If you’re looking into getting help with your financials, congratulations on taking a big step for your business.
It’s important to have someone assist you with making sure your books are clean, up-to-date, and easy to read for tax season.
Should you engage bookkeeping services, though? Or do you need an accountant?
We’ll go through the differences between accountants and bookkeepers, and help you figure out the questions to ask to figure out the best path for your company.
The difference between accountants and bookkeepers
We’ll first start going through the differences between accountants and bookkeepers. You’ll need to know this—as well as a third category, CPA, which we’ll get to—in order to understand what your business actually needs.
Main functions of a bookkeeper
A bookkeeper performs the basic financial tasks that your business needs done daily (although they often don’t work daily). This includes things like making sure your accounts receivable and accounts payable are both kept track of and up to date. Do you have credit card or business loan payments? A bookkeeper will help you make sure these are paid and that you’re not charged late fees. If you collect sales tax, a bookkeeper can also help you get that paid.
It’s a good idea to have a bookkeeper watching over your financials. Even if you’re already using a business accounting program, having professional oversight is massively helpful (and can save you money in the long run). Many bookkeepers work on contract with companies; with small businesses, there’s generally not enough work to do to encompass a full-time position, so they often work with several clients at once.
Main functions of an accountant
An accountant is more advanced. They can perform bookkeeping functions, but they also go deeper—preparing financial statements and even prepping tax documents (though they can’t file them). An accountant keeps an eye on the bigger picture, looking less at the day-to-day activity, and more at top-level reporting.
If you’re to engage an accountant, they can do what you need from a bookkeeper; they need that foundation information to do the more strategic work, anyway.
Understanding the job of a CPA
Are you confused that we said an accountant can’t file your taxes or represent you to the IRS? You’re certainly not alone; many people think that accountants and CPAs are the same. CPAs—certified professional accountants—are accountants, but they have an extra level of certification, which makes them authorized to sign and prepare your taxes for the government.
As you might expect, CPAs charge a premium for their service, so you’ll likely only interact with CPAs come tax season.
Do you need both an accountant and a bookkeeper?
As we mentioned, one thing a bookkeeper or a regular accountant isn’t is certified to do your taxes come tax season. And every small business (obviously) has to file their taxes. So, in a way, you do need both someone to do your bookkeeping tasks as well as a CPA, since you’ll need someone to both do your books as well as your taxes. That said, many business are fine only engaging a CPA when they start getting their taxes in order.
The question for you as a business owner, then, is more about whether you want to engage an accountant year round. The honest answer is it depends. And, sure, that may not be satisfying or definitive, but the answer is dependent on your answers to a few questions.
How to know what’s best for your business
Figure out the answers to these questions:
- How complex are your books?
- Are you at the kind of scale where day-to-day bookkeeping tasks don’t give you enough information to make decisions
- How much do you need strategy help?
- Do you know that your financials are healthy, and are you equipped to make big decisions based on the foundational numbers from your accountant?
- Are you prepared to pay a premium for accounting services?
If you’re at an inflection point with your growth, you may want to consider an accountant who can help you look at your financial statements strategically in a way that a bookkeeper can’t. Remember that you can always engage an accountant for special projects or periodic audits; you can’t (or shouldn’t) do that with a bookkeeper, because they need to be helping you on a daily or shorter-term basis.
What all small businesses should consider
Always make sure that, as a business owner, you’re thinking about the big picture. Even if you think you know a lot about your finances, you can always know more. Engaging a professional will always be a boon to your business, and save you from costly mistakes. In the long run, they might even help your business thrive.
Author Meredith Wood is the Editor-in-Chief and VP of Marketing at Fundera, an online marketplace for small business financial solutions such as business loans. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.