Choosing a financial advisor for your business is a big decision. I recommend finding an advisor who you are comfortable working with, a professional with at least 3-5 years of experience, has good references, and most importantly someone who is trustworthy. Sounds easy enough, but then you start looking and realize there are a lot of choices out there. What’s the difference between a Bookkeeper, an Accountant, and a CPA?
A bookkeeper is responsible for accurately recording and posting the daily transactions of your business. This usually includes accounts payable (entering and paying bills), accounts receivable (invoicing clients and collecting payments), and entering inventory. Occasionally bookkeepers also assist with payroll. A full-charge bookkeeper can handle the data entry as well as generate basic financial statements.
The education level of bookkeepers vary. Some have an Associates Degree while others only have on-the-job training. With their limited accounting knowledge, bookkeepers are typically the most affordable option. They are a good option for basic data entry needs. Buyer beware, since bookkeepers do not have education requirements, it is important to find one with at least 3-5 years of experience and someone that comes with good references.
An Accountant is the next step up from a Bookkeeper. In addition to the bookkeeping tasks, an accountant should be able to set up a bookkeeping/accounting system, monitor it, generate financial statements, and interpret the financial data. Many accountants will also provide tax services to their clients. However, with the new IRS rules going into place, make sure your tax accountant and tax preparer are have are registered with the IRS and have an active Tax Preparer PIN.
Typically an accountant will have a college degree in accounting or business administration. Some will also have a Master’s Degree. Accountants will be educated in basic accounting concepts and will understand the company’s general ledger. For businesses with more complex entries and transactions, accountants make a good choice.
Certified Public Accountants, CPA for short, is the next level up from an accountant. CPA’s can they perform the duties of an accountant and have the ability to perform an audit. CPA’s are a great choice for your business because not only can they help with your bookkeeping but they also have the knowledge and skills to help take your business to the next level by calculating growth ratios, following growth trends, preparing a budget, tracking your progress against your projected income levels, etc. One of the best benefits to hiring a CPA is that CPA’s are required to complete continuing education courses every year, which helps to ensure they stay current on changing accounting trends and rules. CPA’s are a great resource to help you and your business with tax planning and tax preparation.
In order to become a CPA, the accountant must pass a set of rigorous tests to ensure their knowledge and understanding of the accounting laws and regulations. CPA’s are licensed by the state in which they practice. The state boards and the AICPA set professional and ethical standards that CPA’s agree to follow. Similar to an accountant, CPA’s will hold at least a Bachelor’s Degree in accounting or business administration. With new education requirements states have put in place, many CPA’s also poses a Master’s Degree. CPA’s hold the highest level of accounting knowledge, and in return they typically charge more for their services.
As you can see, there are several options available to help your business. Everyone’s situations and needs are different. Finding the right financial and accounting advisor takes time. I recommend interviewing several advisors to ensure you’re making an informed and educated decision. Asking friends, family, and neighbors for a recommendation is a great place to start.
Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.