How to start your own Chartered Accountant (CA) Practice – Opportunities and Challenges.

The real journey of Chartered Accountant begins after clearing CA final exam. Though passing exam and becoming CA is not an end, it is the beginning of a new journey.  Many final cleared student will have feeling that they have successfully become CA and life will be easy thereon. Trust me it is a myth! Though life may be easy in terms of many opportunities, however there is competition and you need to compete with peers and technology which can easily replace you in coming decade.

Job Vs Practice and difficulties in making choice

Even before you start your articleship one has to decide the career in terms of joining job or starting your own practice.  The early you decide it is better. If one is keen to join practice then joining big four firms will not provide exposure in areas of small and medium practicing firm. Ideally a person should join small and medium size firm where he learns everything from audit to taxation from executing to handling client.

In case your family members are already in professional practice it becomes easier to carry on legacy, as you get years of experience and ready clients to serve. Starting your own practice without any family background is challenging and that too if your area of expertise in articleship is different from area you chose in practice.

Switching from Job to Practice

This is mostly a dream task however many are not able to decide! The reason is risk of cash flow and lack of confidence. CA’s who are in corporate job for 3 years or more, are willing to join practice, however they fail to take this step as they have financial commitments and low risk taking capacity for starting practice. I personally have come across many Chartered Accountant who are in corporate job and want to start their own practice, however they fail because they have financial commitment like home loan and are not able to take financial hit during the initially years. My professional journey too has challenges. During my training period I had experience in Internal Audit, later joined Big 4 firm and my last job was with MNC bank. I had corporate experience of more than 5 years in fields other than tax. However I started with tax practice and consultation.

If you are starting practice keep a minimum horizon of 3 years. You should give your commitment for 3 years atleast and should have funds back up for 3 years. As it is always difficult in first 2 years to sustain with low cash flow. So before jumping you should be able to sustain in initially years and make decision to quit or switch only after putting efforts for 3 years.

Creating Online Presence and Business Development

One of the biggest challenge is to connect with prospective clients. In past old days the only way to get new clients was through friends and relatives and that too via word of mouth publicity. E commerce revolution was last decade story. Coming is E service revolution. Gone are the days, in which word of mouth reference was the only way for Professional Development. At present prospective clients search experts online based on skill sets and location. How many of your skills which you possesses are searchable online?

Research says that in coming years the concept of Virtual Service Provider will generate 40% of overall Income for professionals and those who fail to change will miss the growth. The entire end to end services will be delivered online virtually without any face to face interaction. Services like new business setup (Company Formation, LLP, Partnership), Compliance (Statutory Audit, Company Audit, MCA Compliance, Income Tax, GST, etc), Internal Audit, Legal Consultation and Financial Consultation will be done virtually.

Most of the CA’s do have their online presence via website. However, there is hardly any traffic on their website. CA needs to create their online presence in a place where there is information market. How people prefer Flipkart or Snap Deal for online goods purchase or even Zomato to check good restaurant, or Practo to search right doctor and book appointment, similarly for professionals like CA / CS / Lawyers can create online presence at the portal www.expertmile.com. The benefit is you can contribute articles to the portal as per your skill sets, it is shared with thousands of visitors which gives them chances to connect to you and it becomes searchable in google. Many times prospective client searches online his requirement as per location or skillset, presence in such platform can help professional to connect to those clients.

Cash Flows and Survival

It is said that any new business or professional will take 1000 days for it to make reasonable profit and one decade to become master of it. It is true in professional practice also. The expected cash outflow and inflow from practice can be broadly summarized in the below table. As you see in initially years the cash flow are low, however in later years there is significant improvement as growth kicks in.

Year

Cash Outflow Expenses

Cash Inflow Revenue

Net For year

Nature of Exp / income

First Year

Furniture      ₹ 1.5 Lakhs

Rent Cost     ₹ 1.5 Lakhs

Staff              ₹ 50K

Misc Cost     ₹ 30K

₹ 2 Lakhs

 

Negative ₹ 1.8 Lakhs

Capital Investment and income tax  filing and accounting

Second Year

Rent Cost     ₹ 1.5 Lakhs

Staff              ₹ 50K

Misc Cost     ₹ 50K

₹ 6 Lakhs

Positive ₹ 3.5 Lakhs

income tax filing and accounting and consultation

Third Year

Rent Cost     ₹ 2.5 Lakhs

Staff              ₹ 70K

Misc Cost     ₹ 50K

₹ 9 Lakhs

Positive  ₹ 5.3 Lakhs

Auditing and additional Income

Fourth Year

Rent Cost     ₹ 2.5 Lakhs

Staff              ₹ 2 Lakhs

Misc Cost     ₹ 1 Lakhs

₹ 16 Lakhs

Positive ₹ 10.5 Lakhs

Income from Special Skills Learned

Fifth Year

Rent Cost     ₹ 3 Lakhs

Staff Cost     ₹ 3 Lakhs

Misc Cost     ₹ 1 Lakhs

₹ 22 Lakhs

Positive ₹ 15 Lakhs

Income from Special Skills Learned

 

Better opportunity compared with other professions like Lawyer and Company Secretary

Our profession provide better opportunities in practice than that of Lawyers and Company Secretaries. In case of Legal professional though areas of practice is huge, however if we see number of Lawyers in India are more than 17 Lakhs. In CS the area of practice is limited towards compliance in relation to MCA, however most of it can be even done by CA barring few certification which is mandatory by CS.

Creating Expertise Vs General Practice

Initially it is advisable to go for general practice, so that you learn and explore each area. No point when you are jack of all but master of none. So in long run it is always better to specialize in some area. However it comes with its own risk. Imagine government to abolish Income Tax Act! Then all those who has specialize in Income Tax Field will find it difficult to start something new.

Pursuing your dreams

Do not forget in practice you are your own boss. You can always have a work life balance. You can always fulfill your dreams. Yes in beginning you have cash flow issues and may have to take monetary hit, however the self-satisfaction you get is immeasurable. I personally had that opportunities to explore many new desires which would have been difficult if I would have been employed, as you have to give at least 10 to 12 hours to job. In summary there are challenges to start your own practice but the real fruits you get only with patience and trusting oneself.

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article author Ankit Bhansali
Posted On:  2 years ago

If you are doing the job as your own than it is also fruitful..


article author aliflaila
Posted On:  2 years ago

good


article author payal
Posted On:  2 years ago

Good one.


article author Rishi Tiwari
Posted On:  2 years ago

Great Article! Highly Appreciated.


article author CA JITENDRA K MISHRA
Posted On:  2 years ago

Cash flow is total hypothetical . Furniture & Fixtures ,Rent,Staff expenses much more but inflow in second year and ..onward is not seen.


article author Rajiv
Posted On:  1 year ago

Really appreciate the facts and figures and challenges and rewards explained in the article. The Professionals can also register with CA professional service marketplaces like Munim.in for starting their practice or getting more share of the pie. This reduces the cash flow expense and reward is completely based on the work right from the first Service. Hence net positive cash flow.


article author Kapil Kumar
Posted On:  1 year ago

You are a great blog poster, you have post your blog about CA. It is full of knowledge with great communication skill. I have got so many things that describe best CA service.


article author

CA Chirag Chauhan

Tax Expert
Chartered Accountant, CA Chauhan



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    I hope by reading this article you got enlighten on ,How to start your own Chartered Accountant (CA) Practice – Opportunities and Challenges. How to start your own practise in profession, Challanges and opportunites for CA start up, Starting up as A CA - be aware of Cash Flow , Why CA should Create online presence , further to mention before taken any financial decision based on this content it is prefered to take an expert opinion as matter can be subjective.