Throughout my accounting and QuickBooks classes, I’m frequently asked questions like “Do I need a bookkeeper, an accountant, or a CPA?” or “What’s the difference between the three?” There is a very clear and precise distinction among the three, which varies depending on the state, their legal requirements, and the size of the organization. Consider this scenario: whenever you schedule a doctor’s visit, do you ever get questioned if you’d like to see a physician’s assistant or a nurse practitioner instead? Such choices may be enough if you only have a minor medical problem that doesn’t need a highly skilled doctor. This, however, changes if you believe or suspect that your case or medical condition is more serious and requires the attention of a more specialized physician. You may want to wait until a doctor is available. In light of this, selecting or hiring a financial professional for your company can be more difficult. You must evaluate everything and ask yourself one question: “What level of service do I require?” The answer to this question may necessitate additional investigation and thought.
THE BOOKKEEPER-KEEPERS OF FINANCIAL BOOKS
A bookkeeper is exactly what it sounds like: a person who keeps books. Bookkeepers are well-versed in the fundamental functions required for preserving and managing financial records, and they know how to do them accurately.
Smaller businesses may opt to hire them to simply manage income and expenses, as well as maybe payroll. They can provide services that are related to invoices for customers and bill payments that are owed to the vendors.
They may keep a general ledger and document entries as debits and credits, based on the extent of complexity required by the organization. They could also be in charge of producing and generating simple reports. A bookkeeper may simply be accountable for one component of the accounting process, such as accounts receivable, in larger firms or bigger businesses. Employers typically indicate the qualifications and skills they’re currently seeking, such as a business degree or at least participation in and involvement in accounting classes or seminars. A bookkeeper, by definition, does not necessarily involve or require any special training, education, or licensing.
Furthermore, not to be confused with an administrative assistant, a bookkeeper’s job is frequently blended and integrated with that of an office worker who answers the phone, picks up the mail, organizes documents, and so on in the world of small business. However, a bookkeeper’s responsibilities, which should be solely focused on managing the books, are frequently compromised by other office tasks. As the bookkeeper devotes more time and work to the books and takes on more duties and responsibilities, including internal controls, they begin to take on the position of an internal accountant.
THE ACCOUNTANT: MANAGEMENT COMPETENCIES ARE REQUIRED
Accountants are holders or graduates of bachelor’s degrees or master’s degrees in accounting. Unlike bookkeepers, accountants are required to have a formal background in education. In larger companies, they may supervise lower-level accounting staff or bookkeepers. They’re needed by companies for far more than just keeping track of money that goes in and out of their businesses.
The tasks and responsibilities of an accountant may differ and vary depending on the scale and particular needs of the firm for which they work. Accountants are generally expected to provide detailed explanations and interpretations of their clients’ present financial situations so that they can make better business decisions. They accomplish this, for example, by:
Creating the accounting systems and processes for the organization.
Assurance that work is completed quickly and accurately, and that financial information is kept secure.
Producing and generating reports such as balance sheets and liquidity reports, as well as assisting management in understanding their significance, and
Advising on cost-cutting measures.
The job of the internal accountant in providing formal financial reports to management, which will help in more precise and timely management decisions that conform to the organization’s financial realities, is possibly the most disregarded and overlooked of all. This varies according to the size of the firm and reporting requirements. An accountant could be full-time or work part-time once per month to merely close the books and records as well as generate internal financial reports.
Tax Preparer
Becoming a tax preparer is usually more of a function or task than a designation or profession. Everyone at a company can prepare tax returns as long as management or admin (whether it’s the owner or a bookkeeper) has given them permission to execute such a task.
Tax preparation is frequently performed by a third-party CPA (which I’ll describe in more detail later), but 3/4 of all licensed and authorized paid preparers (with qualifications such as PTIN, RTRP, EA, and Attorney) are not CPAs. The role of a CPA is frequently conflated and confused with that of a tax preparer, whereas most small business CPAs specialize in this area, it is not all that they do.
CPA: PROPER REPRESENTATION AND GUARANTEED SERVICE
Although accountants, bookkeepers, and unenrolled tax preparers can handle and prepare taxes for their companies or customers, they cannot represent them in an IRS audit or lawfully sign their business tax returns. In order to do so, they must be a lawyer, an enrolled agent, or a certified public accountant (CPA).
In order to practice in their state, Certified Public Accountants must pass a difficult qualification exam. They must also keep up with changes in tax legislation. CPAs are significantly more adept than accountants when it comes to reviewing and interpreting crucial financial statements because of their education and training. They work for firms and companies in some situations, but most of the time they manage their own businesses.
However, a certified public accountant’s primary role was not to file tax returns or represent clients in IRS audits. The most crucial job of a CPA is to certify financial accounts that are trustworthy to the public… To put it another way, they will certify a set of financial statements (income statements, profit and loss statements, balance sheets, cash flow statements, and so on) and believe them to be accurately reported thus according to accounting rules. This signature could take the following forms:
Compilation
fundamental financial statement revisions to ensure that they are displayed correctly. For small firms, the cost ranges from $500 to $5,000, depending on the intricacy. This is merely an overview and does not constitute a review or audit, so the consumer of the financial statements receives no assurance, but at least the representation adheres to fundamental accounting rules.
Review
It’s a collection with several basic requirements for the CPA to conduct some investigations and perform analytical operations in order to provide securement of the financial statements’ truthfulness and accuracy. For small firms, the cost ranges from $1,500 to $10,000.
Audit
The certified public accountant will certify that the financial statements are fairly and correctly presented and free of substantial misrepresentation (errors that could cause the financial statements to fluctuate enough to sway your judgement about the company’s financial condition). This is the most stringent degree of assurance, and it takes the longest and hardest to complete. It necessitates that the CPA be aware of the company’s internal controls and evaluate the risk of fraud or substantial errors. One audit might cost anywhere from $5,000 to $50,000 in a small corporation.
Assurance Services
In general, any financial-related research or presentation that a CPA can generate using accounting principles and corresponding procedures such as summaries, evaluations, and audits, spanning from company planning and management with financial projections to investment appraisal to cost-cutting analyses.
Finally, there are a few accounting professionals who do not perform any of these functions but do provide support to those who do. Process/control consultants, QuickBooks ProAdvisors (usually experts in the functionality of QuickBooks), and IT consultants (specializing in the accounting industry) help firms speed up day-to-day operations without compromising the accuracy or quality of the books.
Salary ranges widely, as one might anticipate, with CPAs at the top of the pay scale. However, don’t choose a financial advisor just on the basis of cost. Identify the service level you require right now, understanding that as your company grows, you can always upgrade.