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From Fundera Ledger:

Written by: Heather Satterley

You’re at the point in your business that you know you need help with your accounting. You need advice about recordkeeping, legal structure, funding, and how to minimize your tax liability. Your insurance broker tells you that you need a bookkeeper to help you get organized, but your banker is telling you to hire a CPA.

Choosing the right accounting professional will be one of the most important decisions you make for your business, but how do you decide between a bookkeeper vs. accountant, and when should you start looking?

What Bookkeepers Do

Bookkeepers typically “keep the books,” hence the name. They set up the accounting procedures and maintain the records for a company, usually using a computer program like QuickBooks. The purpose of a bookkeeper is to organize financial information in such a way that it can be used by business owners, managers, and accountants.

They understand the day-to-day financial operations of the company and typically dig into the details. A skilled bookkeeper should have at least two to four years of experience or an associate’s degree in accounting.

Tasks usually performed by a bookkeeper include:

  • Recording invoices and payments from customers
  • Recording cash expenses and paying vendor bills
  • Managing payroll
  • Maintaining and reconciling bank and other accounts
  • Advising clients on recordkeeping requirements and methods
  • Cash flow forecasting and management

What Accountants Do

Accountants analyze the financial information that bookkeepers prepare. They advise their clients on a variety of financial issues, and they complete financial reports and tax forms.

While some accountants provide bookkeeping services, they are also skilled in preparing the financial statements and reports that are required by banks and governmental agencies—like the IRS. Certified public accountants (CPAs) are accountants regulated by their state board of accountancy. They must meet minimum educational and experience requirements and complete ongoing annual continuing education to stay on top of new laws and regulations.

Tasks usually performed by an accountant or CPA include:

  • Verifying the accuracy and completeness of the accounting records
  • Preparing financial statements
  • Preparing tax returns
  • Income tax planning
  • Advice on tax law, entity structure, and key financial decisions

What Bookkeepers and Accountants Both Do

Both bookkeepers and accountants provide strategic advice to their clients. A bookkeeper might tell you how to streamline your accounting processes or help you create a budget for your business while an accountant could suggest ways to minimize your tax liability or help you decide whether to incorporate your business.

According to Laurie O’Neil, owner of Innovative Financial Services in East Hartford, Connecticut, bookkeepers help clients with their processes and the detail part of the day-to-day business operations, whereas the CPA is more broad and tax focused.

“We do the hand-holding that the client needs, we set up the procedures, and streamline their processes,” she says. “The bookkeeper can watch and refer the business to a CPA when they need that level of expertise.”

O’Neil’s team of bookkeepers and consultants strive to empower their clients by training them to not only correctly manage their bookkeeping but to understand their financial information. Armed with that understanding, they’re better set up for success.

Bookkeeper vs. Accountant: When Do You Need Either (or Both)?

Debra Kilsheimer and Harold “Hal” Hickey of Behind the Scenes Financial Services in Port Orange, Florida, are a husband and wife team of accountants who provide both bookkeeping and accounting services.

They agree that any small business should consult with a qualified accountant as soon as they decide to open their business. They believe in investing in “good advice,” especially in the early days.

A good accountant can help a small business owner decide on the right entity type, understand tax filing requirements, and offer strategic advice to maximize profits or minimize their tax liability.

At Behind the Scenes Financial Services, Debra focuses on the bookkeeping and processes for clients, while Hal handles the tax side of the business. As Debra puts it, “My goal all year is to help you make a profit, and Hal’s goal is to have you pay less tax.”

Depending on the size and nature of your business, you might be able to handle the bookkeeping initially by yourself with the help of your accountant. But as your business grows and becomes more complex, you’ll want to seek out a full charge bookkeeper. This person will make sure that your records are sufficiently organized so that you have the information you need to effectively manage your business.

Working with an accountant regularly ensures that you’ll recognize when you get to the point of needing a bookkeeper. Debra says that she usually sees this need arise around the six-month point.

Hal also points to OPS (other people’s skills) as a reason to get bookkeeping help sooner than later. The business owner is an expert in their business, and a good bookkeeper is an expert in processes and accounting. It’s worth the money to use OPS to do the things that you might not be good at or enjoy so that you can focus on what’s really important—your business.

Bookkeeping vs. Accountant: Finding Your Dream Team

Many small businesses have both a bookkeeper and an accountant. The bookkeeper is on the ground floor, managing the day-to-day transactions and looking out for changes to the organization or significant financial events that need to be addressed. They understand the inner processes and operational needs of the business, and as Laurie puts it, “They act as the eyes and ears for the CPA and have the skills to recognize when the client may need a level of service or expertise that only an accountant can provide.”

When choosing an accounting professional, whether a bookkeeper or an accountant, Debra and Hal offer this advice:

  • Ask for a referral from someone in your industry you respect and trust.
  • Make sure you are comfortable working with them (as Debra says, “I will know more about you than your priest”).
  • Choose someone who is happy to hear from you when you call and is responsive.
  • Ask them for referrals and actually call them.
  • Finally, a good bookkeeper or accountant knows their worth, and they will charge for it—don’t choose someone simply because they are cheap—you’ll end up paying more in the long run.

You can also find qualified bookkeepers and accountants through your local Small Business Development Center office or through professional bookkeepers associations like ICBUSA and your state’s Board of Accountancy website.