Do I Need A Bookkeeper or an Accountant?
When you’re first starting a new business, it can be tough to know how many people you need to hire. After all, you’re not sure how quickly your company will grow, and you need to strike a balance between making sure you have enough staff to hit the ground running, and maintaining a salary budget that you’ll be comfortable with until your revenue increases. One area where you shouldn’t skimp is picking the person in charge of overseeing your company’s finances.
Should I Hire Someone, or Do It Myself?
You may be wondering whether you need to hire a “finance guy” at all, especially if you’re running a lean operation while you grow your business. The answer is different for every entrepreneur, and it really depends on your comfort level with numbers and finances, but you should know from the start that there are four different options. It’s no longer a world of DIY or hire a pro – while you can do either, there are new online hybrid models launching frequently. The following are your basic choices:
- Do the math yourself, whether using a paper or electronic method to keep your records.
- Use an online bookkeeper.
- Hire a professional bookkeeper.
- Hire a professional accountant.
Generally speaking, if you’re just starting out and your business is fairly small with uncomplicated transactions, you can handle your own bookkeeping using software like Quickbooks. However, as your business grows, it’s in your best interest to turn to a professional – unless you have unlimited time to devote to overseeing your own books, unlikely if you’re a busy entrepreneur trying to keep the reins on all the daily activity occurring in your business!
Why Should I Hire a Bookkeeper?
In short, you should hire a bookkeeper in order to have someone responsible for overseeing all of your financial transactions, tracking the money that comes into your business and the money that goes out. Having a bookkeeper affords you the ability to project future earnings and budget for different projects, without constantly having to run the numbers yourself.
For a fledgling business that relies heavily on virtual methods of communication, choosing an online bookkeeping service like bench.co may make sense. These services provide both the software to track your financial data, and professional bookkeeping expertise through phone calls and e-mails with the professionals on staff. You upload your data through the secure online portal and the bookkeepers do the work for you. These services come at a fraction of the cost of paying someone’s salary to do your bookkeeping in-house.
However, even if your business is new, if you’re the kind of person who prefers to do things on paper (and preserve an electronic backup!), or if you want different employees to be able to sit down and go over the numbers with one point person, it may make sense to hire a bookkeeper to do the work in-house. Other reasons to hire include if you have a specialized business or work with a lot of local organizations, and personnel in your industry are familiar with a certain style of bookkeeping. In addition, no matter what your business involves, as it grows and your streams of revenue multiply, hiring someone to come in will become a sounder financial decision.
Do I Need an Accountant?
There is a difference between a bookkeeper and an accountant. Bookkeeping is the recording of each transaction conducted in your business, whether customer makes a purchase (resulting in cash flowing in to you) or you need to spend some money on new equipment (resulting in cash flowing out to another entity). Each transaction is a piece of data. Accounting is what you do with that data.
Making the leap from hiring a bookkeeper to hiring an accountant often comes when the profitability of your business increases to the point where you start to have more than a few tax questions. If you use an online bookkeeping service or hire a bookkeeper, they can talk to your accountant, but they can’t give the same kind of advice that a certified accountant (CPA) can give, and it makes sense to go straight to the source. If your business is subject to special tax regulations or you require ongoing tax advice from the beginning, then this leap might happen when you first start your company, rather than further down the road as appropriate in other situations.
Accountants have many functions. They can distinguish between transactions requiring attribution to different functions of your business, and collate the data into reports that give you, the business owner, a clear snapshot of the financial position of your business based based on what’s coming in and going out. And, quite importantly, accountants can use the information they gather to advise you on the correct tax treatment is for your business, guide you in ensuring that you are adhering to the rules and regulations of the Internal Revenue Service (IRS), and let you know whether you can do anything differently to avoid negative tax consequences. If you need this tax-specific guidance, then you probably need an accountant.
What to Keep in Mind
Always remember that if you decide to hire a professional, go with the one who suits your individual business’ needs. If you really need a tax pro, go with the big tax accounting firm. But if the tax issues for your business are fairly straightforward and you only need to ask a few questions when you file, you may not need the accountant, and hiring a great bookkeeper to handle the day-to-day transactions will suit you just fine.
September 10, 2019
Alyssa specializes in creating content and website copy for law and accounting firms and nonprofit organizations. She has an undergraduate degree in history and a J. D. from Columbia Law School.