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Should I Hire a Bookkeeper or an Accountant for My Small Business?

New small business owners, having little exposure to financial services, frequently act from the confusion that bookkeeping and accounting services are one and the same. It is infinitely better to know the difference in advance. Prior to engaging the assistance of a financial professional, take the time to understand the distinguishing traits of bookkeeping services vs. accounting services, so you know which type of expert to hire. That way whomever you retain can hit the ground running. In this post we will examine the unique role of each, so you can understand, what does a bookkeeper do vs accountant.

Bookkeeping vs. Accounting Services - an Overview

In the strictest sense, bookkeeping is about keeping accurate records of financial transactions, generally using accounting software. Recording daily transactions serve as a foundation for the accountant's work. The accountant, on the other hand, measures trends and observes the revenues and expenditures with an eye on a firm's overall financial viability. Whereas a bookkeeper records and stores financial data transaction by transaction, an accountant, very often a certified public accountant (CPA), is a licensed professional who has responsibility for analysis, summarization, reporting, and consulting concerning the financials gathered by a bookkeeper.

What Does a Bookkeeper Do?

While the bookkeeper's role may seem narrower than that of an accountant, it is no less essential to the operation of a small business. Among the responsibilities are:

  • Transactional recording - whenever money moves into or out of business accounts, the bookkeeper must make note of the amount, the date, which account, and a host of other details. This can even include expense receipts.
  • Managing the chart of accounts - even a small business owner needs to set up different accounts for different purposes. The bookkeeper keeps track of each, particularly when funds are moved from one to another, generally using bookkeeping software.
  • Reconciling bank statements - just like households, businesses need to have a precise assessment of assets on hand, spent, and received.
  • Creating necessary financial reports - working on balance sheets, profit, and loss statements, and cash flow reports ordinarily originate with the bookkeeper.
  • Managing accounts payable and/or accounts receivable - this involves generating invoices, articulating payment terms for customers, initiating collection efforts, if necessary, and remunerating vendors for their services.
  • Processing payroll - bookkeepers can look at time sheets or other work records, work out the necessary deductions for taxes and insurance, and cut or order paychecks.

What Qualifications Does a Bookkeeper Need?

No state in the U.S. requires formal education for bookkeeping work. So, acceptable qualifications ultimately rest with each employer. That said, many bookkeeping practitioners shoulder responsibilities relative to millions of dollars, so it is reasonable that companies look for certain evidence of competence, experience, and character. 

Although a solid resume and references go far to make the case for a candidate, there is a credential that can support those endorsements. Needless to say, a bookkeeper's job isn't easy, and a bachelor's degree helps.

The American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB) offer professional accreditation for those in the profession. AIPB certification demands a minimum of two years of full-time work experience and passage of a nationwide examination. 

Continuing education courses are offered as prerequisites for renewal. Meanwhile, NACPB conveys credentials to bookkeepers who pass separate tests for small business accounting, small business financial management, payroll, and bookkeeping. Payroll certification is granted after further education. NACBP wants 2,000 hours of experience before certification.

What Does an Accountant Do?

In brief, an accountant works on a macro level, while the bookkeeping process occupies the micro realm. This is a huge difference between bookkeeping and using a professional accountant.

  • Tax return preparation and filing - the accountant is responsible for reporting business income and deductions to the Internal Revenue Service (IRS) and state taxing authorities. Ideally, the accountant will reduce overall tax liability for the business and file a return that keeps auditors at bay.
  • Consulting on financial planning issues - this means accountants can advise leadership on optimal business structure and the creation of a general business plan.
  • Assisting with financing applications - most small enterprises will need a loan from time to time. Accountants can gather the necessary documentation and numbers required by bank underwriters to make a decision on the application. They can also advise on whether rates and terms will work for the business.

What Qualifications Does an Accountant Need?

More government recognition is mandatory for many accounting professionals. In general, states issue licenses for CPAs. However, national professional organizations also recognize chartered financial analysts (CFAs) and certified internal auditors (CIAs). Whether to hire a bookkeeper vs accountant must reference the kind of accountant.

Certified Public Accountant

Every state in the United States mandates that certified public accountants pass the CPA exam. They also require continuing education coursework to renew licensure periodically. Although CPAs must be proficient in matters of federal taxation, for example, they also need to be competent during tax season, when it comes time to deal with tax filings. 

This is why states have an interest in standardizing and regulating the accounting profession and a huge difference between accounting vs bookkeeping services.

Chartered Financial Analyst

The designation of Chartered Financial Analyst lends great professional prestige to those who bear it. It is, however, a credential awarded by the accounting profession, namely the CFA Institute, and not by any federal, state, or local government. 

The substance of this honor is demonstrated knowledge in the areas of financial portfolio stewardship, professional ethics, scrutinizing investments, and international financial markets. 

Given that under 40 percent of those who participate in the three-fold test for this accountant appellation actually pass, those who bear the CFA moniker represent the deep knowledge of, and facility with, complicated accounting principles.

Certified Internal Auditor

Like the CFA, the certified internal auditor title is an honorific from the profession, not the state. Internal audits appraise a company's mechanisms, rules, and procedures as well as its compliance with government regulations. 

These audits help businesses to accurately report on their practices and correct problems before government agencies audit them. Accountants who receive the CIA title not only pass an exam, but they also must have two years of professional practice under their belts.

Should I Hire a Bookkeeper or Accountant for My Small Business?

Deciding between bookkeeping vs accounting need not be an either/or problem. Each business owner must assess the needs of the company. If the problem centers simply on the management of financial records, then a bookkeeper might be the appropriate remedy. 

What about the essential understanding of how cash flow affects creditworthiness, how certain financial losses can benefit you during tax preparation, or how internal procedures are in tension with the articles of incorporation? 

If this wisdom is lacking, an accountant might be the better choice. In some cases, an accountant can double as a bookkeeper. In other instances, a good bookkeeper can save hours of time for a successful accountant. It all comes down to points of need.

Outsourced Accounting and Bookkeeping Services by a Trusted Chicago CPA Firm

Small businesses often have to watch every nickel and dime. This means having a full-time, in-house accounting staff could be cost-prohibitive. At the same time, this situation underscores the absolute need to not do your own bookkeeping. One way out of this conundrum is to avail yourself of external financial professionals. Outsourced bookkeeping services and accounting services can be less expensive yet just as helpful as in-house staff.

The good news is that there is a firm that specializes in aiding small companies with both bookkeeping and accounting tasks. Susan S. Lewis LTD. CPAs is a firm that serves businesses all around the United States from its headquarters in Chicago, IL. It costs nothing to inquire as to how these professionals can give you financial support and help with business growth and keep good financial records.

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