Are you ready to get your taxes or bookkeeping done? Have you been looking for the right professional to review your financial statements?
If so, you may be trying to decide between a Bookkeeper vs CPA. Each of these financial advisors serves to help people figure out how to organize their finances.
But, they do this in different ways.
To learn more about the difference between these two professionals and when to hire them, keep reading.
What is a CPA (Certified Public Accountant)?
A CPA (certified public accountant) is a licensed accounting professional. They have passed the Uniform CPA exam as dictated by the American Institute for Certified Public Accountants (AICPA). Prior to that exam, these individuals also complete education and experience requirements
In coordination with the National Association of State Boards of Accountancy (NASBA), the AICPA conducts the exam and issues the license. The exam itself tests accountants on tax, auditing, and general accounting skills.
After receiving their license, CPAs must sustain it. They must complete Continuing Professional Education (CPE) requirements every one to three years as directed by their state board policies.
The CPA certification is one of the most sought-after licenses in the accounting industry. And, becoming a CPA will distinguish you remarkably from other accountants.
CPAs have the ability to undertake a variety of tasks:
- Preparing and analyzing financial reports
- Conducting audits
- Preparing and filing tax returns
- Assisting in business-related decision making
- Consulting on financial issues
With a wide range of abilities under their scope of practice, CPAs can do more. They have the knowledge to help businesses flourish financially.
Accountant vs CPA
Accountants and CPAs are very similar. The main difference is that CPAs have their CPA certification from the AICPA. However, the requirements set forth for the exam also set the two financial professionals apart.
Both accountants and CPAs must have a Bachelor’s degree at a minimum. But, CPAs must also have (and maintain) their CPA certification.
Without this certification, accountants can still offer advice and insight about big-picture finances in business. However, CPAs can give more in-depth advice regarding the legal and business aspects of the financial sector.
CPAs have the experience and knowledge necessary to give specific advice when it comes to business decisions. They can even represent clients in court if they need to.
With this, CPAs have to uphold a strict code of ethics in accordance with their profession. The AICPA expects them to conduct themselves at higher standards than non-certified accountants.
Lastly, accountants have the ability to create compilation reports, while CPAs can do more. They have the ability to create, review, and audit reports.
Whether you need an accountant or a CPA will depend on what kind of work you need to do. Smaller businesses may fair well with an accountant, while larger businesses may need the expertise of a CPA.
However, the government does recognize CPAs as better qualified professionals than accountants. If your business is facing financial trouble, you should splurge for a CPA. They can be a valuable asset to your business now and in the future.
What Is a Bookkeeper?
Like CPAs, bookkeepers are financial professionals. However, bookkeepers tend to focus on daily financial concerns. As such, they keep up with company ledgers.
On a day-to-day basis, bookkeepers ensure that a company’s ledger holds all financial transactions accurately.
Before financial software, bookkeepers were the ones that walked around with huge binders of financial information. Now, the majority (if not all) of financial details remain online.
You may hear some people refer to bookkeepers as bookkeeping clerks. Either way, they’ll complete the same tasks while on the job:
- Track cash flow throughout the company
- Manage payroll
- Prepare and correct financial statements
- Manage company accounts
- Generate invoices
After becoming a bookkeeper, these financial professionals may use their knowledge to assist business managers in making financial decisions. Although, they do not have the elevated business knowledge that CPAs have.
In most cases, bookkeepers manage financial information using Best Accounting Software without analyzing it. They may help business leaders interpret confusing financial information, though.
Bookkeeper vs CPA: Main Differences
Certified Public Accountants (CPAs) are expert accountants who have passed a state licensing exam. The Uniform CPA exam evaluates whether test-takers have the required knowledge to become an official CPA. Prospective CPAs must also complete a certain amount of hours working as an accountant.
On the other hand, bookkeepers are responsible for maintaining a financial record. This records the money that flows in and out of a business.
CPAs work on preparing, examining, and analyzing financial records. They can draft financial records, build accounting procedures, and conduct detailed audits as needed.
In business settings, CPAs can prepare budgets, estimate profit margins, and prepare tax returns. CPAs even have the ability to legally represent their clients in issues related to the IRS.
Bookkeepers keep track of spreadsheets, databases, and software in order to detect any changes in the records. Their main responsibility involves maintaining these ledgers by tracking money and arranging deposits.
Using this information, bookkeepers can generate statements and balances.
Reasons for Hire
Businesses and individuals hire accountants for financial consulting when it comes to complex transactions. Most popularly, accountants come in handy around tax time. They can help prepare and file tax returns.
Bookkeepers work with routine recordkeeping.
Overall, individuals and businesses hire accountants for short-term needs while they hire bookkeepers for long-term needs.
To become a CPA, you’ll need a Bachelor’s degree at the very minimum. Usually, patients need one to two years of work experience, but this may vary depending on the state you practice in. And, you may need a year or more of work experience under the direct supervision of an acting CPA.
After this education, you’ll need to pass the Uniform CPA Exam. You have to earn your certification in order to practice as a CPA.
Bookkeepers need a high-school diploma at a minimum. From there, they should consider passing the AIPB and NACPB’s Certified Bookkeeper Exam. This isn’t required, but it’s heavily recommended.
Where Bookkeeping Ends and Accounting Begins
Through these reviews of each position, you might have found that bookkeeping and accounting overlap. In fact, bookkeeping is a part of the accounting process.
Larger companies may hire both a bookkeeper and an accountant to work together. The accountant can use the information that the bookkeeper has been tracking. With this information, the account can do a few things:
- Review and audit the financial statements
- Analyze and interpret the information on a higher scale
- Create a financial report using the information provided
- Share business advice with leaders based on what they’ve found
As you can see, the records that the bookkeeper maintains can affect the accountant’s advice for the company. So, each job is important in different ways.
Together, the bookkeeper and accountant can help companies grow financially. Ultimately, this will improve the health of the business overall.
CPA vs Bookkeeper: Which Do You Need?
Unless you have a large business, it may not be worth your money to hire both an accountant and a bookkeeper. So, you should consider the industry you’re in and what level of expertise you need.
In general, bookkeepers are cheaper to employ and better for handling daily transactions. On the other hand, accountants can give advice for operating your business through the lens of a financial expert.
You should understand what industry your business is in, how many employees you have, and how large your inventory is.
If your industry requires you to work with high-volume transactions and complex financial systems, you may require an accountant. They have the training and knowledge needed for high-level financial situations like these.
However, you shouldn’t completely count out bookkeepers. You may need one if your business is having trouble keeping track of daily transactions.
In fact, a bookkeeper with years of experience may be a better choice than an accountant who has just graduated.
What About Small Businesses?
No matter how small your business is, you need some kind of way to review financial statements and make financial audits. Bank reconciliations aren’t going to happen on their own.
If you can’t afford to hire a bookkeeper and/or accountant, you may want to consider outsourcing to a third-party company. Alternatively, you could try an online system like Quickbooks ProAdvisor.
No matter what, you cannot escape the financial duties of your business. Having a small business doesn’t mean that finances aren’t important. In fact, tracking your finances may be the thing that keeps your business from dissolving.
Learn More About Finances
So, in the battle of bookkeeper vs CPA, which one will you choose? We hope you’ll consider the current financial condition of your company rather than worrying about the cost of either financial professional.
Both bookkeepers and certified professional accountants have the ability to change your business for the better. All you have to do is decide what your business needs help with.
In the end, you may figure out that both professionals can help you.
To learn more about finance and how to better your business, check out the finance section of our blog.
Other Helpful Articles