CPAs: The Startup Community Needs You
There is a joke in Hollywood that no matter what one’s day job is, everyone has a headshot in their back pocket. In business, the back pocket accessory isn’t the headshot—it’s the business plan. The startup community is exploding across the U.S. Whether it’s Silicon Valley, New York City or Detroit, state and local governments are embracing startups and encouraging talent to call their fair city home. According to the Global Entrepreneurship Monitor, there was a 60% increase in startups from 2010 to 2011. But there is one important thing most startups are missing: financial guidance.
You and I know the value a CPA brings to any organization. But many startups don’t. The qualities a CPA possesses—integrity, competence and objectivity—are needed and missing from some startups. Not to mention the financial and business knowledge that makes CPAs trusted business advisers. Recently, a report was released that examined the appointments of accounting and financial experts to audit committees, exploring whether concerns about the status of these experts discouraged companies from appointing them.
Case in point: Groupon.
But there was still something missing from Groupon: a CPA. While Groupon’s audit committee had much more financial expertise after its IPO than previously, it was still lacking solid accounting financial experience. Even though the company had business professionals like Howard Schultz, chief executive of Starbucks, there wasn’t one CPA on the audit committee. And while the Sarbanes-Oxley Act requires at least one financial expert on the audit committee, it can be fulfilled by someone who has only supervised finance and accounting staff. It wasn’t until May that Groupon finally realized it was missing a critical component and replaced Schultz and another member of the audit committee with accounting financial experts: Daniel Henry, CFO of American Express, and Robert Bass, former vice chairman at Deloitte (now retired). Bass is a CPA and an AICPA member.
Andrew Mason, CEO of Groupon, could have saved a lot of time and money though if he brought a CPA into his circle of advisers a lot earlier. The truth is that startups are focused on developing and launching their service or product, and rightly so. It’s not until someone, whether an investor or bank or stock exchange, requires a CPA to be involved that most startups pay attention to their financials. But that doesn’t have to be the case.
The value a CPA brings to an audit committee is invaluable. That’s why CPAs need to integrate with the startup community and share their knowledge. CPAs have the opportunity to shape the future of this country and guide the next Mark Zuckerbergs and Andrew Masons. This is the role that the CPA reputation has earned and startups are yearning for that information and financial expertise. What has been your professional experience with startups?
Arleen Thomas, CPA, CGMA, Senior Vice President - Management Accounting, American Institute of CPAs.