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Bookkeeping vs CPA Tasks: Which Do You Need for Your Business?

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The choice between engaging bookkeeping vs CPA services can be a tricky one. However, by understanding their roles, we believe you can more easily make the right decision for your business. 

Understanding Bookkeeping vs CPA Roles

The Role of a Bookkeeper

A. Definition of a Bookkeeper

Bookkeepers primarily focus on the everyday recording of a company’s financial transactions. 

B. Scope of Services Provided by Bookkeepers

Bookkeepers do tasks like recording income and expenses, and reconciling bank statements. They may also manage accounts payable and receivable, and generate basic financial reports.

Exploring the Role of a Certified Public Accountant (CPA)

A. Definition of a CPA

CPAs look at the bigger picture of a business’s finances. They analyze financial data, identify trends, and provide strategic financial advice.

B. Scope of Services Provided by CPAs

CPAs can do bookkeeping tasks, but might choose to delegate these. CPAs can also perform tax planning and preparation, conduct audits, offer financial consulting services, and advise on business investments.

Key Differences in Education and Certification Requirements

The formal education requirements for bookkeepers are generally less stringent than for CPAs. Some bookkeepers might have a college degree in accounting or a related field, but certifications are not mandatory. Such certifications simply enhance their skills and knowledge.

CPAs must hold a bachelor’s degree in accounting or a related field, then pass the rigorous CPA exam. To keep their licenses, they must also complete continuing education requirements.

Collaborative Approach: Bookkeeper and CPA Working Together

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A. Complementary Roles and Responsibilities

Bookkeepers and CPAs definitely fulfill complementary roles within any business’s financial management system. Mainly, as a bookkeeper focuses on the daily details, the CPA is free to take a broader view of the finances. 

Bookkeepers take care of transactional tasks, ensuring accurate financial records. This way, CPAs are not loaded down with these items. They can then use their time and energy to focus on the financial health of the business. Analysis and strategic guidance becomes better when they don’t have to worry about the details.

Maintaining complementary roles between a bookkeeper and a CPA creates an efficiency within the business. Each does what they are best at, and the business can get the best of both.

B. Communication and Collaboration Strategies

Bookkeepers and CPAs can strengthen their working dynamic in a few key ways.

Initial Setup and Planning

It’s important for these partners to meet with you together to define their roles and responsibilities. This helps you all to avoid confusion that can harm efficiency.

Decide on your preferred methods of communication. Then, agree on how you will ensure the timely and efficient exchange of information. We recommend setting a regular meeting schedule to go over ongoing tasks, upcoming deadlines, and potential issues.

Ongoing Collaboration

Develop and maintain a standardized chart of accounts. This ensures that the bookkeeper maintains consistent categorization of financial transactions. The CPA can then do the analysis and reporting much more easily.

Establish clear procedures, too, for data sharing. We recommend cloud-based accounting software so the data is secure and also easily accessible in real time. Secure file transfer protocols work, too, but are not as streamlined.

Encourage open communication between the bookkeeper and CPA at all times. This is a partnership, not a competition. Increase communication and the focus on organization during tax season. The same goes for year-end closing time. 

Factors to Consider When Choosing Bookkeeping vs CPA Services

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A. Business Size and Complexity

If you have a small business and need help managing day-to-day finances, a bookkeeper may be sufficient. As your business grows or your financial needs become more complex, consider the benefits of hiring a CPA. They have broader expertise and can provide a more comprehensive analysis, as well as give strategic financial guidance.

Some businesses choose to hire both a bookkeeper and a CPA. The bookkeeper usually handles the ongoing data entry and record-keeping, while the CPA focuses on higher-level financial analysis and planning.

B. Budget and Resource Constraints

Some businesses choose to forego hiring a bookkeeper and simply learn to do record-keeping themselves. This is a money-saver, but only if learning the books is not eating up more resources than hiring a bookkeeper would entail. 

A business should never forego hiring an accountant, however. Having this expertise on hand is vital to compliance and business health. A good balance for most profitable businesses is to have both a bookkeeper and an accountant, splitting the workload as described above. 

That said, if your needs are moderate and you can’t afford both, consider a bookkeeper with tax preparation experience. You can also explore virtual CPA firms that offer scalable bookkeeping and tax services. This can be a cost-effective option for growing businesses.

