Diet or Exercise?
One of the things you may not know about me is that I have chronic Lyme disease. It’s been a long road to recovery, although I’m happy to say I’m on the mend, now that we know what we’re dealing with. I have a great Lyme doc who has helped me make huge strides in a short amount of time, for which I am eternally grateful.
When I first started working with my ‘Lyme guy,’ I was basically banned from exercise. My gut was all kinds of messed up, so at the beginning we focused on using my diet to start healing my body. This meant a very restricted set of foods, which was kind of demoralizing. And having an active family, it was a bummer to sit out on adventures and to limit myself to yoga when I wanted to feel well enough to go biking instead.
It became especially hard as my energy started coming back. I’d gotten the diet thing down and I just wanted to get out and do more! I felt like I had to choose between diet and exercise.
One or the other?
Sometimes we get into the mindset that we need or want one thing over another. (Tick…tock…tick…tock…Do you ever get that sound in the your head when you’re trying to make a decision? Chocolate…vanilla…diet…exercise…) Which do you want? Which do you really need?
It can be equally tough trying to decide whether you need a bookkeeper or an accountant to help you keep track of your business finances. And whoever you ask for advice, whatever research you’re doing on the web, gives you a variety of answers. Which ones are relevant and useful for you?
Bookkeepers vs. Accountants
In the game of small business, the reality is: it depends. Bookkeepers and accountants generally offer different types of services, although it’s not always clear when you get started what that entails. There’s a lot of general confusion about it all.
If you had asked me a couple decades ago, I wouldn’t have known the difference either. The truth is, just as diet and exercise are good for you body, a bookkeeper and an accountant can be good for your business.
Here’s the standard definition: bookkeepers take care of daily financial record-keeping while accountants are responsible for big picture analysis of those records.
In a nutshell, bookkeepers specialize in nitty-gritty financial activities and data entry. Many small business owners don’t have the need for an in-house financial person, especially in the beginning, and will outsource the work of generating invoices and recording bills to a professional bookkeeper. Or they may take care of daily transactions themselves and retain a bookkeeper for monthly reconciliations and to review the financial reports with an unbiased eye. This is a valuable service when you’re too busy to do the checks and balances yourself.
On the other hand, an accountant – usually a Certified Public Accountant or CPA – is a licensed professional responsible for performing financial analysis, audits, and generating tax returns for individual and business clients. They don’t typically provide day-to-day financial management services, but can be called on to help identify tax ramifications of capital purchases and other strategic decisions.
As a business owner, it’s a good idea to have a relationship with a CPA with whom you’re comfortable to at a minimum ask questions, even if you don’t engage them to do your taxes. Like attorneys, CPAs often specialize in certain business types, so be sure to work with someone who understands the business of selling time (versus storefront, restaurant, manufacturing, etc.).
Keep in mind, there are hybrids out there too. Many experienced bookkeepers provide higher level analysis to their clients and you can also find accounting firms who also provide day-to-day assistance. Some financial management consultants do a bit of both.
But, Liz, why do I need either?
Some entrepreneurs go years without either an accountant or a bookkeeper. And there’s nothing wrong with it. If you’re capable enough to get your invoices out, get paid, take care of your taxes, and generally move your business forward, kudos!
All businesses are required to keep accurate financial records and there is great accounting software out there that you can learn to help keep your finances in order. You can file your taxes on your own, and many people do. Typically, though, most entrepreneurs didn’t get into business to mess around with their books, and so they start looking around for help.
Whether you’ve been in business a while or just starting out, it can feel overwhelming thinking about hiring both a bookkeeper and an accountant. Many people just work with an accountant and bring their box of receipts at the end of the year so their CPA can recreate their financial history. This works just fine and I have clients who ran successful businesses for years in this way. But those same clients are much happier having moved to a true accounting system and learned how to manage their finances so they always know exactly where they stand!
In the end, whether you work with a CPA and a bookkeeper, or just a CPA for your taxes, or just a bookkeeper and do your taxes yourself, understanding the difference allows you to make an educated, conscious decision about what’s best for you and your business.
Just like my diet-exercise situation, you may find you ultimately need both. It’s a matter of knowing which professional will help you accomplish different goals. Want someone to help clean up your books, do your data entry, and take care of the daily details? A bookkeeper is your answer. Need tax advice and help preparing your returns? Find an accountant you want to work with who knows your industry.
Not sure what kind of help you need, if any? Having a clear picture of what your business requires will help you identify which services can benefit your business. As you continue to learn more about your business finances and develop a solid process, you’ll begin to see where you may need help and which type(s) of financial professionals may the best fit for your circumstances.
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