Bookkeeper, Accountant, or Fractional CFO? Which Do You Need?

While small business owners know that accounting deals with numbers and money, unless they have a degree in finance or accounting, the specifics may be a bit of a mystery. For example, how do you know if you need a bookkeeper, an accountant, or a fractional CFO? Here’s a brief breakdown that may help.

What’s the difference between bookkeeping and accounting?

Before we explore the various accounting services small businesses need, let’s clear up something that confuses many business owners. The words bookkeeping and accounting are often used interchangeably, but they don’t mean the same things.

Bookkeeping is part of accounting; it’s the practice of keeping accurate records and documenting financial transactions. It involves recording purchases, reconciling bank statements, and managing payroll.

Accounting is all about using data to make decisions for a business. It focuses on tasks like preparing and interpreting financial statements, identifying important business trends, and providing financial guidance for decision-makers. Think of bookkeeping as the process of organizing data, while accounting is the process of putting it to work.

Basic bookkeeping services

Since bookkeeping is often considered a part of accounting, bookkeepers spend their time recording, categorizing, and organizing financial transaction data. They may also reconcile bank statements, which involves checking your business’ records to ensure they match the bank’s records.

In most cases, the business owner will handle the day-to-day accounting functions, and the bookkeeper will come behind them to ensure the books are in order and rectify anything out of balance.

The essential staff accountant

This is one of the most common accounting job titles out there. Staff accountants are the generalists of the field. They have a wide variety of responsibilities, which can include preparing financial statements, maintaining a company’s general and subsidiary accounts, performing account reconciliations, maintaining payroll records, cash management, and supervising clerical employees.

It is important to note that a good accountant is not just someone with finance skills but also an expert in human relations and communication. They must have exceptional integrity as they oversee financial records, and they must have strong communication skills to present detailed information in a manner that’s easy to understand.

While most small business owners will likely choose to have either a bookkeeper or a staff accountant, it’s important to note the other positions an accountant can fill. Here are just a few:

Accounts payable and receivable management

Accounting clerks generally manage the money flow in and out of your business. An accounts payable clerk works with all the money that leaves your business, whether on a regular or one-time basis. They are responsible for organizing, tracking, and overseeing your bills. They will also review invoices and billing statements for accuracy and dispute any overcharges or inconsistencies.

An accounts receivables clerk manages all the money that comes into your business. This person will create and send invoices to your customers, record incoming payments, and reconcile them against the open invoices. They will also follow up with customers who haven’t paid.

Payroll manager

Keeping your team paid is vital to your business, and it doesn’t happen without a payroll manager or service. While most of us think of payroll as simply paying an employee’s wages, there's much more to it. Many payroll clerks will collect and organize timesheets and enter data related to employees, their deductions, and the pay periods.

In addition, they will also track all of the required withholdings like federal taxes, Social Security, Medicare, state or local taxes, and more. In short, the payroll clerk oversees the entire payroll process and ensures you are complying with payroll tax laws.

Tax prep and planning

While accounting encompasses all financial transactions to some degree, tax accounting focuses solely on those transactions that affect an entity's tax burden and how those items relate to proper tax calculation and preparation.

Tax laws often change and can be complex. A tax accountant ensures that companies and individuals comply with tax laws by filing their federal and state income tax returns. Some tax accountants also offer tax planning advice to help you save money in taxes.

The benefits of outsourced accounting services and a fractional CFO

As you can probably tell, accounting is a crucial part of your business that involves a lot of work. As your business grows, these responsibilities may be more than a single accountant (or owner) can handle on their own. Fortunately, there is a solution: You can hire an accounting firm.

The right outsourced accountants will transform your business by tackling the bookkeeping and accounting services you can’t operate without giving you the time to focus on running your business. They’ll ensure that your books stay organized, your bills and invoices are paid on time, and the financial side of your business runs smoothly.

If you’re looking for that kind of support, you’re in the right place. The Profit Firm is an outsourced accounting team that takes financials off business owners’ plates. We believe in a personalized approach to accounting, giving you a dedicated team and great attention to detail for an affordable monthly fee. Whether you need catch-up bookkeeping or complete financial planning and CFO services, we’ll be by your side every step.

You’ve seen how much is involved in managing your business’ finances. There’s no reason to do it alone when you can have an experienced team on your side. Why not schedule an introductory call to see how we can work together to achieve your goals?