The answer to this is complicated. Many organizations have a bookkeeper, when what they need is an accountant. While many think they are one in the same, and yes there are similarities there are also big, and important differences.
The terms “bookkeeper” and “accountant” can be interchanged to a degree, so I’m going to focus on the literal job roles. Many bookkeepers get their start acting as a data-entry clerk or entry-level bookkeeper for a business and grow, through experience and merit, into being a go-to person for the day-to-day financial recording. The term “bookkeeper” is pretty literal: The bookkeeper keeps the books and retains documentation for transactions.
An experienced or certified bookkeeper may eventually move into being an accountant (the terminology and rules on what a bookkeeper may do and call themselves may be dictated by state accounting boards). An accountant may also focus on reporting, business analysis and processes, and possibly advice. Many times a bookkeeper and accountant work in tandem, with the bookkeeper operating as a “feet on the ground” professional, promoting a stronger relationship between an accountant and a business owner.
Which one do you need ?
Many times it depends on the industry and the level of expertise required. Questions we ask our clients in order to structure our services include: What industry is the company is in? Do they maintain a number of fixed assets or a large amount of inventory? How many employees do they have? The more complex the organization, the more important it is to make sure that the company’s bookkeeper is also supported by a good CPA who can provide advice as and if needed. It’s a great partnership that keeps communication open and data strong.
How expensive are bookkeepers and accountants?
Bookkeepers are, generally speaking, less expensive than CPAs, which makes them a great choice for a company that needs day-to-day expertise. A good bookkeeper can also act as the “canary in the tunnel,” bringing attention to something that might need higher levels of advice. Pricing depends on geographic location and industry, as well as experience.
I would recommend calling around to local accounting or CPA firms, other business owners, or even local business-development centers in order to obtain a referral. A bookkeeper is best found through word of mouth, and many times the you have to look hard because, quite frankly, a good bookkeeper gets busy pretty fast.
I also would highly recommend meeting with an accountant or CPA at the onset of a bookkeeper engagement and periodically afterward. Bookkeepers are a great way to manage expenses, but having the periodic support of a CPA ensures that you have more than one set of eyes on the books. This not only helps to provide more accurate data, but also can act as a deterrent to fraud or theft.
When should you hire a bookkeeper?
The earlier the better. Many owners will try to sort out the information themselves and then have a bumpy ride when it comes time to transition. A good compromise is to consult with an accounting professional when the business is started and then perhaps touch base periodically, such as once a quarter. Ask for a quote or pricing, and fit in some sort of periodic meeting into your budget. Errors tend to continue until caught at year end or the next time a professional sees the books. Books that are set up correctly in the beginning can be a strong tool for measurement and growth. Books measure the pulse of a business, and good bookkeeping expands past basic cash expenses.
Additionally, most accountants and bookkeepers are happy to answer a few questions, and they enjoy being able to see a business grow and for clients to be successful. After all, the basement startup today could be their biggest client tomorrow.