An in-depth analysis of a bookkeeper, an accountant, and a CPA
Now that you know the players a little better from our last post here, let’s dive deeper into what each one does.
Bookkeepers perform the daily tasks, such as receiving and recording payments, entering and paying bills, running payroll, and reconciling the bank statements. “The bookkeeper handles everything that must be done on a daily basis to ensure the business’s books are complete and accurate.”
Bookkeepers typically don’t have an accounting degree, but they should have adequate experience and accounting knowledge. And in today’s cloud-based accounting environment, they’ll often have software certifications to show their competencies with particular applications, such as Quickbooks or Xero.
Can an accountant or CPA perform bookkeeping tasks? Absolutely!
But, remember, it’s a hierarchy. So while the higher role encompasses the abilities of the lower role, it usually outsources those tasks in order to focus on the areas that require more expertise. In a nutshell, CPAs can perform bookkeeping, but they usually do audits or taxes.
Certified Public Accountant (or CPA)
A CPA typically has multiple degrees in accounting or finance and has passed a rigorous 4-part examination covering taxes, financial accounting, auditing, and business law. He or she is required to attend 40 hours of continuing professional education every year to maintain his or her accounting knowledge and professional competency.
CPAs typically specialize in auditing or taxation. Auditing in this scenario means ensuring that the financial statements of the companies they audit are correct. It should not be confused with an IRS audit. Taxation, as you’d assume, means preparing tax returns, planning/advising clients on the best tax strategies, and representing clients in an IRS audit.
CPAs are plentiful in public accounting firms. They often hold positions as CFO, chief financial officer, in corporations. Some even decide to open their own private practice and focus on businesses and individuals that need their expertise, just like The Creative’s CFO.
Private practice CPAs might hire bookkeepers and accountants to perform duties associated with certain engagements.
You’d hire a CPA if you require someone to be very hands-on with your business - working through irregular cash flow issues, making sure you’re set up to pay yourself and receive the maximum tax benefit, planning inventory, selecting your business entity, representing you in an IRS audit, etc. “The CPA is an all-encompassing partner in your business finances as a whole, not just for your taxes.”
The accountant typically holds an accounting degree. They analyze financial statements and accounting transactions to ensure they’re recorded properly. “You might seek out an accountant prior to a particular transaction for help in structuring it for maximum benefit to you and your business.”
Accountants assist CPAs in performing their engagements and are very knowledgeable within their field of experience.
You’d hire an accountant if you need someone with more expertise to help you work through tough financial transactions, plan tax strategy, and analyze your current financial picture more thoroughly.