Making the decision to hire an accountant is an important step for your business. It means having someone dedicated to running the company financials and following laws related to taxes that may be specific to your industry. There are industry standards that can play a large role in the success of your accounting department. We have CPAs on our team who specialize in legal, dental, and tech services to name a few. Next comes the question, Bookkeeper vs. CPA – What’s the difference?
A competent bookkeeper or CPA will help you in effectively tracking income and expenses. They can also provide critical reports that will give you insight regarding how your business is performing, what could be improved and how close you are to reaching goals. CPAs can take the data entry portion of this to the next level by providing assistance with business decisions, becoming an advisor and true partner you can rely on for accurate and informative information regarding your company’s finances. A virtual CFO can take that a step further by helping plan for the future, create financial models and more. Learn more about virtual CFO services.
You may have been looking at hiring a bookkeeper by running a local ad, but is that really the best strategy?
Bookkeeper vs. CPA: Understanding the Difference
The decision to hire a bookkeeper or a CPA really comes down your business needs and goals. Please see our 8 reasons why you should hire an accountant for more information. Finding the right fit can be tricky and it’s important to explore a wide variety of avenues to find the right person for your team.
What does a bookkeeper do?
Your bookkeeper’s ultimate job is to keep your data up-to-date and accurate. The importance of this is to provide good information for you and your advisors, giving you the ability to take historical data as well as make projections for the future to help improve your business decision-making abilities.
Bookkeepers’ duties and knowledge can vary depending on the level of education and experience of that professional. Your bookkeeper should be well-versed in whatever accounting program you utilize and can help you streamline processes like data entry by help you get bank accounts connected and other automations in place. They should also be reconciling all accounts on a monthly or weekly basis depending on your needs and cash flow situation. They can help with bill pay, accounts receivable, collections, payroll, and more.
What does a CPA do?
Most people associate CPAs with taxes. But there is much more to it that that! Many CPAs will offer tax planning as well so you can avoid the stress of any unknowns come tax time. Your business relationship with your CPA should include regular meetings. We prefer to meet with our clients on a regular basis (at least once per month) so that we are involved in the business and truly understand any opportunities or challenges and can adequately assist and guide our clients to minimize risk and maximize growth and profitability. If you have been in business for at least one year and haven’t spoken to a CPA, you may consider getting a business health check to get a starting point and any recommendations they may have.
Depending on your needs and goals as a business, you may consider finding a CPA who also partners with you as a business advisor. As we stated above, we prefer regular meetings with our clients so that we may provide business advisory services in addition to the typical compliance services. By finding someone who will work with you in this capacity, not only will you have a tax preparer, but also someone who can help you read your financial statements, help you prepare for financing through a bank, assist you in improving cash flow, establish a budget, plan for the future and more.
Costs – Bookkeeper vs. CPA
There is a large difference between a bookkeeper and a CPA in levels of training, education and experience. This is translated to the difference in cost as well. Generally speaking, a bookkeeper will earn anywhere from $20 – $60 per hour, whereas a CPA will charge $150 – $350 per hour. Many accounting professionals are also moving to a fixed fee, value pricing model in which a certain set of tasks are established and there is a monthly fixed fee associated rather than charging by the hour. This reduces the stress in calling or emailing your accountant for fear of being charged by the hour to answer your questions and allows for better planning when you know the fee month to month.
It can be a great symbiosis to pair a CPA and bookkeeper if both are competent and can communicate with each other. The bookkeeper may complete all of the day-to-day or monthly duties while the CPA can review the books on a monthly, quarterly or annual basis. By hiring a knowledgeable and experienced bookkeeper and/or CPA, they can save you hundreds to even thousands of dollars a year with deductions you might not even know existed. An experienced advisor can not only potentially save you money, but help you grow your business as well. Check out our free 4 Ways to Grow Your Business Webinar!
Hiring an Accountant for Your Business
It can be difficult to navigate the world of accounting if you are not familiar with the terminology or industry. Hiring someone to fill this position can feel overwhelming if you don’t know what to ask. We recommend asking for a referral from a colleague or friend and looking at reviews and testimonials. Craigslist and other job boards can be an inexpensive way recruiting method, but you must do due diligence in your hiring process if you choose this avenue as opposed to a referral. For example, we have a thorough hiring process that tests specific accounting knowledge, accuracy, proficiency in accounting software, etc. It can be difficult to test these things if you do not have an accounting background.
Here are four questions to ask a potential accounting partner:
- Are you familiar with my accounting software? A certification in QuickBooks or other accounting software can be a great place to start.
- Do you have client references? Speak to other or previous clients of theirs and ensure that they are or were happy with the bookkeeper’s work before hiring them.
- What degrees, qualifications and courses have you completed?
- Do you subscribe to industry news? They should also be able to tell you about any subscriptions or memberships they have to AICPA, their local CPA affiliation and any industry-specific news to show that they are up to date with law and regulation changes.
Ultimately, the long-term goals and current challenges of your business help in making the decision of whether a CPA or bookkeeper is needed. In most cases, both are necessary in some capacity. If the business is new and you need assistance managing data entry or someone to look over your accounting reports, a bookkeeper will probably suffice. But if you have any questions about how your entity should be structured, i.e. LLC, S-Corp, etc., or would like to get some tax planning advice, a CPA is best suited to help guide you through higher level business decisions so you may reach your goals. Weighing out your needs and the benefits of hiring a bookkeeper vs. CPA can be challenging, but hopefully this gives you some things to consider. If you still have further questions we would love to answer them with a free 30 minute consultation.
The Cultivating Business Growth Podcast
is Available Now!
We will release weekly episodes every Monday and decided to kick everything off with a 10-part series focused on strategic planning. Feel free to listen to the series as a whole, or just grab the episodes you feel you need right now.
As you might know, we are business advisors, who also happen to be CPAs. Our success in our 100% virtual firm is largely due to our unique approach in serving our clients and looking at their business as a whole. We talk to many people who are surprised to hear about our strategies and approach as CPAs and thought it would be great to share a different perspective on business growth strategies to business owners at every stage.