A bookkeeper, an accountant and a CPA walk into a bar — wait, what’s the difference? The terms “CPA,” “accountant” and “bookkeeper” are often used interchangeably and often all three are just referred to as “accountants.” You may wonder: if CPAs and bookkeepers are both considered accountants, what exactly does my small business need?
A bookkeeper provides timely, accurate information
Bookkeepers are primarily responsible for providing accurate and up-to-date information relating to the day-to-day sales and expenses of the business. Bookkeeping starts with the organization of receipts, bank reconciliations and keeping the accounts receivable (A/R) up to date. Additional tasks of bookkeepers could include paying your bills, running payroll, collecting on A/R and making tax remittances. The bookkeeper summarizes these business activities in a general ledger, which is a detailed record of all business transactions, categorized by accounts. The one-page summary of the general ledger is called the trial balance.
In general, bookkeeping involves summarizing business transactions that have occurred, and providing the foundation for the profit and loss statement. Bookkeepers often use specialized bookkeeping software to help them manage these transactions. You might be familiar with Xero, QuickBooks Online, Freshbooks, Wave or Sage. These are all common bookkeeping software that you or your bookkeeper might be using.
You may be thinking: perfect — that’s exactly what I need! Someone to help you manage and organize the daily transactions within your small business. You are completely right; you do need someone to help you manage these transactions. But where bookkeeping ends, accounting begins. That’s where accountants and CPAs come in.
An accountant ensures that tax laws are followed
Maximize your write-offs and deductions
Prepare your income statement, balance sheet and corporate tax return
Calculate depreciation on capital assets
Share advice on what they’ve reported: strategy and forecasting
A CPA is not your average accountant
The Canadian “CPA” stands for Chartered Professional Accountant, which is a new designation as of 2015. Before this, there were three types of designated accountants: Chartered Accountants (CA), Certified Management Accountants (CMA) and Certified General Accountants (CGA). These three separate governing bodies consolidated into the CPA, which is easier for clients to understand and more in line with the American CPA (which stands for Certified Public Accountant).
A professional with a CPA designation is not your average accountant. In addition to a bachelor’s degree, CPAs need to have 30 months of extensive experience within a CPA firm and also pass the Common Final Examination. The CPA designation is international; professionals who hold this designation are licensed and are provincially regulated. All CPAs must stay in compliance with the current accounting standards and regulations set out by Chartered Professional Accountants of Canada (CPA Canada). CPAs are required to do 40 hours per year of continuing education to keep up their designation.
Accounting is the language of business, and a good CPA can tell you the story of your business after reviewing your financials. Financial analysis is part of the training that sets CPAs apart and enables them to make good business decisions. Scan the websites of Canada’s largest companies, and you’ll no doubt find a CPA or two occupying those C-suite level positions.
A CPA will ensure that your business complies with the highest accounting standards and regulations in the world. CPAs are reputable for their accounting expertise and knowledge within tax planning, business consulting, risk management, financial analysis, cash-flow management, budgeting, financial forecasting, and identifying market growth and opportunities. CPAs can see the big picture; they are problem solvers and often have creative solutions to business issues. Having a CPA review your bookkeeping and financial operations can help your business flourish with a strategic competitive advantage.
The experience, expertise, and education that the CPA designation demands are a great foundation for many specialized areas of finance, such as private business valuations.
As there is an increased demand for these qualified professionals, accounting services provided by CPAs tend to be more expensive (but don’t let that deter you). You’ve heard the saying, “You get what you pay for.” This is especially true when determining which professionals will be involved in your accounting operations. Hiring a CPA is an investment in your business; the benefits and rewards of having a CPA on your team will speak for itself.
That being said, you don’t need a CPA posting adjusting journal entries and fixing issues with your Quickbooks or Xero account. Bookkeepers are detail-oriented, hyper-specialized business operations professionals that are key to your business operating smoothly.
Accountant vs bookkeeper: which one do I need?
As you can see, CPAs and bookkeepers are very different when it comes to licensing and regulations, responsibilities, areas of specialty and pricing. However, both professions have a distinct and unique role to play regarding the financial operations of your business.
Bookkeepers help business owners manage their daily operations through bank reconciliations, managing payables and receivables, payroll, and monthly and quarterly reporting.
A CPA will provide accounting expertise and financial analysis for you to make knowledgeable decisions with your business direction. They will make sure your financials are in line with generally accepted accounting principles and tax regulations, while also providing the strategic, high-level insights to help build your business.
Are your taxes getting more complex? Is your business growing? At True North Accounting, we find that the secret sauce of financial services for small business lies in having a diverse team made up of both CPAs and bookkeepers.
We have a passion for helping small business owners reach their potential and we would be more than happy to chat with you about business development and tax planning strategies to help your small business thrive. Let us help you with your accounting needs so you can focus your time and energy on what’s important: your business. Contact us today.