Many small business, nonprofits and faith-based organizations, like churches, have never hired an actual finance professional. Often, they make do and get by with volunteer help; it may come in the form of a Board member who provides expertise pro bono or through a well-meaning volunteer who’s learning as she goes along.
But there comes a time in an organization’s journey when they know they need vetted, experienced business professionals. As they grow, build momentum and mature, piecemeal solutions no longer suffice. And one of the first areas ripe for official engagement is the finance function. Yet those fresh to this possibility may not even know what that really means. They just know they need someone to run their numbers, “do the books,” deal with the IRS or run interference on payroll and accounts payable.
So what’s the difference between a bookkeeper, accountant and tax preparer? All too often, these titles get thrown around arbitrarily, and the differences aren’t always clear. However, there are legitimate and, in some cases, legal distinctions worth knowing.
Bookkeepers may or may not be college-educated or possess a degree in a related field. This is a role in which individuals often learn as they go, achieving true on-the-job training by serving in data entry, administrative assistance, collections or accounts support. Certifying bodies, like the American Institute of Professional Bookkeepers, do offer certification and continuing education opportunities for bookkeepers. Unlike accountants, who may be hired for seasonal projects or special assignments, bookkeepers tend to handle day-to-day functions on an ongoing basis and are more of a permanent fixture in a company’s staffing.
Accountants typically have an undergraduate degree in accounting or a related field. Certified professional accountants (CPAs) represent the most reputable and knowledgeable among accounting pros, having passed a qualifying exam that measures their expertise in business law, audits, taxes, personal finance and accounting. Accountants can work in tandem with bookkeepers, but the price point of retaining one typically requires a larger investment. Many businesses keep an accountant on staff as a key role on the organizational chart, but sometimes they are kept on retainer on a rolling basis, too.
Tax preparation is a general function that many can claim; some who do taxes have no credentials at all and are self-trained in preparing and filing taxes. The caveat here are Certified Tax Professionals, who are enrolled agents certified by the IRS. These individuals have passed a three-part IRS examination on topics like business and personal taxes, and are authorized by the U.S. Department of Treasury to represent taxpayers in matters of appeals, audits and collections. Business taxes are usually more complex than those for families or individual filers. So organizations may hire a tax expert for special projects or filings rather than as a full-time staffer.
Determining which type and level of financial expertise your business needs is a unique matter. No two situations or organizations are entirely alike. Typically, larger organizations and those in more regulated fields, for example, face more complex financial considerations. As a result, they may benefit from varying levels and types of services and guidance.
Solo entrepreneurs, small businesses, churches and others have benefited tremendously by engaging bookkeepers, at a minimum.
“When organizations new to recruitment process outsourcing (RPO) learn they can achieve true expertise in their ongoing accounting and finance functions by hiring a contract bookkeeper, they experience a huge sense of relief,” says Lisa Zeeveld, BELAY Chief Financial Officer. “That’s where the ‘rubber meets the road.’ They see the difference between having volunteer help and engaging with a true, qualified professional.”
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The information contained herein is general in nature. BELAY does not nor intends to provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations.