Many business owners might be hard-pressed to describe the difference between a bookkeeper and an accountant. However, while you might be unsure which one you need, most of us need assistance recording and reconciling our daily/weekly/monthly transactions.
Let’s look at when you should consider hiring an accountant or a bookkeeper, the similarities and differences between the two, and how each can benefit your business.
When Does Your Business Need Accounting Support?
Many small business owners get their start by doing everything themselves – including managing the company’s finances. But, if your business is growing, your accounting needs will eventually surpass the time you can devote to them.
Whether an accountant or a bookkeeper, a professional can help you manage your books and plan accordingly for your tax liabilities. Hiring one, or in some cases both, will allow you time to focus on growing your business.
Understanding the Two Professions
A bookkeeper is someone with good accounting skills but may not have a formal degree. They record and classify a company’s daily financial transactions such as sales, expenses, and invoicing. Bookkeepers generally focus less on interpreting data and more on accurate record-keeping.
Alternately, accounting is the process of maintaining financials for a company through recording, analyzing, consulting, and reporting data. Accounting tasks are typically performed by a certified public accountant (CPA).
The difference between a Certified Public Accountant (CPA) and a bookkeeper is that a CPA is licensed, degreed, and must comply with state continuing education requirements. CPAs offer bookkeeping and payroll services but also provide the following:
- Tax advice and planning
- Financial compliance with state and federal law
- Preparing financial statements
Typically, it will cost you more to hire a CPA than a bookkeeper. Often, businesses hire an in-house bookkeeper and outsource CPA services to address more complex financial matters. While the work of bookkeepers and accountants often overlap, generally where bookkeeping ends, accounting begins.
The Benefits of Hiring a Bookkeeper
Bookkeepers offer a wide range of services, usually at very reasonable rates. Consider some of the ways professional bookkeeping could help your business grow.
Paying Your Bills on Time
With what you must do daily to move your business forward, it’s next to impossible to keep up to date on everything yourself. Putting a bookkeeper in charge assures you that everything is managed timely – and ensures your vendor relationships aren’t hurt by late payments.
See Your Business from a Different Angle
Although you may think you have a handle on how your business is doing, it always helps to have a second set of eyes on the day-to-day operations. A skilled bookkeeper can run useful reports that quickly show you the money coming in and how you’re spending it. Having this visual representation of your cash flow can help you understand where you’re doing well and what you might need to improve.
Maintain Cash Flow
Few things are less productive for a business than putting in the work but not getting paid for it. Being so busy that you neglect to bill your clients promptly is an excellent problem to have – except it affects your cash flow. A bookkeeper can stay on top of customer invoices and billing reminders, guaranteeing a steady stream of funds to meet your current obligations and fund your future business growth.
The Benefits of Hiring a CPA
Using their education, skills, and experience, a CPA can substantially contribute to your company’s success. Below are ways a qualified CPA can help you better run your business.
Whether overseeing commercial real estate or compiling and safeguarding data, CPAs are uniquely equipped to manage your company’s assets. They play a crucial role in leveraging your interests by analyzing your competitors’ faring in your markets, assessing customer responses to your products and services, and identifying market patterns that lead to income fluctuations.
Minimize Business Overhead
Because you’ll gain an ongoing cost/benefit analysis of your business expenses, hiring a CPA can help you implement substantial cost-cutting measures. Knowledgeable CPAs can point out areas where you can decrease or eliminate spending based on past analytics. Additionally, because a CPA can cover a wide range of responsibilities, you may be able to eliminate non-essential staff and outsource additional responsibilities to your CPA.
One of the cornerstone benefits of hiring a CPA is their ability to prepare and file your taxes per local, state, and federal laws. Better yet, they can create a strategic tax plan for your business that helps you minimize your tax liability before tax time rolls around. And, if you’re ever audited, an experienced CPA can assist you and your business in defending your tax return and ultimate tax liability.
Bookkeeper or Accountant – Which One is Right For You?
Your time is worth something – actually, it’s worth a lot. So, while it’s vital as a business owner to be involved in all aspects of your business, hiring either an accountant or bookkeeper allows you to take many time-consuming tasks off your plate, allowing you more time to plan your next strategic move.