What are some good questions to ask when hiring an accountant for an early stage startup?
The goal is to prepare the company for VC/Angel funding. As a first time entrepreneur I have no idea how much accounting work is required for my startup. Is it wise to give equity and bring him on board as CFO?
Also, other than asking these questions in person, what are some sources (online or offline) where we can do more research on the accountant's reputation, past performance...?
I agree with the other posts, if you are just looking for basic accounting recordkeeping then hire a fee-based accountant or bookkeeper. However, an accountant is not going to be able to help you with financial business models. If you are looking for the latter then you should look into hiring a part-time CFO on a project or interim basis to develop your business model and link that model to your strategy and key drivers.
Hope this helps.
This is an ultra tricky proposition as there can be many moving parts.
Personally, I'd start with the basics and look for an accountant that can fulfill your Accounting 101 needs. The reason for this is that when you first start a relationship things can sound really good, but the real proof of performance is evident at crunch time. Whether filing quarterly statements or year-end taxes you'll know quickly if you made a good choice in accountants. If they can fill your basic needs then you can talk about more advanced options down the road.
Any good accountant can help you setup your books, the better ones help you plan for the future. If your future includes rounds of funding and a potential IPO that's great, but you'll discover that requires a team of accountants plus more than one attourney. By starting with a basic accountant you'll be able to ensure your books are ship shape when it's time for some heavy duty financial maneuvering. Plus, you'll only have to pay basic accounting fees early on when money is tightest.
If you take the other approach and hire on a heavy hitter from the get go you'll be locked into high fees, stock options, or even a CFO position. What if it doesn't work out, how do you unwind that mess? It's a very high risk proposition. Plus, there is a good chance that new investors will already have an accounting firm in mind that gives them peace of mind that they will want to use. So it's better to take baby steps while you learn the lay of the land.
My oldest business is 14 years old and we've been through 6 accountants. Everything can go great until they: get pregnant, change firms, move away, become too busy, etc. The landscape can change quickly and it's best to keep your exposure to a minimum.
Ask for references of previous clients who have done what you want to do - gotten Angel/VC funding. Talk to the successful clients about how the accountant helped them and what they were like to work with. If the accountant does not have any previous clients that have gotten funded, they're probably not the right choice for you ;)
Most accountants are not interested in working for equity, so expect to pay their fees. You likely don't need a full-time CFO at this point, and the Angel/VC investors may have their own ideas about that anyway. Just get someone to set up your books properly and work with your lawyer on the articles of incorporation so it's set up to do what you want. (Protip: Boilerplate you download off the internet for $50 is highly unlikely to do what you want, and can do some things you didn't expect ;)