If you're having trouble deciding whether your business needs a bookkeeper or an accountant, don't fret too much. Chances are you'll need both — and you can probably meet those needs through judicious use of outsourcing.
Here's a look at some important distinctions between bookkeeping and accounting, and how to get the best of both worlds by using each for the right job at the right time.
Who Does What?
Bookkeepers tend to be involved in day-to-day functions, such as accounts payable and accounts receivable. Certified Public Accountants (CPAs) must fulfill certain licensure requirements and generally focus on high-level tasks that occur at wider intervals, such as filing tax returns.
I've heard the difference between bookkeepers and accountants explained this way: Consulting an accountant is like visiting the dentist every six months for a checkup, cleaning and fluoride application. It's an important part of your dental health — but so is daily brushing and flossing. That's the bookkeeper's specialty. Let's start there.
Basically, a bookkeeper keeps tabs on all the money that's flowing into and out of your business. You could hire a full-time employee to do this. But depending on the workload and their level of expertise, you could be paying a full-time salary for a barebones numbers-cruncher. And if you ask them to do more than crunch numbers, they could leave you hanging.
An outsourced bookkeeping services provider, on the other hand, can provide competencies beyond data entry, up to and including financial analysis. Essentially, hiring the right outsourced bookkeeping services provider ensures not only that you'll get top bookkeeping talent, but also that you'll have access to the sort of expertise normally associated with a controller or CFO. This can be an invaluable resource in helping business owners with the "You don't know what you don't know" problem, such as recording sales tax in different states.
In addition, a top outsourced bookkeeping services provider will keep your business plugged in to the latest software applications, so your business will stay on the cutting edge. Also, through their experience with many other companies, they will have developed tried-and-true processes, saving you the potential aggravation and lost productivity inherent in the trial-and-error approach.
CPAs are essential for navigating complex tax codes, submitting your business taxes and keeping your business in compliance with IRS regulations. They can also help your business prepare for an audit and get you through it with minimum disruption, stress or financial penalties.
Bookkeepers provide the data that CPAs need. The more thorough the job your bookkeeper does of compiling solid financial records, the more efficient your CPA will be in processing your tax filings. As one CPA put it, "When the quality of the client's records is not good, it requires us to spend more time and charge more for our services."
In Perfect Harmony
Now that you know the difference between a bookkeeper and an accountant, you also know why you need both. Through outsourcing, you can find just the right combination to suit both your needs and your budget — and power the growth of your business.