What to Know Before Getting a CPA For Your Business

Are you setting up the financial operations for your business? Wondering who to hire?

In today’s post, we discuss how to outsource accounting.

Even for a small business, financial structuring isn’t cut and dried. You’ve got taxes, payroll, and client billing. You might have business loans and equipment leasing.

But accounting is critical to get right. After all, you’re in business to make money. If you don’t handle your business financials correctly, you could become insolvent very quickly. Or fail to become profitable in the first place.

Do You Need a CPA, Bookkeeper, or Accountant?

Who does what? What’s the difference? Let’s break it down.

Bookkeeper

A bookkeeper handles the daily purchases, payments, receipts, and payroll. They use Quickbooks or other accounting software. You can hire a bookkeeper part time. It’s not unusual for a small business owner to use a bookkeeper for a few hours a week. A bookkeeper may only have a two-year degree. (Or no degree at all.) For basic bookkeeping, you shouldn’t have to pay a lot. Some business owners use competent bookkeepers that charge as little as $20 per hour.

Accountant

Whereas a bookkeeper handles transactional tasks, an accountant plays a strategic role. They do audits, prepare reports, and advise you on taxes.

An accountant should have a four-year degree. However, a person who does accounting work can call themselves an accountant even if they don’t have a formal degree.

Some businesses use a bookkeeper for the day-to-day operations and have an accountant review the books quarterly and prepare taxes.

We strongly recommend hiring a CPA to prepare reports and file your taxes. Which brings us to our next section…

CPA (Certified Public Accountant)

A CPA is licensed at the state level. CPAs must have a basic degree (usually a bachelor’s degree in accounting). They must pass a CPA exam and have the experience specified by the state licensing board. In addition, they have to undergo 40 hours of continuing education annually.

If you hire a CPA, make sure they are properly licensed. You can check with your state. The NASBA (National Association of State Boards of Accountancy) website has the link for each state licensing department.

As a decent–but not strict–guideline, you’ll be looking for a bookkeeper when you know what you need done and just need someone to do it and an accountant when you’re not sure what to do. Andrew Marda, former Capterra analyst

Financial Advisor

A financial advisor focuses on growing your wealth. They guide you on investments, retirement planning, and estate planning.

Hire Someone With Expertise

Decide what services you need. Find a professional with expertise in the operations you are outsourcing. Make sure they have experience with your type of business. Again, ask for references and be specific when you talk with the references.

Choose your accountant based on experience and expertise, not price. The following cautionary story comes from a Reddit commenter who is a CPA:

We had a client come over from a cheaper CPA who wasn’t an expert and missed a ton of deductions, credits, and planning opportunities for a construction client. All said, we could only amend back 3 years and still got him over a million dollars in tax refunds… he had been in business for over 20 years. Not worth the 2k he saved a year.

Take your time. Interview several professionals. Talk to firms and individuals. Ask a LOT of questions. This is an important decision.

Know What Services Are Included

Whether you hire an individual or a firm, outline the specific tasks you need performed. Make sure you understand how they will bill you for their work. For example, a bookkeeper might charge by the hour. If you hire an accountant to prepare your quarterly and year-end taxes, find out if they charge a set fee or billable hours. This is crucial. If they charge by the hour, you could end up paying far more than you’ve budgeted for.

Understand Your Financials

Some business owners outsource their bookkeeping without even having a grasp of what’s going in. Accounting is a core part of business operations. Even if you hire someone else to do it, you need to know how it works. Business owners who learn how to handle the daily books and keep tabs on them when outsourced are better off. They can spot cashflow problems early and make better financial decisions. Even if you hate bookkeeping, learn how to do it anyway!