What’s the difference? CPA, Accountant and Bookkeeper
Most people use the terms bookkeeper, accountant and CPA interchangeably, because they deal with finances and numbers, but that does not mean they are the same. While all roles are vital in business financial management, there are distinct differences.
Bookkeeper
A bookkeeper may or may not be college educated or possess a degree in the related field. Certifying bodies, like the American Institute of Professional Bookkeepers, do offer certification and continuing education opportunities for bookkeepers. This role is often task oriented and mainly in charge of recording the daily transactions of a business (cash inflows and outflows) and maintaining the general ledger. Including but not limited to the following: bank and credit card reconciliations, invoicing and accounts receivable, billing and accounts payable, sales tax payable and payroll journal entries.
Accountant
An accountant typically has an undergraduate degree in accounting and has a more expansion understanding of accounting and financial management. They are capable of doing everything a bookkeeper does, but they take it another level and use the financial information posted by the bookkeeper to review the financial statements and they understand the interworking’s between the financial statements (Balance Sheet, Profit and Loss, Statement of Equity and Cash Flow).
Certified Public Accountant (i.e. CPA)
Take it another level higher than an accountant to a Certified Public Accountant (CPA), which represents the most reputable and knowledgeable among accounting professionals, having passed a qualifying exam that measures their expertise in business law, audit, tax and accounting. They are certified by the State and in addition to passing the rigorous tests they are required to maintain continuing education (i.e. California CPA’s are required to take 80 hours of continuing education every two years and you can search the status of the CPA's license on the California Board of Accountancy).
When you hire a CPA you will have a trusted advisor who is a qualified in all aspects of financial management to run and operate your finance department. Where you may be able to hire a bookkeeper or accountant to handle your day-to-day processing of transactions, the real value-add and business partner will be a CPA. Handling anything from bookkeeping, cash flow analysis, financial controls, financial reporting and analysis, strategic financial review, budgeting and forecasting, tax planning and etc.
While it may cost a little more to hire a CPA, it will be worth it as they may be able to save you thousands in the long run in operating costs, taxes, penalties or provide strategic insights on revenue, profitability, financial processes, cash flow, etc. No one understands the importance of having tight control over operating costs more than a CPA, but this is one investment worth making.
The Bottom Line
If you are starting a business or running a well-established business, it is important you regularly review the needs and expertise required to support the operational and strategic direction of your business. Identifying the best role (bookkeeper vs accountant vs CPA) for current and future business, needs to be a continuous conversation that is taking place.
If your small business isn’t yet at the point to hire a full-time staff to manage the financial functions, there are many benefits to outsourcing and part-time bookkeepers, accountants and CPA’s available to assist with your business financial needs. Outsourcing financial functions will be an investment into your business as it will save you time and money to do what you love and help your business grow.
