Do I Need a Bookkeeper or an Accountant?

Many business owners wrestle with questions relating to the financial health of their companies.

​They worry about cash flow shortages, hiring expenses, the expected future value of investments, increasing materials costs, and how they will manage all of these financial uncertainties and complexities. 

These types of considerations are universal – they arise at every stage of the business life cycle and across all industries. However, one of the most common overarching questions facing business owners today is around which type of financial professionals they should employ to oversee these matters.
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Business owners wonder if a bookkeeper will be sufficient for their needs, whether an accountant is worth the added cost, if an accountant can cover bookkeeping functions as well or if both will need to be hired in tandem, and how to transition between the two. Addressing these deliberations requires a thorough understanding of business needs and a foundational understanding of the simple question, “What will the bookkeeper or accountant be required to do?”

Managing Day-to-Day Finances

Even businesses without sophisticated financial requirements will still have daily operational needs. For routine AP (accounts payable), AR (accounts receivable), and payroll functions a bookkeeper is a good fit. An in-house bookkeeper can be hired full-time or part-time to perform these functions without the added cost and hassle of needing to find a trained or certified accountant.

A business owner can lean on a bookkeeper to handle a wide range of financial matters, but the bookkeeper should never be solely entrusted with the business’s finances. For proper segregation of duties, a bookkeeper’s authority should be limited to prevent fraudulent activity and his/her actions should be overseen to avoid errors. Granting too much autonomy can create the right conditions for unethical behavior and erroneous activities. This is especially true for bookkeepers that are less experienced because financial mistakes can easily result without mal-intent, affecting financial reporting and subsequent decision-making.

Making Strategic Business Changes

During times of transition an experienced financial professional can lead the way, managing business finances to maximize profitability. While the period of transition itself may be short-lived, the resulting financial complexities often necessitate the ongoing use of an accountant as a result. Accountants have the breadth of experience to advise on whether subsequent financial changes should occur after a major business shift has occurred.

An accountant is instrumental during strategic business changes such as:

• Opening new locations
• Transferring ownership
• Expanding into new product lines
• Merging with another company
• Changing the business’s legal structure
• Divesting a subsidiary
• Entering new markets
• Changing accounting systems or approaches

During the hiring process, searching for candidates that have specific experience in the arena where a business plans to venture can bring in relevant skills. Working with a third-party accounting company is a shrewd way to search out specific skill-sets and areas of expertise that will benefit the business during transitional periods.

Filing Taxes

Anyone can file business taxes, and yet, confusion about who should file them remains among business owners year after year. Business owners may be hesitant to try a new approach, creating a situation where they continue to use a less than ideal solution for tax filings simply because it is what they have always done. In other cases, a previous bad experience can turn a business owner off from seeking the right financial professional for tax preparation.

While some business owners hire a bookkeeper, tax accountant, CPA, or enrolled agent to prepare taxes on their behalf, others simply pay for tax software and trudge through on their own. Unfortunately, these business owners run the risk of either underutilizing available deductions, causing tax over-payments, or over utilizing them, increasing the likelihood of an audit. Either way, the results are unnecessarily messy.

Business taxes are always best handled by a financial professional. A bookkeeper or accountant is going to be better suited to file business taxes than the typical business owner. Both likely have a deeper knowledge of the company’s specific finances and more experience with filing business taxes. And unlike an enrolled agent, who is simply brought in at tax time to provide a single service, bookkeepers and accountants can advise on the business’s ongoing financial position. However, when it comes to reducing a business’s tax burden and planning for future financial needs, a tax accountant is by far the best choice.

Tax accountants specialize in tax matters, making them an excellent source for reducing tax liability and planning for future tax filings to maximize ongoing profitability. Most tax accountants have a wide range of experience, although some may specialize even further in specific industries.

Weathering an Audit

Being audited calls for the services of an experienced financial professional. Unfortunately, a business’s advanced needs during an audit are often more than a bookkeeper can provide. Accountants have a broader view of a business’s finances than bookkeepers, allowing them to better respond to an audit scenario.

Furthermore, accountants that have seen companies through previous audits will be well poised to represent the company professionally and provide all required information in a way that will be conducive to an equitable resolution. So, while accountants are an ideal choice during an audit, experienced accountants are even more preferable. 

For situations where the financial relationship is limited in duration (like during tax season or throughout an audit) it often makes more sense to use a third-party accounting company instead of hiring an in-house accountant. Partnering with a company externally can accelerate the process of finding an accountant, minimize the costs associated with doing so, and improve financial results.
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We offer both bookkeeping and accounting services. If you need either, please reach out to us!