To run your business successfully, you will undeniably have to carefully think about financial management, aiming at doing it right. Of course, this is often not something that you can do alone, not only because you may lack the skills and the knowledge, but also because you will have a lot of other responsibilities on your plate, so you won’t have enough time to devote your attention to this. Therefore, you need to get help from professionals.
While you may understand that already, though, there is a chance that you are slightly confused about the type of professional you need to hire. You’ve heard about bookkeepers, but you’ve also heard of CPAs, and you may be unsure of which one of those two professionals you actually need. Well, I get that, as the difference is not always clear to everyone.
The truth is, though, that these two professionals differ in many crucial areas. And that, thus, you have to understand what both of them can do for your business, so as to figure out which one you really need. What we are going to do right now, therefore, is take the time to shed light on what it is that bookkeepers and CPAs do respectively, as well as underline the key differences, in an effort to help you choose the right option for you. Without any further ado, thus, let us get started.
What Does a Bookkeeper Do?
We are going to begin with bookkeepers. These professionals are, in essence, responsible for maintaining your financial records. What they do is handle those day-to-day transactions, in an effort to ensure that all the financial data is accurate. So, they will record all the sales, purchases, payments and expenses, that is, all daily transactions, thus keeping proper and precise financial records for you.
Bookkeepers manage your accounts payable and receivable, and they can also be responsible for processing payrolls. Furthermore, they can generate some financial reports, such as income statements and balance sheets. Most of them use great accounting software to provide you with more precise records, and to efficiently manage the financial data. Clearly, their main responsibility, thus, is handling and organizing the financial information, as well as ensuring accurate record keeping.
What Does a CPA Do?
Certified Public Accountants (CPAs) take things a step further, though. In short, they are qualified to perform a broader range of financial tasks, as well as tax-related ones. What they can do for you is prepare and file tax returns, conduct financial audits, ensure compliance with tax laws and regulations, represent your business in front of the IRS during any audits, and much, much more.
Perhaps one of the main things that you should be aware of is that a great CPA will also provide you with business consulting and financial analysis services. Additionally, they will be able to offer some tax-saving strategies, as well as do great financial planning for you in general. As you can see when you visit Cambrean CPA or similar companies, these professionals offer a much broader range of services than bookkeepers. They are more analytical and strategic, meaning that they can help your business ensure regulatory compliance, minimize tax liabilities, as well as make informed and smart financial decisions.
Main Differences to Consider
Now, while the above should have given you a better idea about how these two professionals are different, you probably want to understand those main differences even better. So, let me tell you about the key ones to consider, as that should help you make up your mind and decide which professional to hire for your particular business. First things first, while CPAs have to meet state licensing requirements and pass the CPA exam to prove their high level of expertise, bookkeepers need to have basic accounting knowledge, but they don’t need formal certifications.
Moving on, a bookkeeper focuses solely on recording financial transactions and maintaining accurate records. On the other hand, a CPA provides a wider range of services, including tax planning, financial analysis, auditing, as well as compliance services. On a more concrete level, your bookkeeper may be able to assist you in gathering financial data, but they cannot file tax returns unless certified, and they can’t offer tax advice. A CPA, however, is certified to file those returns for you, as well as offer tax advice, and represent you before the IRS.
Now, as you may have guessed it, another main difference lies in the fees of these two professionals. And, as it is probably perfectly clear already, hiring a bookkeeper is the cheaper option, simply because you get fewer services. CPAs are slightly more expensive, due to their licensing and expertise, but they are also sure to provide you with all the financial services that your business may need.
Which One Do You Need for Your Business?
So, now that you’ve understood the main differences between these two professionals, you want to make up your mind and hire the right person for you. Well, which one is right for your business? There is no doubt that both bookkeepers and CPAs play important roles, and that they can both be useful in one way or another. But, to choose the right solution, you have to carefully think about what it is that your business specifically needs.
If you’re just starting out, and you want to keep the costs down, while having someone there to maintain proper financial records, a bookkeeper may be enough for you. Furthermore, if you already have someone handling your taxes, and you simply need someone to maintain those records and handle the daily transactions, you should also opt for a bookkeeper. Yet, if you need assistance not only with those records, but also with tax preparation, planning, compliance, financial analysis, and strategic advice, you should hire a CPA, and let them handle everything for you. Basically, if you want expert guidance on your investment decisions and any kinds of complex financial matters, as well as taxes, the best thing to do is partner up with a great CPA and get the peace of mind you need.