Bookkeeper vs CPA

The first step in any decision is assessing your current situation. So first ask yourself:

• What type of company do I have?

• Do I need someone to only keep track of my transactions?

• Do I need help understanding my financials?

• Do I need help with payroll, sales tax, and income tax?

• Do I prefer dealing with just one person for my financials or multiple people?

• Am I going to be hands-on?

• What’s my budget?

Definitions

A “bookkeeper” in their simplest form is going to help you track transactions. In general, they will reconcile your bank statement, accounts receivables and accounts payables. In addition, some bookkeepers may offer payroll and sales tax services. For the most part, a bookkeeper may have basic accounting knowledge, but they are not required to have a degree in accounting. In addition, they are not required to have any state certifications or continued education to maintain a license.

A “CPA” is a Certified Public Accountant, which grants a license to provide accounting services to the public. In the State of Texas, a CPA must have the required credits to earn a Bachelor’s Degree in Accountancy and should have completed more than half of their Master’s program. To become a CPA one must pass a Uniform CPA Exam that consisted of 4 areas: Financial Reporting, Auditing, Tax Regulations, and Business Concepts. This training prepares them with the ability to manage your bookkeeping, income taxes, payroll, sales tax, financial statements, auditing, and provide financial consulting. However, like in most professions, CPAs will specialize in a certain area. CPAs are also required to maintain licensure through continuing professional education, in an effort to keep up with law changes and policies.

*Texas prohibits the use of the designations "accountant" and "auditor" by a person not certified as a Texas CPA.

Comparison

Both Bookkeeper and CPA will have the basic knowledge to get the job done, however, a CPA will generally have a broader scope of knowledge because of the additional training and study required to maintain their license. A CPA would have a deeper understanding of all transactions that flow through a business. Their proficient understanding of the various types of companies and industries help owners be better prepared and organized with all aspects of their finances. Although both essentially perform the same job function, a CPA will provide you with specific details regarding your current and future financial situation. Why would this be important? Because all business at some point will have to deal with banks and the IRS. Bookkeepers do routine work and can complete the essential work and tax returns but a CPA can analyze the work and help you make high-level business and tax decisions. Another key difference is that a bookkeeper might not be enrolled to prepare tax returns, the IRS requires all tax prepares to have a preparer tax identification number. This means that you also might need to hire a tax agent to file your taxes at the end of the year; unlike a CPA, they can do both. One of the main reasons people tend to choose a bookkeeper is they feel they are the cheaper option. However, I have found that this is not always the case. When you hire a CPA with a bookkeeping and reporting background, they would perform the same monthly procedures that a Bookkeeper would all year round; in other words, you get two for the price of one. Remember, depending on your bookkeeper you might need to hire a CPA or additional staff to handle sales tax, payroll tax, and income tax. In addition, a Bookkeepers lack of knowledge of current tax laws may cause a business to miss specific deductions or require you to pay taxes that you do not necessarily need to.

Bottom line

You’ll need to invest time in making the best decision for your company. A CPA is better qualified to handle all your business financial needs and often overlap with bookkeeper’s work. However, a bookkeeper can help with records and daily financial transactions. Lastly, keep in mind as the old saying goes “You get what you paid for.”

If you’re looking for a CPA, give me a call! I’d love to answer any questions you might have.