Running a small business is hard enough as it is. It takes a lot of money to start a business, and there are no guarantees you’ll actually succeed. Between finding trustworthy vendors, dealing with irate customers, hiring good employees, and “hustling” to market your products or services, it’s hard to find time to do whatever it is you set out to do in the first place! And to top it off, you start hearing all kinds of advice about hiring a bookkeeper or an accountant. But how do you go about finding one? And what’s the difference between bookkeepers and accountants anyway?

It’s easy to be confused about the difference between the two. They both work on a small business’s finances, the two terms are often used interchangeably, and there’s even some overlap regarding their responsibilities. But there is a distinction, and for your business to succeed it’s important to know what it is.

What Bookkeepers Do

Generally speaking, a bookkeeper is someone who makes and maintains a business’s day-to-day transactions. Their responsibilities typically include:

  • Setting up and updating the company’s accounting processes and procedures
  • Paying and recording bills and other expenses
  • Creating invoices, keeping track of sales and other receivables, and following up with customers who have outstanding balances
  • Reconciling bank, credit card, and other accounts (e.g. loans, PayPal, petty cash)
  • Managing payroll, including payroll taxes
  • Budgeting
  • Maintaining and organizing the company’s raw financial data, typically through a general ledger

Most bookkeepers have earned a least an associate’s degree in accounting or a related field. They’re also the ones that use accounting software, such as QuickBooks, on a daily basis.

What Accountants Do

If bookkeepers keep track of a company’s finances on the day-to-day level, accountants have more of a “top-down,” analytical view. Here are some of the tasks they’re usually responsible for:

  • Going over the company’s accounting records for errors and discrepancies
  • Preparing financial reports, such as balance sheets, income statements, and profit & loss statements
  • Analyzing sales trends and developing cash flow forecasts
  • Adjusting journal entries
  • Providing financial advice, such as identifying potential growth opportunities

Accountants typically have at least a bachelor’s degree in accounting or a similar major. Most accountants become Certified Public Accountants (CPAs), which require additional education and experience, passing an exam, and meeting a minimum yearly requirement on continuing education. CPAs can be valuable for two very important aspects of your business:

  • Business formation & organization. They can advise you on whether you should set up your business as a sole proprietorship, limited liability partnership, corporation, etc.
  • Taxes. The majority of a CPA’s work involves helping individuals and businesses with their taxes. Thanks to their extensive knowledge of the tax code, CPAs can assist you in filing your tax returns (or do it for you), point out expenses that can be deducted, determine what documents you need to keep for tax purposes, help you apply for loans, and advise you if the IRS ever comes calling with an audit.

In short, bookkeepers focus on a business’s inner workings; handle major events like a sudden onslaught of new clients, busy or slow seasons, or organizational changes; and can help find ways to reduce overhead and improve profits. Accountants, on the other hand, help you see the “big picture” of your business; guide you through the many complexities of tax law; and provide other higher-level services that can give your company a vision for the long-term.

Do You Need Both?

At first glance, it may seem redundant to hire both a bookkeeper and an accountant. You might be thinking to yourself, “Why would I hire a bookkeeper and an accountant? Why hire a bookkeeper when an accountant can do everything a bookkeeper does and more? Why can’t I just have my CPA do my books?”

CPAs prefer to provide the tax, business advisory, and other high-level services they’ve trained extensively to do, not day-to-day bookkeeping. Some CPAs refuse low-level work altogether, while others charge a premium for work bookkeepers can do for far less. Hiring a separate bookkeeper and accountant, then, can actually save you money; you can pay a bookkeeper less than a CPA for the same kind of work, and you pay the higher rate for a CPA only when you need them.

If you’re just starting out with your business, or if it’s very small, you can probably get away with having just an accountant. Accountants are practically necessary when you create your business, and in the first few months it’s in operation. And if you don’t have a lot of bookkeeping needs, your accountant may be able to take care of it, or you might even be able to do it yourself. Once your company starts growing, however, it makes sense to hire a dedicated bookkeeper so you can spend more time on your business itself. You can also leave your bookkeeping to an outsourced firm like Innovative Financial Services, LLC.

Having both a bookkeeper and an accountant has one other advantage: having two sets of eyes overseeing your finances. This setup helps keep your books accurate and complete, and ensures you have someone to contact in case your bookkeeper runs into a problem.

What to Look For

When hiring a bookkeeper or an accountant, here are some qualities you should look for:

  • They should be someone you feel comfortable working with. You want someone who responds to you in a timely manner, and who likes to hear from you. Accountants and bookkeepers who enjoy their work are likelier to provide a better service.
  • They should be proactive, and willing to get involved with your business. When you meet someone for an initial consultation, ask them if they have any questions about your business. If they don’t, this is a bad sign.
  • They should speak to you in plain English. Accounting is a field with a lot of jargon, but while it’s important to know some terminology, if an accountant or bookkeeper can’t communicate with you, you’re not going to know what’s going on in your business.
  • They should be honest and willing to tell you what you need to hear — not what you want to hear — when you need to hear it.
  • They should have good client references. If most of a CPA or bookkeeper’s clients are satisfied with their work, chances are you will be too.
  • Many accountants and bookkeepers have errors & omissions (E&O) insurance; while this isn’t required, working with someone that has this insurance might give you extra peace of mind.

How to Find a Bookkeeper or Accountant

The best way to find a bookkeeper or accountant is through word-of-mouth. After all, whoever you hire will be responsible for your finances, the lifeblood of any business; therefore, you will need to find someone who is dependable and trustworthy. Asking for referrals takes much of the guesswork out of this process. Turn to fellow business owners, especially those in the same industry, to see who they rely on for their accounting. If you already have a CPA, they may also be able to refer you to bookkeepers they trust. If you hear the same names come up repeatedly, or if a colleague talks at length about how great their accountant or bookkeeper is, those should be your top candidates.

There are many ways to look for bookkeepers and accountants online. For CPAs, the American Institute of Certified Public Accountants (AICPA) is a good place to start, as well as your state’s board of accountancy. BookkeepingHelp.com is a great directory of bookkeepers, in addition to the NACPB database. And if you’re looking for an accountant or bookkeeper with QuickBooks knowledge, you’ll want to find someone certified by Intuit’s ProAdvisor program.

When vetting candidates, make sure to do your due diligence — do a background check, ask for client references, and meet with them face-to-face for a consultation. And whatever you do, don’t go for the cheapest option. Good bookkeepers and accountants know the skills they possess and the value they provide to their clients, and charge accordingly.

Conclusion

By understanding the difference between bookkeepers and accountants, business owners can better determine how they can meet their unique financial needs. This, in turn, sets them up for future growth and success. If you’re just starting off, use this information to see what kind of professional or professionals you need. And if you’re more established, check in every so often to ensure your accountant, bookkeeper, or both are continuing to provide the quality services you’re looking for.