Should I hire an Accountant, a Bookkeeper or do my small business accounting myself?

If your business is growing, you may be wondering if your days of balancing the books yourself are numbered. It’s time consuming. And risky, especially if accounting isn’t your area of expertise.

Maybe it’s time to find a financial pro who knows the numbers and the tax code like the back of their hand. But, who do you turn to?

Here, we’ve provided a primer that explores when it is appropriate to hire an accountant, a bookkeeper, or just keep doing things on your own.

What is the Difference Between an Accountant and a Bookkeeper?

Most people don’t know the difference between an accountant and a bookkeeper. It’s a common misconception—both professionals work to keep your records in order ready for audits, tax time, and gaining more control over cash flow.

However, an accountant and a bookkeeper occupy different parts of the accounting process.

A bookkeeper records and classifies a company’s financial transactions; payroll, sales made, and bills paid. Their goal is to create an accurate picture of your finances and the role ends there. This person must be detail-oriented and have a basic understanding of accounting principles. But, you don’t need to have a bachelor’s degree or any additional credentials to find work.

An accountant, on the other hand, builds on the reports generated by the bookkeeper. They offer a full-picture of your finances. Accountants look at financial statements, assets, and other data sets, and interpret the findings. Their job is to report economic conditions to the company and help business leaders make better financial decisions.

Still, there can be some overlap between the roles.

Bookkeepers in smaller organizations may take on more accounting tasks, even if not formally qualified to do so. Because of the rise in automated accounting software, functions that were once reasonably complicated have been made much more manageable.

Long story short, a bookkeeper takes care of one aspect of accounting—the recording component. Accountants cover the full picture.

When You Need an Accountant

As we mentioned, an accountant analyzes all aspects of the financial process. They’re more of a strategic partner than down-in-the-weeds detail man. Larger companies employ full-time accountants, but small to mid-size companies generally work with an outsourced profession instead.

The common perception of an accountant’s work usually conjures images of the mad dash toward the end of the tax year. Outside of tax season, your accountant can provide additional guidance. They might consult with you about how to maximize deductions or develop a business plan.

Here are some hypothetical reasons to call an accountant:

• Preparing tax returns and financial statements
• Verifying the accuracy of books
• Tax planning
• Advice related to financial decision making, tax law, assets, and entity structure
• Business planning
• Payroll issues
• To set up accounting software correctly

As you can see, these services aren’t something you need on a regular basis. The accountant is there to guide you through critical processes that can help you grow your business the right way, craft a business plan, and apply for the proper licenses.

When a Bookkeeper Makes More Sense

If you have an accountant, you’re already on the right track.

But if you’re going to an accountant for everything, you could be overspending on financial services. A CPA can command much higher rates than a bookkeeper, so it can be a good idea to use both professionals for their traditional purpose.

A bookkeeper, whether you hire an in-house employee or a freelancer, is a ground level financial pro. This person works to make sure books are up to date, and nothing is amiss. They’ll also be aware of financial red flags and can help you identify when it might be time to enlist the services of an accountant.

Typical bookkeeper tasks include:

• Recording payments and invoices from customers
• Paying vendor bills
• Recording cash expenses
• Managing payroll
• Advising clients on best practices
• Managing and forecasting cash flow
• Reconciling bank accounts

Bookkeepers are essential to any business as they help you keep on top of taxes, manage your cash flow, and make sure you stay organized. Day-to-day, your bookkeeper is there to make sure you pay your credit card bills on time and record your expenses accurately.

Typically, you’ll work with a bookkeeper on an ongoing basis. They maintain your general ledger and make sure all items are coded properly. They typically use accounting software which will allow them and any member of your team to add invoices, expenses and other parts of your business finances on their desktop, your server or the cloud which makes managing the books fairly straightforward.

This makes things easier on the accountant, who you’ll spend fewer hours with each year, thus saving money in the long run.

What You Need to Know About Managing Your Own Books

Many business owners will flat out tell you – it’s not the best idea to do your own books.

But you’re likely already managing your own small business finances and things probably aren’t going that bad so that isn’t necessarily true. The real decision you’ll need to make is, do you want to do the books or focus on other things?

What you need to do if you decide to go the DIY route:

• Keep receipts and records
• Reconcile accounts
• Create purchase orders and invoices
• Bill clients
• Maintain a balance sheet
• Summarize income and expenses
• Create basic financial reports

If you’re going to continue down the DIY route and manage your own accounts make sure to investigate software to help you out which will allow you to continue managing your own business finances even as you grow.

The price for accounting software can vary from free software such as Manager to more expensive programs such as Netsuite so ensure you compare and find the right one for your business needs – likely the free software to start with.

We recommend working with an accountant to get your system set up, if you have concerns about coding, asset management, or other accounting principles. This will ensure that you start keeping the books the right way, instead of finding out something went wrong come tax season.

Accountant, Bookkeeper, or DIY Job?

Ultimately it’s up to you whether you choose to use a professional or try and do your own accounts using accounting software – each has it’s own advantages and disadvantages from time savings to cost savings and everything in between.

If you’re a small business with a limited budget and have been using a spreadsheet or no accounting at all – it makes sense to use accounting software, like Manager and try the do-it-yourself option. As you grow and have more transactions to record you may need a part-time bookkeeper with an end of year accountant, which will naturally evolve as your business grows.

Let me know in the comments if you have any insights and guidance from your own business about when to hire an accountant, a bookkeeper or do it yourself.