Running a small business means wearing a lot of hats—sometimes too many. At some point, you’ll realize you need help with your finances. But who’s the right person for the job? A CPA? An accountant? A bookkeeper?
What’s the difference, anyway?
It’s a valid question, and it’s one we get asked all the time. The truth is, not every small business needs a CPA, but most businesses do need some combination of financial expertise. This will help you figure out exactly what kind of financial expertise your business needs so you can stop guessing and start solving.
What is a CPA?
A CPA (Certified Public Accountant) is a financial professional with significant training and credentials. Becoming a CPA isn’t easy. To even qualify for the CPA exam, most states require 150 credit hours of education—that’s more than a standard bachelor’s degree. Many CPAs earn a master’s degree or double major in undergraduate studies to meet the requirements.
After that, they need to work in public accounting for a year or two (depending on the state) and pass a rigorous four-part exam. CPAs must complete continuing education—typically around 40 hours a year—to stay licensed. They’re not just book-smart; they’re constantly staying up to date on accounting standards and regulations.
What Does a CPA Do?
A common misconception is that CPAs are automatically tax pros, but taxes make up only a small portion of the CPA exam—about half of one part of the four-part test (aka, not all that much). While some CPAs specialize in tax, many focus on other areas like auditing financial statements.
For example, if your business needs audited or reviewed financial statements for lenders or investors, you’ll want a CPA. These professionals can certify that your financials are accurate and reliable based on a thorough review or audit.
You might need a CPA if:
- You need audited or reviewed financial statements.
- You’re seeking strategic financial advice on large-scale business decisions.
What is an EA?
If taxes are your main concern, an EA (Enrolled Agent) might be exactly what you need. EAs are certified by the IRS and focus exclusively on tax matters. They can represent you before the IRS, negotiate on your behalf, and even respond to tax issues as if they were you—provided you authorize them.
Like CPAs, EAs are required to complete ongoing education to stay sharp on the latest tax laws.
When Should You Choose an EA?
While CPAs can also provide tax services, EAs are specialists in this area. If your primary need is tax-related—filing returns, planning, or handling IRS issues—an EA may be a better fit than a CPA.
What’s the Role of an Accountant?
“Accountant” is a broad term that applies to anyone managing financial records. It’s not a specific credential like CPA or EA, but an accountant can be an invaluable resource for overseeing your financial systems and preparing accurate financial statements.
Accountants typically handle:
- Creating and reviewing financial statements.
- Managing accounting systems and processes.
- Analyzing financial data to identify trends and opportunities for growth.
Unlike bookkeepers, accountants often provide strategic advice, helping you make informed decisions about the financial health of your business.
You might need an accountant if:
- You want to understand your financial performance.
- You’re looking for advice on how to improve profitability.
Bookkeeper: When You Need the Day-to-Day Numbers Managed
Bookkeepers handle the transactional, day-to-day aspects of your finances. They’re responsible for:
- Tracking income and expenses.
- Managing accounts payable (bills) and receivable (invoices).
- Reconciling your bank accounts.
Bookkeepers are essential for keeping your financial records accurate and up to date. However, they typically don’t provide strategic advice or handle complex financial tasks like preparing financial statements or tax filings.
You might need a bookkeeper if:
- Your financial records are messy or disorganized.
- You’re spending too much time on daily financial tasks.
Most Small Businesses Need a Mix of Expertise
Rarely does a small business need just one type of financial professional. The type of financial expertise you need depends on the current challenges you’re facing. For many small businesses, the answer isn’t one professional—it’s a combination of roles. Here’s a typical setup:
- Bookkeeper: Keeps your daily financial transactions accurate and up to date. Think of them as the ones making sure your bank balance and records aren’t a mess.
- Accountant: Looks at the bigger picture, preparing financial statements, ensuring your systems work efficiently, and giving strategic advice to help your business grow.
- Tax Expert (CPA or EA): Handles all things tax-related, from filings and planning to representing you if the IRS comes knocking.
For example, if you’re a small business owner who struggles to keep up with invoicing and bills, you likely need a bookkeeper first. If you’re trying to understand why your business isn’t as profitable as you’d like, an accountant can help. And if tax season gives you nightmares, a tax professional (CPA or EA) is who you want in your corner.
How to Identify What You Need
Start by asking yourself these questions:
-
Are my daily financial records accurate and up to date?
If no, hire a bookkeeper. -
Do I need to understand my financial performance or get strategic advice?
If yes, look for an accountant. -
Do I need help with taxes?
If yes, consider a CPA or EA. -
Am I required to have audited or reviewed financial statements?
If yes, you’ll need a CPA.
A Comprehensive Solution for Small Businesses
At Patrick Accounting, we understand that small businesses often need more than one type of financial expertise. That’s why we take a comprehensive approach to small business finances. Our team includes bookkeepers who ensure your books are in order, accountants who provide strategic insights, and tax professionals who navigate the complexities of tax law.
You don’t have to figure out everything alone.
The right financial professional—or team—can save you time, money, and stress. Take the time to evaluate your business needs and find the expertise that fits.
And if you’re still unsure, we’re here to help. Patrick Accounting offers the support your small business needs to succeed, all in one place. Let us handle the numbers so you can focus on growing your business.
To see if we'd be the right fit for your small business, read Who is a Good Fit for Patrick Accounting.
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