Despite the fact that your accounting books, balance sheets, and account payable records are the lifeblood of your business, you probably really only think about them during critical times of the year – normally, the end of your fiscal year, and tax time.
There’s also a good chance that as an entrepreneur, you were the person first in charge of keeping the ledgers in working order. Now, with your business growing and your revenue on the rise, things are getting more complicated.
And that means one thing – you’re going to need help, professional help.
Maybe you’ve considered hiring a bookkeeper or accountant before. It’s possible you’ve already worked with one, perhaps on a freelance or one-off basis. However, you are now realizing that having a sole expert consistently in charge of your ledgers is the best thing for your business. However, the terms bookkeeper and accountant are used almost interchangeably. Do they really mean the same thing? And if not, what is the difference?
This article will provide an overview of bookkeepers and accountants, the differences between the two professions, and how to choose the right one for you. We will also briefly discuss the term CPA and how it factors into the bookkeeper vs. accountant equation.
What Does a Bookkeeper Do?
Let’s first define the term: what is a bookkeeper?
In this case, the term very accurately describes the job: a bookkeeper is in charge of “keeping the books.” Here’s what that means.
Bookkeepers normally work in businesses focusing their attention on the transactional nature of the business. This includes recording daily sales, documenting business expenses, processing payments, managing payroll, and ensuring that the books are balanced at the end of each month.
Additionally, bookkeepers keep track of the accounts receivable and accounts payable records. For accounts payable, this means ensuring that vendors are invoicing for the correct amounts and that those bills are being paid on time to avoid penalties. For accounts receivable, this usually entails issuing invoices to clients, following up with clients for any outstanding balances and recording payments received. Bookkeepers may also be involved in handling petty cash and creating basic financial statements.
What Does an Accountant Do?
So, what is an accountant?
For the most part, accountants take a look at a business’ financial health from a broader perspective. An accountant is more than capable of performing all the same duties as a bookkeeper but typically is a better resource if you’re making any long-term financial business decisions.
Additionally, accountants or CPAs are responsible for ensuring that your business is in compliance with tax laws and prepares your tax returns at the end of the year. This includes reviewing deductions and credits for which you may be eligible. Accountants also have the knowledge to analyze your books, looking for sales trends and discrepancies, and they will prepare your end-of-the-year financial statements.
Differences Between Bookkeepers & Accountants
First, let’s examine the similarities between the two professions.
As stated above, both bookkeepers and accountants are capable of handling the day-to-day financial information for your business. Additionally, both professions have certification programs. The American Institute of Professional Bookkeepers (AIPB) offers a program for bookkeepers that results in the designation of certified bookkeepers. The American Institute of Certified Professional Accountants (AICPA) offers a certification program for accountants to become designated as CPAs.
However, it’s important to note that bookkeepers and accountants can perform work without certification. Therefore, reviewing someone’s qualifications before hiring them is always a good idea.
Now, for the differences.
Bookkeepers are more familiar with daily business finances and the transactional aspects of business. CPAs are typically more experienced with larger picture thinking when it comes to long-term financial goals. The chances are you already work with a bookkeeper, but you might have only consulted an accountant at specific times or for tax season.
Due to the type of work they perform, bookkeepers are normally a less expensive option than an accountant. An accountant is normally a less expensive option than a CPA. Obviously, cost will play a factor in your decision. However, keep in mind that the ramifications of cutting corners when dealing with a bookkeeper or accountant can have far-reaching effects, including increased potential for IRS audits, lost revenue and overdue invoices.
Finally a note about bookkeepers vs. CPAs. A CPA simply means the accountant is certified by the AICPA. So, a CPA is an accountant who holds a specific certification.
Choose The Right One
So, how do you choose the best bookkeeper or accountant for your business needs?
- Examine your situation. What exactly are you hiring this person to handle? If the answer is based more on day-to-day business, than a bookkeeper would be best. If you need help with tax preparation or are looking to take a long-term financial leap, a CPA is the way to go.
- Check their qualifications. How to choose the best accountant or bookkeeper will also depend on their qualifications. How much familiarity do they have with your type of business or your industry? Small businesses are their own unique entity, so hiring a bookkeeper or CPA with only big business experience is not ideal. Additionally, it’s best to hire a CPA when looking for an accountant. The testing provided by AICPA is fairly rigorous and the designation of CPA implies that the accountant takes his or her profession seriously and has been deemed an expert by their peers.
- Ask for referrals. Bookkeepers and accountants often work hand-in-hand. If you’ve worked with one or the other, ask for a referral. Working together breeds trust among CPAs and bookkeepers so finding someone each is comfortable with will make for a more harmonious working relationship. You can also ask for referrals from the larger business community and see who other entrepreneurs have worked with as well.
At the end of the day, your business is about money. Make sure you’ve hired the right person to manage your records and prepare your taxes, whether that is a bookkeeper or an accountant. Need help finding an accountant. Let QuickBooks ProAdvisor help.