If you’re like most small business owners we know, we’re willing to bet that you’ve been wearing an awful lot of hats. You’re not only the inventor and creator of your business, but you also are likely to oversee business development, manage client relationships, as well as keeping the whole operation running smoothly. At some point in your company’s growth, however, the demands on your time simply become too great, and it becomes the more prudent choice to get professional help in areas such as accounting and bookkeeping.
We often hear people asking whether their business needs a bookkeeper or an accountant. We think it’s actually a bit of a trick question. Chances are that you need both. Each of these professionals performs different services, and you’ll need the right person when those services are required. The distinctions between the two tends to get a bit blurred, however, so let’s look at the differences between them and when you need the services of each one.
A bookkeeper will typically handle recording of day-to-day financial transactions. These are likely to include accounts receivable tasks like invoicing your clients and receiving their payments, as well as accounts payable tasks like reviewing your vendors’ bills and issuing payments. Your bookkeeper should also be able to handle bank reconciliations, and run your payroll. A “full-charge bookkeeper” (really a somewhat more advanced bookkeeper), can probably manage journal entries, and close out your books at the end of each month.
An accountant can be expected to have more specific professional education, including a degree in accounting or finance. A CPA (Certified Public Accountant) will have passed a series of exams covering auditing, tax regulations, financial reporting, ethics, and a host of other business topics. Accountants are qualified to perform more high-level financial functions. These are likely to include filing your business tax returns, producing financial documents like profit-and-loss statements, and providing tax advice and other strategic financial advice.
It’s going to be a good idea to use the right professional for the right need, to be most cost-effective. You wouldn’t call in a master carpenter to pound in a few nails to hang your pictures, and similarly, it doesn’t make sense to pay an accountant to do routine bookkeeping. Generally speaking, you need a bookkeeper fairly regularly, even in the early days of the business, to handle the day-to-day tasks, and take that workload off of your plate. You will eventually need an accountant, however, when your finances get too complicated, when you need financial advice, or when it’s time to deal with the government.
Many small business owners are finding that the ideal solution is to outsource these matters to a virtual accountant. You’ll get the benefits of a full team of experts to whom you can turn over your complete accounting and bookkeeping functions. They’ll manage the entire process, and dedicate the right staff member to each job you need performed.