What is the difference between bookkeepers, accountants, and certified public accountants (known as CPAs)?
Many times, these terms are used interchangeably by small business owners, but there are distinct and important differences. Sometimes people balk at paying for these professional services, but the investment is well worth avoiding getting sideways with the Internal Revenue Service or Oregon Department of Revenue. Do-it-your-selfers many times make errors especially when it comes to payroll and the timely submission of reports and payments.
This is something the IRS and Oregon Department of Revenue take very seriously, and the penalties are severe.
Here is a brief summary of what duties bookkeepers, accountants, and CPAs typically perform and the requirements of each.
• Bookkeepers work for a company to keep track of the finances. They are responsible for accounts receivable and payable, inventory, accurate and timely recording of transactions, monthly, quarterly, and annual reporting and, in some instances, payroll. They can be independent contractors or employees. With regard to training, some bookkeepers have only a high school diploma, but many companies prefer someone with at least an associate’s degree. Bookkeeping certifications and licensing are available through national organizations. As an aside, bookkeepers are in very high demand and for someone qualified, is it a highly profitable business.
• Accountants typically can prepare detailed financial statements, audits of a company’s books, and prepare reports for tax purposes. It is important to note that only CPAs, tax attorneys, and enrolled agents are able to represent a taxpayer to the IRS.
• What can a CPA do? To begin with, they have a much higher level of training and expertise. They have passed required examinations, meet all statutory regulations, and obtained licensing. A CPA can prepare and sign tax returns for businesses and individuals, and represent clients before the IRS for audits and other important matters. The national professional association for CPAs is the American Institute of Certified Public Accountants.
Small business owners are busy. Many lack the expertise or simply don’t keep their financial records up to date and are unaware of legitimate and important tax deductions. Depending on the size and type of business, an owner may have a bookkeeper and/or accountant, and then depend on a CPA for more complex matters, tax planning, and preparation of tax returns.
While it is always best to accurately track income and expenses throughout the year, the beginning of the fourth quarter will allow you a short window of time to get your books in order and implement the services of one or more of these professionals.
Especially with all the unique circumstances surrounding COVID-19, it is highly recommended that business owners employ the services of a CPA. Make the appointment as soon as possible so plans can be made to put the business in the best possible position before 2020 tax returns are due. If delayed, not only will this compromise the business, but this is when CPAs’ schedules become full and they may be unable to accept new clients.
The level to which a business owner keeps tabs on the company’s finances is a sure recipe for either success or failure.
Make that appointment today.
Greg Smith is the executive advisor for the Umatilla Electric Cooperative Business Resource Center, located at 1475 N. First St. in Hermiston. The center provides free, confidential advising to small businesses and can be reached at 541-289-3000 or firstname.lastname@example.org.