You got into business because you love what you do, not because you know how to manage your bookkeeping or analyze your finances. That’s why financial experts exist. They do all the mathematically heavy lifting so you can do what you do best: run and grow your business.
But unless you’re a financial expert yourself, it can be hard to know what kind of help you need. What’s the difference between an accountant and a bookkeeper anyway? When should you hire a CPA or CFF? And what do those acronyms even stand for?
Let’s break down the different types of financial experts you’ll encounter over the course of running your business—and when you should hire them.
Get a quick comparison of four different types of financial experts and how they can help your business.
Put simply, a bookkeeper upkeeps your books. That much is obvious. But what exactly do they do? Bookkeeping responsibilities vary depending on the size and needs of your business. But a bookkeeper’s main goal is to organize and maintain your business books.
Imagine how much time you could save if those duties didn’t fall to you! Bookkeepers exist to free up time in your schedule to focus on the vision you have for your business. Working with a professional bookkeeper also minimizes the room for error, ensuring you have accurate financial data. And, come tax time, a bookkeeper can help you prep your books for accurate filing. In the event of an IRS audit, clean and accurate bookkeeping records are going to be your best friend.
There’s no specific milestone or checkpoint that indicates when you should hire a bookkeeper for your business. If the day-to-day management of your business books is taking up too much of your time—time that could be spent growing and optimizing your business—it’s a sign you might need some help.
Likewise, if you’re starting to feel like your books are a riddle wrapped in a mystery inside an enigma, a bookkeeper can help you sort them out. Most business owners don’t feel totally confident when it comes to the financial management of their business, bookkeepers are a great resource.
While a bookkeeper maintains and updates your books, an accountant uses those books to assess your finances, provide financial insights, and diagnose the financial health of your business. An accountant can help you make financial decisions for your business, determine profitability, and look for opportunities to grow your bottom line. A bookkeeper handles the clerical side of bookkeeping, like data entry and monitoring, while an accountant analyzes those numbers.
In general, an accountant’s duties include:
An accountant’s role typically requires a higher level of expertise and education. Accountants usually hold an accounting degree and are either accredited by the Accreditation Council of Accountancy and Taxation or are registered as a certified public accountant (CPA). CPAs must pass the CPA exam to use this highly regarded title.
It’s not uncommon to work with both a bookkeeper and an accountant. Bookkeepers manage your financial records so accountants can provide expertise and advice. You can hire a bookkeeper anytime, but an accountant can’t do their job without a bookkeeper (or, at the very least, a solid bookkeeping process).
It might be time to hire an account if you’re already working with a bookkeeper and you’re ready for deeper financial insights and business growth. An accountant is a dedicated financial partner for your business. They want to help your business grow, and they’ll give you the tools and advice you need to do so.
A bookkeeper manages your books and an accountant analyzes them, but a financial advisor looks beyond the books. A financial advisor takes both personal and business finances into account, whereas an accountant or bookkeeper isn’t interested in seeing your personal funds unless you accidentally make a business purchase on a personal card.
As always, duties vary by business needs. But in general, financial advisors help by:
If you’re just starting out, a financial advisor can help you make the most of your venture capital as you transform it into a viable business. They can assess your business model and help you outline a plan for financial success. Beyond that, they can help you establish essential accounting and bookkeeping processes to pave the way for your future accountants and bookkeepers.
A financial advisor is never required for running a business, but they can be a new entrepreneur’s best friend. Business owners just starting out can benefit from consulting with a financial advisor as they build a business plan, develop accounting processes, and set financial goals for their business. Beyond that, a financial advisor can help you with basic business setup like choosing a business structure, finding business insurance, or creating a retirement plan.
If you’re new to the business landscape and not quite sure how to navigate it, a financial advisor may be a good partner to invest in.
Taxes aren’t anyone’s idea of a good time, but small business taxes are even more complicated. Working with a bookkeeper or accountant to prepare your books for tax season is a great first step, a small business tax professional can take you the rest of the way.
A tax professional can be authorized by the IRS to represent you on all tax matters. It’s their job to stay up to date on ever-changing tax laws, rules, and regulations, so you don’t have to. These rules can change every year, and they have a big impact on how much you owe or get back in your refund. Additionally, tax professionals are experts at identifying ways to save money at tax time, and they can give you advice for reducing your tax liability in the future.
Anyone who prepares taxes for a fee can call themselves a tax professional, but not all tax preparers can represent you before the IRS. If your accountant is a CPA, they can prepare your tax return and represent you before the IRS. Likewise, enrolled agents (EAs) are tax professionals who have passed the special enrollment examination given by the IRS and can represent both individuals and businesses before the IRS.
You can certainly prepare and file taxes on your own, but you might be missing obvious small business tax credits and deductions or making mistakes that could result in a costly IRS audit.
If you’re feeling anxious about filing taxes for the first (or even 27th) time, a tax professional can ease your fears. If your taxes are complex, you have an outstanding debt with the IRS, or you’re worried you won’t make the filing deadline, investing in a tax professional is a responsible choice.
Every business has different needs. You might not be ready for a full-time bookkeeper, but you could still use some help managing your books. You might not need an EA to help with taxes, but you could still use a bit of guidance. No matter what financial help you need, you have a few options:
Once you’ve decided the level of financial expertise you need, make sure you do a little vetting of your own. It’s important to work with a financial expert who understands your business, knows your industry, and has your business’s best interests in mind.
Ask these questions to get the full picture:
Working with a financial expert, whether a bookkeeper, accountant, advisor, or tax professional, is a two-way street. They can only do their jobs well if you do yours. For business owners, this means:
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