What Should a Small Business Expect from an Accountant?
Do you have any idea how much time small business owners spend on bookkeeping? According to the National Small Business Association (NSBA):
- 40% of small business owners identify bookkeeping and tax preparation as the worst part of owning a small business. It’s safe to assume that less than 40% of entrepreneurs and small business owners start their business because they are passionate about bookkeeping and taxes.
- In fact, well over half (58%) of entrepreneurs and small business owners say that when it comes to what they dislike most about federal taxes, “the burden of managing federal taxes is worse than actually paying the taxes.”
- Another cost you have to consider is measured in time and attention. How much time do entrepreneurs and small business owners spend on accounting tasks? According to the NSBA’s figures, 40% spend 80 or more hours per year. Another 18% spend 41-80 hours, 15% spend 21-40 hours, and 27% say they spend 20 or less hours per year. This is all time that could otherwise be spent on doing the more fulfilling aspects of entrepreneurship, like interacting with customers and clients.
It’s no wonder that so many entrepreneurs and small business owners decide to reclaim some of their time and defer their finances to the expertise of one or more accounting professionals. What accounting services do you need, though? Are “bookkeeper” and “accountant” synonymous? And what about CPAs?
What’s the Difference Between a Bookkeeper and an Accountant?
Here’s a quick overview of the difference between bookkeepers, accountants, and CPAs.
A bookkeeper works to keep your financial information well-organized and securely stored, and will be able to offer analysis and insights into your business’s financial overall standing. With a bookkeeper, you gain compliance with IRS-mandated record-keeping including gross receipts, purchases, expenses, assets, and more.
While a bookkeeper will have on-the-job training and experience, an accountant will have a formal degree in the field. Depending on your business and your needs, the benefits of having an accountant are wide-ranging. Here’s what you can expect from an accountant:
- For businesses that are just starting out, an accountant will help create a solid financial foundation. Among other things, an accountant will help budding entrepreneurs with determining business structure, creating a financial plan, assist and guide banking decisions, ensure compliance with government regulations, and more.
- For established businesses, an accountant will assist with maintaining accounting systems, helping you better understand financial statements, keeping an eye on payroll processes, and providing tax advice and preparation.
- For growth-minded businesses, an accountant can study cash flow patterns, inventory management, pricing structures, and more in order to help target areas for growth. In addition, accountants help develop financial forecasts and insights and protect against IRS audits.
What Is a Certified Public Accountant (CPA)?
The primary difference between an accountant and a CPA is that in addition to their accounting degree, a CPA has to meet additional state and education licensing requirements and pass a formal exam. A CPA candidate completes 150 hours of college-level coursework, spends a year working under an established CPA’s supervision, then takes their licensure exam.
Another difference between an accountant and a CPA is that a CPA is considered a fiduciary—meaning they have a legal duty and power to act on their client’s behalf—and a non-CPA does not qualify as such.
Finally, while any accountant might be able to prepare a tax return, a CPA tends to have a deeper understanding of applicable tax codes—largely a result of the extra study required to become a CPA.
Do I Need a CPA for My Small Business?
While it is not a formal requirement for small business owners, many will opt to work with a CPA for the reasons listed above. In some cases, small businesses will hire both a bookkeeper and a CPA. What does a CPA do for a small business that a bookkeeper or non-CPA accountant can’t? As mentioned above, they are more highly-credentialed, can act as a responsible fiduciary, and will help you avoid running afoul of the IRS when tax season rolls around.
How Do I Choose a Small Business Accountant?
Accountants and CPAs can do a lot for small business owners, so the first step in your search for one should be to ask the question: what do you want from an accountant?
In addition to offering the accounting and related services you need, the best small business accountant or CPA will be responsive and proactive in their handling of your finances. This way, you can focus more on running the other areas of your business.
At Delta Wealth Advisors, we offer a range of services including:
- Bookkeeping and account reconciliations
- Outsourced CFO services
- Proactive business tax planning
- Financial statement preparation
- Financial analysis and decision making
- Succession planning