5 Types of Accountants Every Small Business Owner Should Know

Start a business they said. Make a lot of money they said. Live in bliss, retire in Paris, and have no worries they said.

I see all the lies.

Well, maybe not all. That Parisian, crepe infused, macaroon filled retirement with Mona Lisa is possible, but has to stay on hold until you find a little help monitoring your coins.

Each stage of your business finances have unique needs that should be addressed by the appropriate accounting professional. Knowing who to hire and when to hire them in your revenue cycle can be a cash consuming challenge if not handled properly. Do you need an accountant or a bookkeeper? What is the difference between an accountant and CFO? Are accounting professionals required to be CPAs? Can I afford an accounting professional with my current budget?

Before jumping head first down the rabbit hole of uncertainty, let’s talk about how to make a distinction between the five types of accountants you may encounter and how they can help keep an eye on Benjamin and his friends.

The Bookkeeper

Bookkeepers document the cash flow of your operations. By collecting, sorting, and recording your business transactions on a day-to-day basis, they’re able to craft the financial story of your business. All income, expense, and tax transactions are recorded in your accounting system (think QuickBooks). From there, the bookkeeper will create the appropriate files, often called source documents, in accordance with your organizations recordkeeping policy.

If you’re a small business owner, this was probably you until the task became too large and too time consuming. Consider hiring a bookkeeper when keeping track of the money in and out of your bank account starts to distract you from actually running your business.

Bookkeeping services may be outsourced or handled by an in-house employee. Outsourced services are typically cheaper than hiring a full time employee. Consider outsourcing this, and any other accounting function, if you have a fixed budget and do not require full-time hours to complete the job.

Your bookkeeper’s primary responsibility is to keep the accounting system up to date with all business transactions for further review and processing by the accountant or CPA.

The Accountant

Accountants take the data collected and recorded by bookkeepers, add any additional information unique to your company (depreciation, assets sold or purchased, owner distributions, etc), zeros out your trial balance and closes out your general ledger each month and year. They then turn all of that information into reports that allow you to measure your company’s current financial position against your financial goals.

Did that just make you head hurt? Stay with me. If you’ve never heard of these things, it’s likely you don’t need this person just yet. Small business owners will need to make this hire once your money monitoring needs exceed periodic income and expense analysis or when your business expands and outside funding needs arise.

Your accountant’s primary responsibility is to prepare, examine, and distribute financial reports to aide in the business owner’s decision making process.

The Controller

Controllers create and implement internal controls, handle all banking activities (including any financing and lines of credit needs), extends managerial oversight of the accounting team, and safeguards quality and assurance in the financial reporting process. Here is where you begin to see business owners relinquish day-to-day financial decision making responsibilities to someone else.

Small business owners should consider hiring a controller when they have less time for daily happenings such as approving and signing checks, overseeing regulatory compliance and accounting processes, or personnel management and need more time to focus on the vision and direction of the organization.

Your controller’s primary responsibility is to oversee the company’s operations and accounting team while ensuring the business is running efficiently via accurate financial reporting. They may also be listed on the business operations bank account and have check signing authority.

The CFO

Chief Financial Officers (CFO) provide leadership to the accounting team, financial guidance to the executive team, strategy on long-term financial planning and manages the company’s financial risk. They typically meet with other C-Suite members to discuss the direction the company is going and what is needed from the financial team in order to see that goal manifest. They also are responsible for creating and overseeing the annual budgeting process for the organization.

CFOs are typically full-time contracted executives with air tight non-competes and large employment compensation packages, including severance agreements should their contracts end earlier than expected (which is common).

A CFO is probably too expensive for the average small business owner. That’s where accounting consultants come into play. Accounting consultants offer executive level services at a much more affordable rate. They typically take on small business interests by project or retainer to keep cost down and value up.

Your CFO’s primary responsibility is to measure risks that are associated with the company’s overall financial objectives.

The CPA

CPAs, not to be confused with tax preparation professionals, are strategists commonly known for their tax and audit expertise. CPAs partner with organizations to create tax strategy which will limit their financial liability at the end of the tax year, stretch the operational budget by showing owners how to utilize tax credits throughout the year, and to assure federal and state financial reporting and compliance.

While your bookkeeper, accountant, controller and/or CFO may also have the CPA credentials, more often than not, an independent CPA is needed as an unbiased fresh set of eyes on your overall financial big picture.

Your CPA’s primary responsibility is to create a strategy that will keep your tax bill low and your estate value high.

The Conclusion

Hiring one accounting professional to serve as a combination of either of the five accountants above isn’t unheard of. At times, small business owners may need to blur the lines to maximize both financial and human capital in their growth stages. Hybrid accounting professionals are perfectly okay, temporarily.

Making more, requires you to invest more. Don’t get stuck with one person who produces good results at the expense of two people who could produce great results. The sooner you gain full control over your dollars, the sooner you can get to Paris.

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