C. Long-Term Financial Goals and Growth Plans

A CPA might be a better fit than a bookkeeper if you have long-term financial goals and growth plans. This is mainly because CPAs are trained to focus on strategic planning. They go beyond the basics of the day-to-day transactions.

Financial Analysis and Modeling

CPAs are keyed into analyzing financial data and identifying trends. Moreover, they provide strategic financial advice that is actually specifically tailored to your growth plans. They know how to create financial models to forecast future performance, assess the feasibility of expansion plans, and help you make informed investment decisions.

Tax Planning Strategies

As your business grows, the tax complexities tend to increase. CPAs can develop tax-minimization strategies to optimize your profits and support your long-term financial goals.

Guidance and Support for Growth

If you plan to raise capital for business growth, you’ll need better than average financial statements. A CPA can help you prepare the statements and projections you need to not only meet investors’ requirements but also impress them.

A CPA is also qualified to advise you on possible mergers and acquisitions. They can ensure that you check the financial viability of such opportunities and maximize their benefits. In line with this, they can identify potential growth risks and help you strategize to mitigate them.

Frequently Asked Questions

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What is the difference between a bookkeeper and a CPA?

In essence, a bookkeeper maintains the financial records while a CPA analyzes and interprets those records. The CPA provides financial guidance and strategic advice based on the data that the bookkeeper gathers. 

Can a bookkeeper also provide tax preparation services?

A bookkeeper with qualifications above the usual standard may be able to provide tax preparation services. It also depends on the complexity of your tax situation. They can also leverage software options for relatively simple tax situations.

Tax preparation involves compiling financial data, calculating tax liabilities, and filing tax returns with the government. All things being equal, a bookkeeper can learn how to manage all that without CPA certification. 

Remember that tax mistakes can lead to penalties. If you have any doubts, consult with a qualified tax professional.

How often should I consult with a CPA for my business?

Most experts recommend consulting with a CPA at least every quarter. This allows them to stay abreast of your financial situation. This helps them identify trends and potential issues to ensure your books stay in order at all times. 

Regular consultations can help you make informed financial decisions. The more complex your business is, the more often you should talk with your CPA. For instance, you can consult monthly if you have high sales volume, large inventory, or complex tax considerations.

Do I need both a bookkeeper and a CPA, or can one professional handle all my financial needs?

For some small businesses with straightforward finances, a bookkeeper with tax preparation experience may be enough. For example, a bookkeeper can probably handle most financial needs for a sole proprietorship with minimal income and expenses.

That said, having both is still highly beneficial. CPAs can offer you higher-level analysis and strategic advice. They know tax planning and minimization strategies, too.

What are the typical fees associated with engaging bookkeeping vs CPA services?

The fees for hiring a bookkeeper or a CPA can vary. 

The average hourly rate for a bookkeeper in the US ranges from $20-$60 per hour. Still, some people charge as low as $15 per hour and others as high as $100 or more per hour. It all depends on their experience, location, and service offerings.

If you outsource bookkeeping, it is usually at least 60% cheaper. Some bookkeepers or agencies also offer monthly fixed-rate packages for a set number of hours or specific services.

CPA hourly rates range from $150-$350 or more, on average. This also varies significantly depending on experience, location, and specialization. Rates can also change depending on the complexity of your business. 

For specific tasks like tax preparation, many CPAs charge flat fees based on the project scope and complexity. Don’t forget that you can also negotiate rates, especially for ongoing services. 

When considering cost, remember that the cheapest option isn’t always the best. Always look for a qualified professional who understands your business needs and offers competitive rates. All things being equal, go for the one who also has specific experience working with businesses in your industry and niche.

 

What Is AccountsBalance?

accountsbalance

AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.

We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.

You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.

Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.

And here’s some free resources:

 

 

In Summary

Ultimately, choosing between bookkeeping vs CPA services depends on your specific needs and budget. Consulting with both a bookkeeper and a CPA can actually help you understand their services. This way, you can determine the best fit for your business.

Want help with your bookkeeping? We make it easy. Get startedSpeak w/ a Founder, or Schedule a Callback

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Julia Valdez

Julia Valdez

Julia is a career freelancer and agency owner turned coach for those seeking abundance and victorious living. A professional teacher and decades-long lover of the art of words on paper and the stage, she loves sharing actionable advice on life-changing topics. When she’s not helping freelancers and other small business owners grow, you can find her sharing lots of laughs over little crazy things.

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