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Bookkeepers and CPAs (Certified Public Accountants) provide valuable financial services to business owners. Although both roles provide financial management and financial reporting, there are critical differences in the type of services offered. Although the services of a bookkeeper and a CPA may often overlap, it is important not to confuse bookkeeping with the role of a CPA.
Founders can do the accounting work on their own. However, outsourcing financial services such as bookkeeping can help a founder focus on other aspects of growing their business.
According to a 2017 survey, founders spend 40% of their time on tasks like accounting, payroll, and other non-income generating tasks. This begs the question: Should founders devote time to bookkeeping — something that may be new to them or considered a nuisance — or focus on what they know best?
If you’re looking to hire a bookkeeper or CPA to lighten the load, but aren’t confident in understanding the critical distinctions between them, keep reading.
CPA vs Bookkeeper
You have a few options to choose from when it comes to keeping your business finances in order.
For example, accounting firms and accounting software offer various accounting services to businesses of any size.
- Accounting software comes in many shapes and sizes but does not include instructions on how to apply it to your business or the people to support it.
- Accounting firms offer accounting services, including traditional bookkeeping services. They offer the bodies but not the software solutions. Added benefits like tax advisory, tax return preparation, and CFO advisory typically cost premium rates.
So, rather than looking for a full-time hire to record day-to-day transaction activity and prepare month-end reporting, you have the option to hire a bookkeeper or a CPA. We recommend hiring a bookkeeper over a CPA.
A bookkeeper is a finance expert with a knack for math, organization, and attention to detail. A bookkeeper will focus more on daily updates, transaction detail, and management reporting, while a CPA may focus more on specific accounting guidance and assurance services at higher prices.
What separates bookkeepers from CPAs boils down to daily responsibilities and financial management. Bookkeepers provide daily insights into transaction activity, updating the books on time. CPAs tend to focus on high-level external considerations based on materiality at month-end or, more often, year-end. Businesses can operate solely with a bookkeeper and receive more relevant and timely reports.
A bookkeeper’s role
Bookkeepers are responsible for the day-to-day recording of financial transactions. However, bookkeepers must often evaluate applications, establish processes, and give management daily answers to business questions.
Bookkeepers perform the following tasks daily:
- Setting up and maintaining accounting software
- Reviewing purchase orders, generating invoices, and processing payments
- Recording transactions from accounts receivable and accounts payable
- Updating cash balances, reconciling bank statements
- Completing payroll and administering benefits
- Maintaining general ledgers and supporting schedules
- Providing month-end reporting, including profit and loss statements and balance sheets
- Generating ad hoc reports (sales, receivables, inventory, headcount)
- Updating and maintaining budget vs. actual analysis, month-over-month spend analysis, and providing management with insights into business drivers
Bookkeepers track the financial health of a business on a daily basis. This includes having a finger on the pulse of cash flow and daily spend. Bookkeepers can quickly provide management updates if transactions fail to process, expenses look off, or recorded numbers show that the actual activity of the business doesn’t meet management’s expectations.
It’s essential to note that hiring a full-time bookkeeper may not be in a startup’s headcount forecast. Their average salary begins at $45K, not including benefits. Most bookkeepers are accountants or controllers and require a higher salary. Consulting bookkeepers typically cost $75 to $150 per hour.
Most accountants and entry-level controllers are CPAs, but a CPA designation is not required for bookkeeping.
A CPA’s role
To become a CPA, one must pass the Uniform CPA Examination and have a master’s degree. CPAs have a much wider pool of knowledge and in-depth understanding of more complex financial transactions. Only a practicing CPA, meeting specific compliance requirements, can express an opinion on audited financial statements and provide assurance services.
CPAs offer more in-depth financial services like:
- Representation of clients in issues with the IRS (internal revenue service)
- Advanced tax advisory services
- Accounting advisory services on complex financial transactions
- Audited financial statements
- Driving business transactions that require assurance services
A small business typically doesn’t require CPA services. Their salary is higher, and their rates for consulting services can be three to four times more than a bookkeeper.
A CPA’s starting salary is $69K per year without including benefits. Hiring a controller or VP of Finance with a CPA designation will likely cost $150K to $200K per year, without benefits. Similarly, most consulting fees for experienced CPAs range from $400 to $500 per hour.
Keep this in mind if you’re looking for a CPA to do bookkeeping services.
Which works best for your business?
There are pros and cons to both options.
CPAs offer financial advice to founders when an accounting transaction needs evaluating for potential tax implications, revenue needs recognizing under USGAAP standards for investors, or a bank loan requires an audit.
Bookkeepers offer a less expensive alternative but can provide the vast majority of day-to-day financial maintenance and month-end reporting processes, taking this burden off the founder's shoulders.
Ultimately, the decision comes down to your business needs and what your startup can afford at the early stages of its growth. Startups should focus on their value proposition while remaining accountable to investors for financial reporting. It’s costly to hire a full-time accountant in the first few years of building out a product. As a startup grows and requires more financing, additional CPA services can be beneficial.
Your business may outgrow your bookkeeper after a few years. It’s a learning process. Once you’re more familiar with the accounting processes, surpassing a bookkeeper may be necessary. Experienced finance teams with dedicated CPAs are advantageous when a startup needs audited financial statements, and the founders are on the path to an IPO.
Bookkeeping vs CPA services for startups
Bookkeepers and CPAs can provide valuable financial services together. As a startup grows, bookkeepers can continue to provide day-to-day management reporting while CPAs provide accounting expertise.
However, when founders without much accounting experience try to go it alone, managing the accounting and reporting is a less-than-easy task that can lead to long-term problems with investors.
While a good bookkeeper can help the organization grow and support day-to-day activities, a more experienced finance professional elevates financial reporting to a level that a founder will need to share with their investors.
At Zeni, all our controllers have industry and process expertise as bookkeepers. Most of our controllers have CPA, CA, CMA, or MBA designations. Zeni’s controller team can provide daily financial insights and services far beyond the typical bookkeeper, including daily and month-end bookkeeping with financial expertise and financial reporting through Zeni’s dashboard.
However, Zeni is not a traditional CPA firm that requires members of the firm to be CPAs.
Rest assured, no matter what Zeni package you choose, you’ll be able to receive experienced, dedicated support from Zeni’s team of finance experts. Unlike other consulting CPA services that charge a high hourly price, Zeni charges a flat monthly subscription fee based on your monthly expenses – startup-friendly pricing with no surprises.
Want to learn more about what Zeni has to offer? Schedule a free demo.
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