With a sluggish economy and unemployment trending upwards, more and more startups are set to enter and infiltrate the Australian business world. This presents many opportunities – as well as challenges – for accountants to meet the needs of these burgeoning enterprises.
Business numbers on the rise
Despite the publicity that surrounds business closures during strained economic periods, the number of businesses actually tends to increase during these times.
According to a recent media release by the Australian Bureau of Statistics (ABS), the number of businesses trading in Australia increased by 1 per cent in the 12 months to June 2014. That is an additional 20,496 new companies, taking the total to just over 2.1 million.
One of the main contributors for this increase could be redundancies or concerns about job security, with many aspiring entrepreneurs seizing the opportunity to work for themselves.
Financing new enterprises
A primary concern for the majority of startups is access to finance, with the challenges of maintaining healthy cash flows leading many firms down the path to failure.
However, well-informed accountants can help support startup clients by discussing these vital points:
- Startupcapital:Their options for initial funds, including loans, lines of credit, venture capital,crowdfundingor direct investment.
- Government grants: The federal government offers a range of grants and assistance, including assistance for research and development or exporting and venture capital funding.
- Managing finances: How businesses plan to manage their ongoing finances, control costs and distribute profits.
- Taxation:The assistance and oversight of corporate taxation affairs, allocation of funds for tax and supportive documentation.
- Staffing costs: Many new company directors are unfamiliar with the extent of staffing costs, including their own status as a company employee.
- Trade credit insurance: Protecting a fledgling business from late or non-payment of invoices.
Supporting a struggling startup
To advise these clients on their unique challenges, accountants need to tailor their services to the needs of struggling startups. Firms will need to consider the type of advice, assistance and support needed by new businesses and make some fundamental changes:
- Avoid accounting jargon: Communicate with startupclients in simple language, using terms they will understand.
- Be available for consultation: Investing time to ‘hand-hold’ new businesses can lead to greater returns down the track as the business grows.
- Act as an educator: For many small businesses, their accountant is their main or even sole source of finance, tax and operational advice. This places accountants in a unique position to act as an accounting advisorto educate new businesses and mentor them in the establishment of good practicesfrom the start.
- Make referrals: Be proactive in referringstartupclients to government bodies, external service providers and information sources that will benefit their operations.
- Have patience: New businesses are on a steep learning curve and are bound to make mistakes. Patience is key by providing information as and when required, and repeating advice if necessary.
- Know their business: An accountant who thoroughly understands their client’s operations and pain points is much better placed to provide support and assistance.
Assisting a startup business can be intense and demanding initially, but the return on such an investment can be considerable. With a front-row seat to the take-off of a new business, proactive accountants have a key role to play in determining whether the startup reaches for the stars or crashes and burns.