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I’m a business owner and I need help with the numbers. Should I hire an accountant or a bookkeeper?

When we encounter this question, we always respond in the form of another question: What, specifically, do you need your ‘numbers person’ to do?

While some of the responsibilities of a bookkeeper and an accountant can overlap, they play very different roles within a business. Here are some of the key differences between a bookkeeper and an accountant:

Why should I hire a bookkeeper?

Bookkeeping is the first part of the accounting process, which involves organizing all the raw numbers data of the business into reports for the accountant. A bookkeeper pays bills, invoices customers, maintains the checkbooks, and may also manage payroll. These processes record accurate transactions of sales and expenses. Essentially, he or she manages the documents which are the basis for your financial statements.

Generally, bookkeepers are more affordable than accountants, and usually have either a two-year associate’s degree or no formal education. A self-taught bookkeeper is not necessarily a bad thing, so be sure to keep a couple of things in mind when searching for the right fit:

  • Consider their work history. While no formal education might be a red flag at first, a bookkeeper with 20+ years of gainful employment is likely a solid option.
  • Ask for references. If you can easily find companies that recommend a bookkeeper’s work, you’ve likely found a great future asset for your team.
  • What size businesses has your potential hire worked with in the past? Finding someone with experience in a similarly sized business, or a similar industry as yours, is a major plus.

Why should I hire an accountant?

Typically, an accountant reviews, analyzes, and interprets the numbers prepared by a bookkeeper. Once the raw data from sales, payroll, and bill payments have been organized the accountant can begin working.

A good accountant will have excellent analytical skills, as providing a fair and true representation of the company’s financial status is one of their critical responsibilities. He or she will make recommendations on budgets, prepare financial statements, and perform detailed inquiries of sensitive income, expense, or balance sheet accounts. By hiring an accountant, you’re hiring someone who can manage the higher-level checks and balances of your finances. If you had record-high sales last quarter, your accountant can advise where to put that money in next quarter’s budget. If your business has shareholders or reports to a board, the accountant will provide them with an accurate report of projected income for next year.

If your bookkeeper makes a mistake, an accountant can catch and fix the mistake during a detailed inquiry of an account. Such a mistake could cost your business thousands of dollars in IRS penalties; so, sometimes, hiring an accountant can pay for itself.

Should I hire an accountant who isn’t a CPA?

Most importantly, there is no legal defining boundary between an accountant and a bookkeeper. Unlike the title of medical doctor or psychologist, accountant is not a legally protected title, meaning anyone can claim the title of accountant. This is the most important thing to consider when hiring someone to handle your finances. If you’re going to hire a finance worker to do something higher-level than invoicing, payroll, and bill paying consider someone with a CPA certification, not just a self-titled accountant. Certified Public Accountant (CPA) is a title that requires graduating from an accredited four-year college or university, passing a rigorous examination, and required continuing professional education. Through such continuing education, CPAs stay up-to-date on ever-changing tax law and what sort of tax deductions might be available to your business. In fact, investing in a CPA may end up saving you money through savvy tax deductions.

If you want to make sure you’re hiring someone with valid certifications, you can use this search tool created by the IRS.

What if I cannot afford to hire a full-time finance person?

If your business is just starting out or is small, you may not be able to afford a full-time bookkeeper or accountant or may not have enough work for them to do. One option may be to hire a part-time bookkeeper or accountant. Keep in mind, the same cautions and criteria for selecting a full-time bookkeeper or accountant apply to a part-time bookkeeper or accountant as well.

Another option would be to hire an independent bookkeeper or accountant for a set hourly or periodic fee. The bookkeeper or accountant would be contracted to work a set number of hours per week or month at a set hourly or periodic fee. You would not have the additional cost of a full-time employee and the overall cost will be lower as the number of hours contracted will be less than you would have to pay a full-time person. On the other hand, you will not get the same level of attention as a full-time employee from an independent bookkeeper or accountant, as they will most likely have many other clients. If you choose this option, we recommend you interview the professional to determine if they are a good fit. In addition, you should ask for references from the bookkeeper or accountant’s current clients and review online resources such as the Better Business Bureau for reviews and comments regarding the professional’s services.

Very few business owners regret hiring a qualified bookkeeper or accountant. Unless you have a strong background in managing numbers yourself, hiring a CPA is the best way to ensure that your bookkeeper’s mistakes don’t get missed, you’re maximizing the deductions available to you, and you’re getting sound financial advice as you plan the future of your business.

Do you have questions about hiring a bookkeeper or accountant? Give us a call or send us a message, so that we can help you find the best options for your business.