28 Apr Accountant vs Bookkeeper: What’s the difference?
Not sure if you should hire an accountant or bookkeeper?
Small business owners start their venture to do what they love. For most, Accounting and Bookkeeping falls outside of the love classification, and closer to the dislike, loathe, life would be complete if I never had to deal with again, classification. This is where the rare breed that enjoys this type of work steps in. It takes a special individual to enjoy this type of work, and that is okay for me to say as I was unfortunately born into this life of enjoying numbers and making nerdy accounting jokes.
Once a business gets started, they quickly realize the importance of record keeping. Some are fortunate enough to have a staff member that is qualified to take care of this, allowing items to be taken care of in-house. The majority however, has to venture out and obtain an individual to take care of this. Historically this has meant hiring a part-time employee or finding a local Accountant to outsource this responsibility to. This practice isn’t completely dead, but today’s technology has opened doors that weren’t available in the past, creating a new breeding ground for freelancers and virtual accountants/bookkeepers.
Are my too small for an accountant, or too large for a bookkeeper? Wait, they’re the same thing, right?
Accountants, Bookkeepers, CFOs, Controllers, Comptrollers, CPAs, Enrolled Agents, Number Crunchers, Tax Guy, whatever you want to call them. To most, the titles included in this list all carry similar definitions. I mean, they all just deal with numbers and financial statements, right? Yes, but as your operations continue to grow you will realize the importance and unique skillset each different specialization can bring to the table.
Different Types of Number People
Arguably the most common title used for all individuals and positions in this field. It has grown to the point that if you deal with numbers, you’re an Accountant. While this is generally true and acceptable for simple conversation, it is important to remember that many subsets have branched off from this one vague term.
When used properly, an Accountant is somebody who analyzes data entry and ensures that all accounts appear to be in line. From there they create financial statements and provide an analysis to individuals up the chain. In short, Accountants tend to look at the bigger picture.
A bookkeeper generally does not have the qualifications, knowledge, or skill set that others in this list will have.
I say generally as today the bookkeeper position continues to become taken over by qualified individuals that have opened their own business (such as a cloud-based accounting firm) and bundle bookkeeping with other services that they provide. Traditionally, a Bookkeeper is responsible for data entry while an Accountant produces the final statements after review.
Chief Financial Officer (CFO)
A CFO is essentially an advanced Accountant. The CFO also looks at the big picture, but is generally responsible for decision-making or strong recommendations. The primary duties include monitoring cash flow and financial planning.
A Controller is an individual who oversees the accounting department. Usually right underneath the CFO, they supervise and ensure financial statements are being prepared properly. They then provide feedback to the CFO, and a lot of times can serve as an advisor to the CFO. Individuals in this position are well educated and see the everyday accounting operations, making them valuable sources of feedback or opinions to upper management.
A Comptroller is equivalent to a Controller, with the only difference being that they work in non-profit or governmental accounting.
As many of you know, CPA stands for Certified Public Accountant. A CPA is an individual who has fulfilled their state’s education and work requirements, while also passing a rigorous exam. There is no doubt that a CPA has advanced knowledge in the accounting industry. However, a common misconception to this title is that all CPAs are financial and tax accounting experts. While some are, a lot like to specialize and differentiate themselves from one or the other. This doesn’t mean that they don’t help out on a tax return or two during the busy season (or an audit in the slow season), but the CPA designation is vague and doesn’t do well at showing a specialization.
On the flip side of things, an Enrolled Agent is a very specialized certification. An Enrolled Agent is somebody who specializes in Tax, and can represent any taxpayer in any jurisdiction of an audit. Education and work requirements aren’t as rigorous as a CPA, but they have to pass a three-part Special Enrollment Examination (SEE) that concentrates solely on individual and business tax along with client representation. An Enrolled Agent likely won’t have as much knowledge or experience in the financial accounting field, but they have shown advanced knowledge in the tax field.
A derogatory term for an “Accountant”, aka any of the positions listed above. Please do not call your accountant a number cruncher.
As this area continues to become more complex and specialized, many organizations have been created to offer certifications showing specializations throughout the field. Most of these are relatively new and unheard of to the public, but they are continuing to grow and someday I believe an emphasis on these will take precedence over the traditional, vague terminology. A list of the most common certifications and issuing organizations are as follows:
Certified Financial Planner (CFP)– The CFP credential shows advanced expertise in the field of Financial Planning. In today’s world financial planning has grown past the area of investments, and CFPs are there to help with every aspect including expense management, debt reduction, retirement planning, investments, and so on. The CFP certification is issued by the CFP Board.
Certified Fraud Examiner (CFE)– The CFE credential denotes proven expertise in fraud prevention, detection, and deterrence. CFEs are trained to identify the warning signs and red flags that indicate evidence of fraud and fraud risk. CFEs help protect the global economy by uncovering fraud and implementing processes to prevent fraud from occurring in the first place. The CFE certification is issued by the Association of Certified Fraud Examiners.
Certified Government Financial Manager (CGFM)– CGFM is a professional certification recognizing the unique skills and special knowledge required of today’s government financial managers. It covers governmental accounting, auditing, financial reporting, internal controls, and budgeting at the federal, state and local levels. This certification is issued by the Association of Government Accountants (AGA).
Certified Internal Auditor (CIA)– The CIA credential was put in place to show advanced knowledge and skills in the Internal Audit field. The CIA certification is issued by the Institute of Internal Auditors.
Certified Management Accountant (CMA)– One of the most popular designations in this group, the CMA shows mastery of critical accounting and financial management skills needed in today’s job market. This is issued by the Institute of Management Accountants.
Certified Public Bookkeeper (CPB)– This accreditation displays bookkeeping knowledge, skill, experience, and ethics to clients and employers. Bookkeeping is a role many think they can do, this certification makes it easier for clients to decipher and choose qualified candidates. This certification is issued by the National Association of Public Bookkeepers.
Any of these terms will do in general conversation. The other party will understand, no need to become technical. On the other hand, it’s important to understand the specializations of every role. Once your company reaches the point of multiple “accountants”, you want to avoid hiring a CFP to run your accounting department simply because they’re a number guy.