While accounting, CPA, and bookkeeping all require excellent math skills, there are some important differences between these three roles. Before deciding which one best meets your business’s needs, here are the differences between an accountant, a bookkeeper, and a CPA.
The main difference between a bookkeeper, accountant, and a CPA
Bookkeeping is the process of recording all transactions that your business conducts while accounting seeks to determine what those activities and the hard data mean for your firm.
Accounting provides you with a complete picture of where your business stands financially. You are given key aspects such as reports, finances, and the near future to get an idea of what is going on in your company.
On the other hand, a Certified Public Accountant (CPA) is a state-licensed accountant who has met licensing requirements and can therefore provide attestation services. Your regular accountants cannot give attestation services, only a CPA can help you with that.
Audit your current financial situation to know your true needs
A business owner who is deciding whether they need to hire a CPA, an accountant, or a bookkeeper should assess their current financial position and compare it to how they want the business’s finances to grow. This article will help you decide if that growth will be manageable in your current position or not.
The choice also depends on the size of your company
As a small business owner, staying on top of your finances is vital. By ensuring that your financial data are accurate and up to date you will have the tools needed for sound decisions that facilitate healthy cash flow.
It’s important as a small business owner that you supply yourself with current information about how money has been coming in and out over time, so it can be used when making plans or budgeting certain choices while keeping efficient operations running smoothly within the company itself.
As your business grows, there may be a lot of customers to keep track of. More employees and vendors can too make it difficult for you to maintain proper financial records on your own.
When you don’t have enough time or patience for these tasks yourself, a bookkeeper or accountant can take on some of the heavy lifting. The terms are sometimes used as synonyms with CPA services, but there is an important distinction between what they do:
Here’s what you need to know when deciding between a bookkeeper, accountant, and a CPA
Bookkeeping, accounting, and CPAs are three distinct roles that differ in their focus.
Bookkeeping is the process of documenting monetary exchanges between two or more parties, recording each transaction as it occurs while also summarizing periodic earnings and expenses in ledgers that can be reviewed later for tax purposes, auditing, etc., so they should produce work with accuracy and attention to detail.
- Bookkeepers track and make a record of all purchases and sales made by a client.
- These professionals also review all financial documents, such as bank statements.
- Bookkeepers keep track of accounts payable and receivable so that the company knows how much it owes and how much customers owe it.
- They pay the invoices that are due in the accounts payable department.
- They handle payroll and keep it up to date.
Between an accountant, and a CPA, bookkeepers have a median pay of around $40,000 a year and typically only hold on to education up until high school.
Unlike bookkeepers, accountants have deeper insight into data analysis
Accounting takes this information from bookkeepers to provide business owners with insights into what’s going on financially within the company.
Accountants can also look over books to plan tax strategies, offer advice, and make future projections about expenditure using accurate information.
Accountants must earn at least a Bachelor’s Degree as well as passing an exam that allows them to become a licensed accountant. They can get paid $69,000 on average per year. An Accounting agency may choose to hire a bookkeeper with experience keeping ledgers because it is more cost-effective. They usually leave the higher-level services for an accountant.
The rigorous process of becoming a CPA leads to higher wages.
To become a Certified Public Accountant, one must have at least 30 hours in courses related to accounting, and 20 hours in graduate-level classes.
This shows how demanding the standards are when applying for this position. It’s very difficult, so only those who meet these requirements will be considered by employers.
CPAs usually stand out amongst other accountants because of their expertise and experience, therefore if you require their services, expect to pay higher rates.
There is another important distinction between a bookkeeper, accountant, and a CPA
Between these three somewhat similar rollers, only CPAs have licenses that allow them to write audited financial statements.
In case you own a company that sells shares on the stock market, they need an audited financial statement such as a balance sheet or income statement. Investors can assess their worth from these statements so small businesses may not require one for themselves if it doesn’t serve them well.
The future for bookkeepers, accountants, and CPA firms
It seems that having a background in finance will be beneficial going forward, as employment growth is expected to continue at 14-16% from 2010-2020.
And that includes all three levels of accounting professionals in Las Vegas. This can largely be attributed to the fact that there is an increasing number of businesses that necessitate financial professionals.
Experts who can watch over their finances and ensure they comply with complex federal securities laws so companies don’t get into trouble (i.e., stricter regulations).
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