If your business finances have gotten to be more than you can handle on your own, it’s time to call in a professional. But who should you hire? You’ve heard of bookkeepers…and you’ve heard of accountants. What’s the difference, and which do you need?
If you’ve managed your own accounting up until this point, you probably did much of what a bookkeeper would do. Typically, a bookkeeper manages daily financial transactions, such as:
- Logging business expenses
- Managing receipts
- Tracking sales and invoices
- Paying vendors
Your bookkeeper can also process payroll, which is handy if you have staff or contractors working for you.
A bookkeeper uses accounting software, such as FreshBooks or QuickBooks to manage your business accounts. If you already use an accounting platform, you would just give a bookkeeper access to your accounts.
What to look for: Education-wise, bookkeepers usually have two to four years of experience in bookkeeping, or an Associate’s degree. When interviewing potential bookkeepers for your business, look for one with a history of helping small businesses, and one who pays attention to details.
You should hire a bookkeeper if: your financial needs are relatively simple. If you’re a solopreneur, this is probably the case. Also, realize that you will need to oversee this role, so if you want to be completely hands-off on your finances, an accountant might be the better option.
An accountant does everything a bookkeeper does, and then some. Rather than simply enter data, an accountant also verifies it and analyzes it. An accountant will be more familiar with financial reports like profit and loss statements and balance sheets. They can also audit your accounts, create financial and sales forecasts and build your business budget.
Essentially, an accountant helps you strategize your finances. They can see where your expenses and income are now and come up with ways to reduce costs and boost revenue. An accountant can also process your annual tax return and strategize how to reduce your taxable income.
What to look for: Accountants have at least a Bachelor’s degree in accounting. They may also become Certified Public Accountants (CPA), which requires a rigorous test and ongoing training.
You should hire an accountant if: you plan to seek funding or bring on investors. Your numbers need to be in tip-top shape to attract funding. If you have multiple departments in your business, an accountant may be able to better keep all the financial data across departments straight. Also if you are a publicly traded company, you will need an accountant who understands compliance.
Which Does Your Business Need?
Still having trouble deciding between the two? Ask yourself these questions:
- Am I looking for simple data recording, or do I want more financial strategy help?
- What’s my budget for this role?
- Am I looking for someone to replace me logging into QuickBooks each day, or do I need someone who’s got more financial savvy than me?
- What components do I want help with (payroll? taxes? expenses? reports?)?
When to Consider a CPA
If a bookkeeper is Cool Whip, and an accountant is real whipped cream, a CPA is real, organic whipped cream made from cows who sleep in velvet beds. Many small businesses don’t need the extra skills that a CPA offers, but yours might.
If your tax situation is complicated, know that a CPA is required to take tax preparation courses regularly to stay on top of tax code. And should you ever be audited by the IRS, you want a CPA on your team, as a CPA can represent you to the IRS.
Should You Hire Both?
The decision might not be between hiring a bookkeeper and an accountant. In fact, you might need to hire both. If your company is growing and it’s got complicated finances, hiring the two might help you. The bookkeeper would deal with more of the day-to-day financial activities, while acting as a liaison between you and the accountant. The accountant would help with that financial strategy that will help you grow your business.
In-House or External?
Once you determine which you want to hire, consider your options. Usually, a bookkeeper is a full-time employee, though your needs might dictate finding one that will work part-time.
Unless your financial needs are great, you probably need just a few hours of an accountant’s time each month. In that case, you can hire a freelance accountant or small accounting firm to assist you. Typically, this kind of accountant will work on a retainer, which includes a set amount of tasks he/she performs monthly. You may pay extra (hourly or flat rate) for additional services, such as tax preparation.
Whether you hire a bookkeeper or an accountant, it’s important that your small business finances get the attention they need. Having a professional on your team frees you up to focus on other aspects of running your business.
Which one will you hire – an accountant, a bookkeeper or both? Tell us in the comment section below.