Why Is It Important to Have CA While Setting Up a Company/Startup?

4 Apr,2022

Having a well-educated and informed Chartered Accountant by your side when setting up a company or a startup can help at varying stages. Since CAs are experts in taxes, finance, agreements and laws, they can serve as integral parts in applying business plans, formulating strategies, deciding on software to be used, receiving subsidies and maintaining accounts.

Consulting a chartered accountant when planning to start a company can give you clarity on important aspects early on so you do not get trapped later on. CA experts prepare the proper accounting structure for your startup.  

Why Do Startups/Businesses/Companies Need Accounting?

Accounting is among the most significant business functions entrepreneurs need to understand when starting a new business. The entrepreneurs with plans of setting up startups often wonder why do we need accounting. Or if you think about why accounting is important for a new business, you must know that startups require solid accounting methodologies allowing their business leaders, financial managers and founders real-time visibility to the right picture of their financial health.

Since startups have an unpredictable nature, solid accounting for startups is a necessity. Access to proper accounting information is crucial for nimble analyses that help identify the scopes of growth and improvement. Accurate accounting for the startups also offers strategic decision-making insights.

So, what is accounting?  For the uninitiated, accounting is a business process to record, organise, and understand financial information. The different accounting processes summarise, report, project, and analyse business transactions using financial statements.

There are 4 types of accounting, and we will get into their details below:

Financial Accounting: This type of accounting summarises financial transactions from the accounting period of a business into financial statements, like cash flow statements, balance sheets, and P&L statements. At startups, the important external stakeholders like the board of directors and investors have these statements.

Cost Accounting: This form of accounting records financial details related to the cost of producing products and services. These details are used by startups for budgeting, making predictions, and analysing business performance.

Tax Accounting: This kind of accounting tracks incoming and outgoing finances related to the operations of a startup and concerning their effect on the startups' tax burden.

Managerial Accounting: This kind of accounting is also called management accounting, and it uses the same procedures as financial accounting. In this form of accounting, financial details are recorded solely for the internal stakeholders who use the details for making informed decisions to meet business objectives.

There are two accounting methods:

Accrual Basis Accounting: This is a method where expenses and revenues are recorded when their associated transactions occur regardless of when the original funds change hands. This is the most commonly used accounting method that offers the right picture of the financial health of a startup. It also makes way for planned decision-making.

Cash Basis Accounting: This accounting method creates a more instant recognition of expenses and revenues by recording them only when the funds for a particular transaction are exchanged. 

How Can CA Add to Your Startup's Growth in the Long Run?

For entrepreneurs with plans of setting up a business, wondering why CA is necessary right at the beginning is quite apparent. If you think you need to hire CA for tax filing only or go clear with the audit compulsory for companies, you are wrong.

There is a significant role of a chartered accountant in business, whether big or small. Be it any business that you are looking to set up, it will not be able to thrive well without chartered accountants and business advisors. It is not just necessary to get a chartered accountant for small businesses but even for the larger businesses that need to deal with a lot of finances and transactions.

When you start a company, as an employer, you can start with just one or two employees. But within these one or two employees, you must hire a CA to ensure you follow all the taxation policies such as Labour Laws, TDS and salary provisions.

There are a plethora of services provided by CA. Below, we will be having a look at some of the essential duties of a chartered accountant:

Helping in the management of expenses: Chartered accountants can help you save a lot of money as a business holder. They will ensure that your startup does not lose track of its direction because of extreme financial issues.

Assisting in proper investment: A qualified CA not only frames affordable business solutions but even offers advice on the most profitable investments. They help businesses grow and use the best methods for making startups profitable units.

Help in cutting down a company's costs: This is one of the most significant CA duties and responsibilities. Starting from tax returns to year-ending accounts, CAs are good at maintaining and rectifying the most minor details related to the financial flow within a company.

You must hire an accountant because only a well-educated and experienced accountant can serve as your best guide in understanding different salary payable procedures, the do's and don'ts of making payments, business revenue forecasts, and applying for different funds.

Introduction of CA Firm and How It Easily Deals With the Financial Stuff of a Company

So, what is a CA firm? It is a chartered accountant firm that offers financial advice for startups. CA firms in Bangalore help with company registration or startup registration. These firms audit accounts and offers trustworthy, precise and unquestionably crucial financial reports for the proper operation of a new company. Getting a CA on hire from these firms can help startups manage auditing, taxation, corporate economics, insolvency, legal accounting and company recovery.

Based on the requirements of a company, chartered accountant firms prepare the most suitable models for startup India registration. They also ensure that the financial structure and procedures of a business are efficient and duly support a company's operational efficiencies.

With time, your startup will grow and thus, it will encounter more complexities like business procedures and tax dealings. Therefore, it makes sense to hire CA online to take care of all such situations by offering effective solutions.


In the end, your main objective is to hire a chartered accountant with the quality of helping your company reach its goals within the shortest period. Whether you have already started business operations or you are still scribbling on the planning stage, having a CA can help you save money and time down the road.

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