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Does Your Small Business Really Need a CPA, When a Bookkeeper Will Do?

A common quandary for newer entrepreneurs is the challenge of tempering business needs with wants. It’s not at all unusual for small business owners, especially incoming ones, to have their sights so set on success and the end game that they make predictable mistakes in the process.

“Stretching too far, too fast, is a common misstep among enthusiastic business owners eager for growth,” writes Laura Petrecca in USA Today. “And the ramifications of too-rapid expansion can be great.”

On the surface, this can look like an entrepreneur who – with metaphorical guns blazing – buys and acquires each and every thing she feels is essential to operating a business. Money may be spent on securing office space (when a home office will do); hiring each and every team member on the front end (when a stable of part-time workers or contracted professionals is adequate); or even investing in expensive IT systems that may not even be relevant to the business (when common off-the- shelf options may suffice).

Another manifestation for small businesses is hiring a Certified Professional Accountant, or CPA, to handle their financial functions when a bookkeeper is more than enough. In short, this may be the equivalent of buying a just-licensed teenager a Cadillac when a base model Kia is all they really need.

So how can a small business owner understand who they need, and when? What are some signs that a bookkeeper is a smart investment, in terms of time and money, for businesses getting off the ground?

Temper Expectations

New businesses wouldn’t ever begin if not for the ingenuity, innovation and incredible vision of its founders. But sometimes all that excitement and enthusiasm gets out of bounds. This leads to the pursuit of instant gratification before the business is ready.

According to Bryan Miles, CEO and co-founder of BELAY, that rush to the finish line is a common feeling among entrepreneurs. “They’re solving complex problems with their business, and they just want the feeling that they’ve finished something. Something ‘in progress’ always feels unsettling to a leader.”

Hence, the inclination to pull all sorts of triggers prematurely and hasten the possibility of going broke in business.

Know the Difference

Many small business leaders are truly experts in one or two things – namely, the item they sell or the service they provide. This means they are not typically strong financial managers. Sure, they may know how to read a banking statement and balance a checkbook; but they may not be proficient in the more involved aspects of business financial management. Sometimes entrepreneurs first try to tackle the finances and “books” on their own. But the realization that doing so is unsustainable leads them to the considerations explored in this piece.

There are distinctions between bookkeepers, accountants and tax preparers. Just because they all deal with finances and number-crunching does not make them the same. Bookkeepers are well-equipped to handle the routine and ongoing financial management / maintenance needs of businesses. Producing reports, reconciling accounts, processing accounts payable and accounts receivable, recording expenditures and receipts, and monitoring P&L are all within a qualified bookkeeper’s grasp. Some also bring billing, payroll, purchasing and auditing skills to the table.

CPAs, on the other hand, tend to specialize in more strategic and niche areas of finance. Sometimes these are more relevant to larger entities – big businesses, complex organizations and major corporations. Examples include long-term planning for investments, taxes, and mergers and acquisitions; internal controls and quality assurance; fraud auditing and account investigations; international accounting; and individualized financial consulting.

Assess the Cost Burden

For all businesses, cash might be king. But for younger and smaller businesses, leveraging too much financial risk and being beholden to too much ongoing outlay can be problematic.

As CNBC reports, running out of money is the number one reason small businesses fail. When obtaining financing and facing issues with profitability become key snags for a new business, clearly taking on too many expenses can add to that burden.

That’s why it’s important to know the difference between the cost comparison between CPAs and bookkeepers, too. Hard figures on how much more expensive CPAs are than bookkeepers are a bit difficult to come by, especially among private companies, providers, firms and consultancies. Most do not broadcast their rates for competitive reasons.

However, a look at data by the federal Bureau of Labor Statistics (BLS) is instructive. According to the agency, CPAs (most closely categorized with accountants and auditors) made a median salary of more than $68,000 in 2016. For the same year, bookkeepers (classified along with accounting and auditing clerks) made slightly over $38,000 per year, or $18.46 per hour. Research website KompareIT shows that bookkeepers can command anywhere from $15 to $60 per hour, while accountants charge much more - $60 to $250, depending on whether one is a junior accountant or a top-end CPA.

Those rates, accounting for the difference, are apt to be proportionally passed on to the client.

“Determining whether a business needs a CPA or a bookkeeper is really an individual decision, informed by so many factors,” says Tricia Sciortino, BELAY Chief Operating Officer. “It’s more than a distinction between the luxury option and the practical solution. And as businesses grow and refine their operational strategy, identifying the best fit for their ongoing and future needs is a continuous conversation that needs to take place.”


Ready to start working with a BELAY Virtual Bookkeeper? Find out more here.