Transitioning from a Bookkeeper to an Accountant

Migrating from a bookkeeper to an accountant is a major change that many business owners feel unprepared to initiate. They often ask:
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• When is using an accountant absolutely essential for a business? 
• Should a bookkeeper’s responsibilities be handed off to an accountant, or do they work best in tandem? 
• Does an accountant need to be hired in-house or can accounting functions be outsourced? 
• What do the mechanics of a successful transition plan look like and how long should it take to complete? ​​

Understanding when to entrust someone new with business finances is complicated but knowing how to do so operationally is even more difficult. Shifting from a bookkeeper to an accountant requires a deep understanding of business needs, comprehensive awareness of available options, and a detailed transition plan. These elements allow a business to identify the best fit for its particular needs and create a roadmap to guide the transition.

When

Small businesses on both upward and downward trajectories often wait too long to bring in an accountant. Companies in rapid growth stages may deprioritize finding an accountant in favor of onboarding more revenue-producing personnel first. Conversely, companies weathering cash flow shortages or client turnover may opt to forgo the expense of hiring an accountant until cost-cutting measures have been implemented or profits improve. Unfortunately, both of these scenarios represent times when businesses need the unique skillsets of experienced accountants the most.

Leaning on an accountant is also crucial through major business transitions such as:
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• Bringing in investors or obtaining financing
• Launching additional offerings
• Opening subsequent locations
• Making business structure changes that affect taxes
• Hiring more employees and utilizing independent contractors
• Expanding to new markets
• Developing a franchise model
• Implementing internal controls after fraud has been detected

An accountant can navigate the business through these complex financial waters while making strategic decisions to minimize its year-end tax burden. As an added benefit, accountants typically have professional connections, like lenders and attorneys, that they can leverage to form trusted partnerships.

How

Identifying when to utilize an accountant is only the first step. Once the need for an accounting professional has been realized, a business owner must begin the, often arduous, tasks associated with making this change. Finding the right fit between business needs and available options might be the most dreaded part of the process, but the technical handoff may take the longest. It is vital to allow enough time for each step instead of hurrying to complete the transition. Rushing through critical components can result in costly and frustrating delays.

Analyze Business Needs

Finding the right financial solution is impossible without knowing what it should be solving.
Business owners should have a deep knowledge of their business’s financial needs – its operational successes and failures, as well as any available opportunities. In the same way that a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is done for the business as a whole by marketing professionals, owners should be able to objectively look at their current financial operations and analyze where improvements need to be made. Guide the discussion with questions such as:

• Are there currently any highly efficient financial processes in place that should not be changed?
• What should the business be doing financially that it is not already doing? Why are these items not being done currently? Do barriers exist that make these tasks difficult to accomplish? What kinds of prerequisites are needed to get started?
• What could the business be doing strategically to improve its financial position?
• Are there any anticipated changes coming to the industry that would affect the business’s financial operations?  

Business owners should include not only their bookkeepers in these discussions, but anyone who has first-hand knowledge of the company’s financial operations. Procurement, HR, marketing, product development, and any other relevant teams should be looped into the discussion as well.

Research Options

​Sometimes business owners assume that their only options are hiring an accountant to replace their bookkeeper or hiring an accountant to work alongside their existing bookkeeper. They may not be aware of more cost-effective and creative solutions.

Businesses looking to harness the experience of a professional accountant can hire one in-house, but that is certainly not the only option. The steep cost of recruiting, hiring, and onboarding an accountant internally is the primary reason that business owners opt to utilize a third-party accounting firm instead. Additionally, individual accountants are initially vetted and subsequently overseen by the accounting firm, removing the onus from business owners and minimizing ongoing liability.

Furthermore, utilizing a local accounting firm ensures that all city and state-specific financial requirements will be taken into consideration when making strategic decisions. This is crucial for highly regulated and newly emerging industries.
 
Accounting firms allow a way for business owners to contract out their accounting needs to an experienced professional. Depending on the nature of the agreement, third-party accountants can perform comprehensive ongoing financial functions or execute a la carte services like reporting, budgeting, forecasting, or tax preparation. When researching accounting companies, business owners should look for firms with offerings that fit their specific needs.

Create a Transition Plan

Hiring an internal accountant or external accounting firm will not be successful without first outlining the responsibilities and expectations for the role. Clearly articulate what the role will look like, which deliverables will be required, and how success will be measured. If hiring internally, use this information to shape the job listing. If hiring externally, convey this information to accounting firms when evaluating their offerings.

Once the hire is complete or the accounting firm is chosen, make the hand off right away to minimize disruptions, but retain previous assistance for as long as possible to ensure a smooth transition. The cyclical nature of financial needs often results in questions arising well after a new financial professional is brought into the business. If a bookkeeper is being replaced by an accountant or a contract with a former accounting firm is ending, stay in close contact until all functions have been successfully transitioned.

When an accountant will be hired to work in conjunction with a bookkeeper, roles must be clearly divided to avoid inefficiencies and establish accountability. Ensure both professionals will work together respectfully by valuing both equally despite their different contributions.
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If you are transitioning, we have a great team of bookkeepers and accountants to assist you. Please contact Eric or Todd here.