to respond to other short-term needs. Consider going for a customised loan for CAs that takes your professional qualifications into account. These loans give you access to faster loans with a better deal.

While personal financing is convenient, it can be risky to invest all your funds in a business. External financing keeps your personal finances separate from your business funds and gives you more money access. If you are on the fence, you can opt for a mix of the two.

Step 3: Make a breakup of the costs

Identifying the nature and measure of costs is critical to finding out how much capital you require and how much should be the desired returns.

  • Office space (buying that would require a considerable cash outflow and give your firm a valuable asset; renting, which would entail a regular expense for your firm and prove a safer option till it establishes retained clients and sustained income)
  • Infrastructure, which includes furniture and fixtures, internet connection, workstations, and office equipment (desktops, photocopiers, scanners) that you can buy or rent
  • The right software solution that enables you in assisting your clients
  • Hiring and training personnel; you can choose to hire qualified CAs, trained professionals, or articled assistants, based on your services
  • Marketing costs like branding, website development, social media campaigns, print advertising

A business loan for CAs can help you meet all the costs and ensure that your practice runs smoothly.

Step 4: Making your cash flow grid

As a CA, you understand the importance of documenting finances and projecting cash flows. Prepare a cash flow grid that predicts your firm’s long-term profitability and allows you to better plan for the following years. Hereunder is a specimen of the same.

Year Cash Outflows(A) Cash Inflows(B) Net Cash Flow(B-A)
1 Furniture Rs. 2,00,000

Rent Rs. 1,00,000

Staff Rs. 30,000

Miscellaneous Rs. 20,000
Rs. 2,00,000 Rs. (-1,50,000)
2 Rent Rs. 1,00,000

Staff Rs. 40,000

Miscellaneous Rs. 30,000
Rs. 3,50,000 Rs. 1,80,000
3 Rent Rs. 1,50,000

Staff Rs. 50,000

Miscellaneous Rs. 50,000
Rs. 6,00,000 Rs. 3,50,000
4 Rent Rs. 2,50,000

Staff Rs. 1,00,000

Miscellaneous Rs. 1,00,000
Rs. 10,00,000 Rs. 5,50,000
5 Rent Rs. 3,00,000

Staff Rs. 2,00,000

Miscellaneous Rs. 1,00,000
Rs. 15,00,000 Rs. 9,00,000

A five-year projection of the cash flows, as illustrated above, reflects the financial viability of your firm. It helps plan capital and regular expenses better. It also assures you that the actual returns stay in line with the projected returns.

You can also opt for the Flexi variant of a CA loan that helps you borrow when a need arises and prepay as you have extra funds. A unique offering, it comes with several benefits.

Working for self always seems to be more appealing than working for someone else. In addition to creating a work-life balance, you live and fulfil your own dreams. With the indirect tax system in India completely revamped, enterprise clients are looking for consultancy on GST. Therefore, there is no better time than today to consider setting up your own CA firm.

Additional Read: How to finance your CA firm?

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