As I began my virtual business, I noticed many advertisements for work-from-home opportunities. Included in these advertisements were many remote bookkeeping opportunities. Often, businesses will hire a bookkeeper rather than an accountant because the bookkeeper is cheaper. So, what is the difference between a bookkeeper and an accountant? What service can each provide to a business owner? Which option is the best fit for a small business?
An accountant can be a bookkeeper but a bookkeeper cannot be an accountant. Education, training, or certifications are not required to be a bookkeeper. There are national certifications available for bookkeepers but not required. A bookkeeper commonly know about a specific software program. A bachelor’s degree (120 semester hours) in accounting or a finance-related field is required for an accountant. All CPAs are accountants but not all accountants are CPAs. A Certified Public Accountant (CPA) license requires (depending on the state) 150 credit hours of coursework, experience, passing the CPA exam, and taking an ethics course. Not only does the CPA need that to get licensed, but they also have to maintain their knowledge with continuing professional education to renew and retain their license. A CPA is going to be most current on the changes in the profession.
Let us talk about what each can do for you and your business. A bookkeeper can take care of the daily transactions. The bookkeeper enters and organizes the data. The accountant oversees the bookkeeper and reviews the data. The data is analyzed and reports are created. The accountant can make adjustments and provide analysis, expertise, and tax advice. The accountant can also prepare the tax return. The CPA can do everything the bookkeeper and accountant can do but the CPA can also electronically file your tax return and represent you in front of a tax agency. The CPA will have more knowledge regarding tax matters.
What about costs? Yes, you are typically going to pay more for the services of a CPA than an accountant. And the services of an accountant typically cost more than the services of a bookkeeper. You are going to get what you pay for. The accountant will make adjustments and corrections during the review. The cost of cleaning and correcting the books can add up if the bookkeeper is not knowledgeable. You will end up paying for the information to be handled multiple times. When you have an ailment and want to see the doctor, you end up explaining the problem several times. You have to explain to the receptionist why you need a doctor’s appointment. Then you have to explain to the nurse why you are being seen. Finally, you get to repeat your story to the doctor. Wouldn’t you like to just walk straight into the office and tell your story one time? The same goes for transactions. You will have to explain the transaction to the bookkeeper so they know how to record the transaction. Then you will need to explain the transaction to the accountant so they can ensure the transaction is reflected on the financial reports correctly. Then you will need to explain the transaction to the CPA so they can determine the most advantageous tax treatment. Can you put a cost value on your time?
So, do you need a bookkeeper, an accountant, or a CPA? Do you need one of each, or a combination of two, or can you get by with just one? In the accounting world, my answer is always going to be – it depends. You will want to evaluate the needs and goals of your business.