As a business owner, one of your main objectives should be keeping your cost (overhead) low. One of the ways to accomplish this is to delegate smarter. What does delegate smarter mean? This means that you should assign certain tasks to certain qualified individuals with the goal of keeping your overhead low. What I am getting at here is this, reducing your accounting expenses by 50% or more. You can accomplish this by hiring a reputable, keen, ethical, well-trained, professional bookkeeper to manage your books instead of hiring a CPA or accountant to manage the books.
For lack of a better term, the bookkeeper can do the grunt work, so that the CPA or tax accountant does not have to spend their time doing it. Grunt work, what exactly is that? Grunt work can be described as data entry (entering accounts payable and receivables info), reconciling bank statements, etc. Quite honestly, most CPAs or accountants would much rather not have to deal with this type of work. It is likely that some CPAs and accountants feel that doing that type of work (grunt work) is not what they got their accounting degrees for.
Most accountants want to see clean books. They don’t want to have to deal with trying to figure out what chart of accounts an expense should be listed under, etc. That can be the job of the bookkeeper at a much lower rate than the accountant charges. Besides, freeing up time for the accountant will allow him or her to focus more on the financial health of your business, to prepare your company’s tax returns, possibly help you to apply for business loans if, and when needed, and the accountant can also help to solicit investors if needed.
I know, using the term grunt work might sound like the bottom of the barrel work, but it isn’t. The tasks that bookkeepers can perform for you can be quite valuable and save you lots of your hard-earned dollars. Isn’t that your end-goal, to save money?
In hopes of helping you to understand the roles that the bookkeeper and accountant plays, I will provide you with some key responsibilities of each.
The recording of the day to day financial transactions of a business, management of the chart of accounts and the creation of financial statements for a specified period, is usually the general duties of a bookkeeper. A bookkeeper can be entry level or full charge. Though full charge bookkeepers have more responsibilities than an entry level bookkeeper, they do not have as much responsibility as accountants have. Utilizing the expertise of a bookkeeper is well worth the cost, which, again, can be at least 50% less than the services of an accountant. The bookkeeper should have at least an Associate Degree in accounting and have a general knowledge of the General Accepted Accounting Principles (GAAP).
Generally, a professional who is trained in all areas accounting, including bookkeeping, which most accountants dislike doing. Analyzing various accounting records, doing tax computations, managing employees and budget development are some key responsibilities of accountants. There are different categorizations of accountants. The most common designations being either a Certified Public Accountant (CPA), Certified Internal Auditor (CIA), and the Certified Management Accountant (CMA). Pretty much the accountant takes the information that the bookkeeper gives to him or her and uses this information to file your tax returns, do financial projections and possibly participates in budget development.
In general, a business can manage with just the services of a bookkeeper, if the bookkeeper is qualified to handle certain important tasks. Let’s talk about dollars for a few minutes. In general, a CPA or an accountant charges hourly rates that start somewhere around $45/hour, on the low side. Well, you can hire a bookkeeper for just about 50% of that amount per hour. At this point, you might be asking yourself, if a bookkeeper can do all the necessary work to maintain your company books, what do you need an Accountant or a CPA for? For starters, generally, a bookkeeper does not possess the qualifications and knowledge that a CPA or an accountant does. In addition, a bookkeeper typically would not have the training that a CPA or an Accountant does. Though this may be the case, bookkeepers can get the job done for you at half the cost. You can save the heavy-duty stuff for the accountants and keep your costs down in the process.
You might be a small business just starting off and you may have a little bit of knowledge about bookkeeping and you want to try to manage the books yourself. Well, that’s not really a wise thing to do. In my opinion, managing your own books is like trying to teach your child to drive, and for any of you who have tried to do that (teaching your child to drive), you know that for the most part, that doesn’t work. Even if you are familiar and experienced in using the latest bookkeeping software, you can make mistakes, and in some cases, those mistakes can be quite costly. Again, the end goal should be to lower your overhead, not to increase it. Besides, your time could be better spent trying to grow the business by producing clients and generating revenue, not wasting your time doing the bookkeeping. You want to work smarter…not harder. It would be a wise choice to delegate the bookkeeping tasks to a qualified bookkeeper.
Depending upon how much you trust the person, you can assign the bookkeeper a little responsibility, or a lot of responsibility. In some cases, full charge bookkeepers can do what some accountants do, such as analyzing various accounting records, doing tax computations, and possibly preparing tax returns for your business, all at a fraction of the cost of hiring an accountant. Don’t discount the services of a bookkeeper as if he or she is a bottom feeder because that bottom feeder could save your business lots of money, stress, and angst.