Do you really understand bookkeeping and accounting for your business?
Accounting involves recording, interpreting, classifying, analyzing, reporting and summarizing your business’s financial data. Bookkeeping involves recording financial transactions. This is the first part of and foundation of the accounting process.
If you’ve hired a bookkeeper for your small business in addition to your CPA, have you ever wondered how responsible your bookkeeper is compared to your CPA, especially when it comes to ethics? After all, you’d expect both of them to be ethical, skilled, and trustworthy, right?
It’s critical to the success of your business and your reputation within your industry to work with reputable people. Otherwise, you and your business may suffer, i.e., you may close your business and your employees would lose their jobs.
Who’s Handling Your Small Business’s Financials?
Do you know the difference between a bookkeeper and CPA? Understanding which one you need may baffle you, so here’s the difference between a bookkeeper and CPA.
Bookkeeper
A bookkeeper processes daily financial transactions, which includes purchases, receipts, sales and payments. Recording these is done through a general ledger or journal. Most small businesses use software such as QuickBooks to keep track of their entries, debits and credits. The result is a trial balance with a final total of debits and credits that match. Some bookkeepers, especially those who are certified, classify and summarize financial information into financial reports, i.e., balance sheet, income statement, cash flow statement, etc.
CPA
A CPA (certified public accountant who passed a rigorous exam from the AICPA) focuses on business analysis, processes, and reporting and provides advice to a small business owner, especially for complex accounting and tax issues. Often, a bookkeeper and CPA will work together to ensure the integrity of the
the company’s financials.
Small business owners often hire a bookkeeper to handle the day-to-day recording of transactions but have their CPA review their financials at specified times throughout the year. Even though you may think you only need a bookkeeper, a CPA can give you peace of mind that proper accounting procedures are being followed.
How Responsible Are Bookkeepers Compared to CPAs?
Hiring the right financial professionals for your small business is critical for continued success. Therefore, you may have thought about how responsible bookkeepers vs. CPAs are when it comes to ethics. Do bookkeepers believe “it’s the CPAs job?”
Ethics is critical for all of us. Everyone in every walk of life has to have a standard of ethics that can be upheld to best serve the public. That’s what financial professionals are really here for as consultants, bookkeepers, and CPAs. However, bookkeepers are on the front line. They’re the ones who small business owners count on to be the most ethical people possible. Without their ethics and without their strategies around watching for unethical behavior – certainly, a CPA doesn’t expect them to have unethical behavior, but they want them to also watch out for others who may be having it. Their responsibility is absolutely critical to the industry.
With bookkeepers, consultants, CPAs, it’s critical that they’re aware and assist small business
owners regardless of what they charge to do so, and watch for those internal controls and implement
them.
Hire Ethical Bookkeepers and CPAs for Your Small Business
No matter the size of your business, it’s important to hire ethical financial professionals who will ensure the accuracy of your financial transactions. Why? Because the data will be used to make decisions for the future of your business – growth can open your business up to more complex accounting concerns.
Keep in mind that some small business owners choose to handle their own bookkeeping through the QuickBooks accounting software. However, they’ll provide their CPA with financials weekly, monthly or quarterly. Some small business owners whose companies have experienced growth hire a bookkeeper, or even have a small accounting staff in addition to working with a CPA.
As far as ethics go, bookkeepers are on the frontline of your business. Make sure you conduct a background search before hiring someone. Consider asking your CPA for recommendations, and even interviewing candidates. You’ll have peace of mind knowing that you’ve hired the right person for the job.
Worried about business fraud? Read this blog post about why you need to pay attention now!
