Recently, I had lunch with a local CPA and a bookkeeper. They work together and are both partners at their firm. My first question to them was, “What are the differences between your two jobs?” They laughed, but for not-so-obvious reasons. A bookkeeper can do most of what a CPA does, but they cannot sign off on official documents like tax returns or financial statement compilations.
I was happy to pick their brains about their work.
Bookkeepers deserve respect because many do understand accounting and financial management very well. For example, for some services this bookkeeper even charged more than the CPA! Experience matters. There are a few solid bookkeepers I can recommend too.
On the other hand, not all bookkeepers are as good as the one I met with. The norm, however, is that bookkeepers don’t understand accounting very well. It shows in their work and eventually the business owner must hire a someone like me to clean up their books.
To become a CPA, you must spend extra time in college, pass an extremely difficult test, and work for another CPA for at least a year. These requirements are to ensure that CPAs know what they are doing. We are also required to meet annual continuing education training and for public practices, like mine, allow our peers to do an in-depth review of our work.
Here is a list of what I consider the key benefits to working with a CPA:
- Know the appropriate accounting treatment for many different types of transactions
- Understand tax laws and implications
- Can provide more in-depth analysis and advise on important business decisions
- Save you time and money at tax time if were already familiar with your books
- Can put our signature on financial statements to be used to get a loan from a bank or raise capital (this is a form of assurance, such as a review, compilation, or audit)
- We know how to study and dig for answers (we didn’t go through all that schooling and pass crazy exams because it was easy!)
- Are vetted (after schooling and the very difficult exams, we must complete continuing education every year and are subject to peer reviews)
- Held to a high ethical standard, with great penalties if we don’t comply
In summary, you can expect consistent high-quality services from a CPA and a wider range of services. There are good bookkeepers out there, but they may charge the same or more and they cannot perform as many services as a CPA. If you want to hire a bookkeeper, I recommend asking for references and vetting them. I find the second most important quality of a CPA/Bookkeeper is personality and fit. Ask yourself if the person is someone you can have an open and productive relationship with.