Small Business Finances: Should You Hire a Bookkeeper, an Accountant, or Both?

As a small business owner, you know that bookkeepers and accountants are professionals who can help take care of your company’s financials. But do you know what the difference is between their roles — and which one is better for a small firm? Although their duties can overlap, each one has a distinct part to play and your small business can benefit from using both.

Here’s why: A bookkeeper keeps the daily financial records of your business up to date and balances the books regularly. Having this accurate, complete, and timely financial information is critical to the smooth operation and long-term survival of your business. But you have to know how to use the data.

That’s where an accountant comes in. An accountant looks at the big picture of your business’s finances based on the information the bookkeeper has compiled. Your accountant analyzes the numbers and gives you the financial advice you need to help make good business decisions. Tax return preparation and tax strategy are also tasks they are trained to handle. Ideally, a bookkeeper and accountant will work together. And of course it’s important that you, the business owner, work closely with both of them to keep tabs on the money side of your business, including its current state and the projections for its future financial health. Using a bookkeeper and an accountant can make that easier for busy small business owners.

In fact, many small business owners say they they wish they had started working with these financial professionals sooner; so, it’s never too early to find these key financial partners, even if you are just starting out and only need occasional consultations. As you consider whether or not you need a bookkeeper, accountant, or both, here’s a closer look at each of their roles.

Small business bookkeepers

At a minimum, your small business should have a bookkeeper. Even if you don’t have any employees and haven’t yet made a sale, a bookkeeper can help you get set up on an accounting software program. That way, from the very start of your business you or your bookkeeper will have a place to record expenses and capital investments, and keep tabs on potential tax deductions. Some bookkeepers are certified in specific accounting programs, such as QuickBooks.

While anyone can call themselves a bookkeeper (there are no required credentials), there are two national organizations that certify bookkeepers who pass their exams and meet their requirements, including ongoing education and agreeing to an ethics code. The American Institute of Professional Bookkeepers outlines its standards on its website. The National Association of Certified Public Bookkeepers has its program info here.

Core bookkeeping duties

• Create and send invoices

• Enter and process payments made and received

• Track receipts and reimbursements for employee business expenses

• Reconcile accounts and create reconciliation reports

• Maintain the general accounting ledger

• Prepare initial financial reports, like profit-and-loss statements

A bookkeeper may also:

• Set up your accounting system

• Process payroll

• Value and track merchandise inventory

• Work under the direction of an accountant

Cost: Rates can range from around about $20 to $75 an hour, or more, depending on whether you need basic bookkeeping (data entry and receipt scanning, for example) or a full-charge bookkeeper.

Rates and fees will vary based on how much work you need done, the going rate in your geographical area, how complicated your business finances are, and how often you use a bookkeeper’s services.

Bookkeepers usually charge less than accountants so it makes sense to rely on them for most of the routine financial upkeep of your small business. A bookkeeper can be on staff part-time or full-time, or hired as an independent, freelance contractor.

Be careful: There are bad actors in any profession, especially where money is involved. Be sure to check references before you hire a bookkeeper. And don’t expect to wash your hands of your business’s financials once you do hire one. That could make you an easy target for an embezzler, whether the person is on staff or an outside contractor.

Small business accountants

Most small businesses can benefit from working with an accountant in order to take advantage of their financial analysis and advice. At the very least, your small business should check in with an accountant once a year in order to update your tax strategy and go over the financial information the accountant needs to prepare your taxes, even if that information is shared electronically.

Not all accountants have passed the national accounting exam and met the requirements to become a Certified Public Accountant, or CPA. For example, a cost accountant at a big company wouldn’t need to be a CPA. But some states don’t let a person advertise themselves as an accountant unless he or she is a CPA.

Specifically, a CPA is an accountant who has passed the exam and earned the Certified Public Accountant certificate and license from a state accountancy board to practice public accounting. What does that mean exactly? Public accounting is work done for members of the public, as opposed to internal accounting for a private company or government organization.

A CPA can also represent your business before the IRS. That said, not all CPAs specialize in tax matters and you’d still need a tax attorney to represent you in tax court. Non-attorneys have to pass a difficult examination to do so, and few try.

Core accounting duties

• Analyze company financial data

• Prepare company financial reports or approve initial reports prepared by a bookkeeper

• Create financial projections

• Provide management advice on the financial impact of business decisions

• Conduct internal audits and regulatory compliance checks

• Provide tax advice and tax planning

• Handle income tax return preparation

• Represent your business before the IRS or state tax authorities, if necessary

A CPA may also:

• Set up the corporate structure of your business

• Affirm the reliability of your business financial information for outside parties

• Oversee your bookkeeper’s work

Cost: Rates vary by geographic area and by the scope and frequency of the work you need done. Typically, a CPA will charge about $100 to $200 an hour or more.

Be careful: Check backgrounds, licensure status and references whether you plan to hire an accountant as an employee or as an independent professional. And make sure you understand everything your accountant tells you about your business. If someone is bent on committing financial fraud, a passive business owner is an easier mark.

For many small business owners, keeping track of their firm’s money can be challenging and cumbersome, but it’s an essential key to run a successful business. That’s why calling in the right professionals who are skilled at crunching numbers makes sense.

Now that you have a better idea of how the duties and roles of bookkeepers and accountants differ and how they can complement one another, you’re ready to choose the combination that is best for your small business.