Bookkeepers, Accountants, CPA's - What's What and Who's Who?

You might have heard about Aliens vs. Predators. They are two different species from two different galaxies. In the accounting world, it can sometimes seem like that as well, and since I've had client recently ask me what the difference is between bookkeepers, accountants and CPA's, I've decided to write this article to show you the differences and also point out what to look for when you hire one.

Bookkeeper: Is just that, a keeper of the books. It helps if this person is meticulous and very organized. A bookkeeper should know QuickBooks software cold, know how to do bank reconciliations and have a very good knowledge of "where things belong." They need to know the differences between the following:

1. Assets
2. Liabilities
3. Income
4. Expenses

If your bookkeeper doesn't know which is which, you won't know if you're making or losing money.

So how would you know if your bookkeeper isn't a "keeper" as we say? If they are disorganized! The tell tale signs are a desk that looks like a bomb hit it, with papers all over the place. Their appearance may be quite disheveled. When they are making a collection call, there is a proper way to handle that. Remember, the person is speaking to your customers and is a reflection of you. How do you want the outside world to perceive you and your business?

Another thing to factor in is transparency. If the person gets hit by a truck, do you know where everything is? Is the person computer savvy? There are a number of bookkeepers who are very old school. "This is the way it was done." That might not serve you as there is so much new technology around.

Be on the lookout also of having the same person doing everything. For example, if your bookkeeper is preparing checks to be signed, another person should be signing the checks, not the bookkeeper. The bank reconciliation should be prepared by a third party. This is designed for your protection. We've all heard stories of business owners being blindsided by thievery and so just be aware to have different people doing these various functions.

Accountant: Besides knowing what the bookkeeper knows, which by the way, most accountants don't, the accountant should know what the financial statements mean and be able to explain it to you in a way that makes perfect sense.

This information on what's happening in your business should be used by you to make the business more profitable.

When you choose an accountant, (see all the negative things about the bookkeeper, and multiply by two), you have to be more careful! Why? Because if the accountant is responsible for deadlines, payroll taxes, sales taxes, estimated payments, these things are time sensitive. If these deadlines are missed, you could be looking at large dollar penalties and interest charges, so you have to notice if the accountant waits for the last minute, because then you have a problem.

CPA: These folks should know what the bookkeeper and the accountant know and should be able to prepare the financial statements so they can be used by investors, potential buyers, banks and lending institutions. Most CPA's have a pretty good grasp of what is right and wrong in the eyes of the Internal Revenue Service.

The question I want you to ask yourself is, "Is my CPA making money for me?" If the answer is no, what do you need him for? Very few CPA's are savvy business people. They understand taxes and financials but don't understand how the business side of things work. What new business idea does your CPA supply you with?

Remember, you get what you pay for. If you have a guy you are paying $500 a month to and at the end of the year he prepares your tax return, what you have is a $6,000 tax preparer. If you are paying $2,000 a month and all the guy does is prepare your taxes, go hire the $6,000 preparer - it's a better deal.

How does a CPA make you money? If your business is successful, how can it be more successful? A CPA should have the ability to analyze the business and tell you what you are doing right and wrong. If you are doing everything right, do nothing and stay on course. Not doing so well" Ask why. What changes have to be made to turn the business around?

When things are going poorly, what people look to do is cut back on expenses... but you should ask, "Am I getting what I am paying for?" You may be better off by hiring a very expensive CPA who will do something versus someone who's not going to do anything.

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