What is the difference between a CPA and a Bookkeeper?

‍Key Takeaways

• A CPA is a licensed professional that has the ability to assist with complex financial matters. They can also provide tax support and strategic planning.
• A bookkeeper assists with routine tasks and financial record keeping in order to keep business operations running smoothly.
• CPAs must meet very specific educational requirements and pass the CPA exam in order to gain their designation. Bookkeepers do not have such strict requirements.
• CPAs perform several functions that bookkeepers do not such as complex financial analysis, tax planning, and financial reporting.
• Benefits to using a CPA for your bookkeeping include reduced financial risk, possible tax minimization strategies, and increased efficiency.

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Summary

CPAs and bookkeepers are accounting professionals who serve as important partners for business owners. However, they each bring unique backgrounds and skill sets to the table. If you’re trying to decide what kind of help you need to enlist for your business, it is best to start by understanding the differences between working with a CPA and a bookkeeper. At Easeify, you will have both a CPA and a QBO Pro Advisor Bookkeeper working on your books.

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What is a CPA?

A Certified Public Accountant (CPA) is a licensed professional who typically chooses to specialize in a specific area of accounting such as tax or auditing. CPAs may be involved with preparing and filing tax returns, financial consulting, conducting audits, and creating financial reports.

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What is a Bookkeeper?

Bookkeepers play a large role in managing the day-to-day finances for businesses of all sizes. Their responsibilities typically include data entry, payroll processing, and generating monthly financial reports for management. While bookkeepers maintain a business’s books and records, they do not analyze them the way a CPA does.

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Education Requirements

The path to becoming a CPA usually begins with a four-year bachelor’s degree. Although the degree does not have to be in accounting, a certain number of credit hours from accounting and business courses are required. CPA candidates need to have taken at least 150 credit hours to become licensed by their state’s board, so most students will add on an additional year of study at either the undergraduate or postgraduate level. Some states do allow candidates to start sitting for the CPA exam before reaching the 150 hour mark.

The CPA exam consists of four parts each covering a different area of accounting. The parts include: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation. Many states also require an ethics exam. These exams are four hours each. Studying for and passing the CPA exam is a rigorous process that takes several months, if not years, to get through. All four parts of the exam must be passed within 18 months or a candidate will need to start the process over. The exam is one of the most difficult in the entire United States. Once a CPA, they are licensed to work in all 50 states, no matter which state issued their license.

Bookkeepers have more flexibility as there are no specific educational requirements that need to be met. They usually have either a high school diploma or an associate/bachelor’s degree in a variety of fields. A lot of bookkeepers will take supplementary courses in accounting and obtain certifications to further enhance their skills.

Although the educational requirements to pursue either career differ, CPAs and bookkeepers both tend to be detail oriented people who enjoy problem solving.

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What can a CPA do that a Bookkeeper Cannot?

CPAs and bookkeepers both manage financial information for businesses, but they do so in distinct ways. Here are six examples of duties a CPA can perform that a bookkeeper cannot:

1. Tax planning and strategizing. Bookkeepers have an excellent handle on basic tax principles, but they do not have the same level of expertise as CPAs when it comes to complex tax planning.
2. Higher level financial analysis. CPAs draw on their experience to provide businesses with comprehensive insights into their financial health. They interpret financial data and use that to offer strategic recommendations. Bookkeepers primarily are concerned with recording transactions and keeping the books organized.
3. Financial reporting. CPAs are able to create and certify financial statements which can then be provided to external parties like investors and creditors. Bookkeepers generate standard financial reports but lack the authority needed to certify them.
4. Complicated financial transactions. CPAs are better equipped to handle challenging scenarios such as capital assets,  and mergers and acquisitions. They also advise on the implications for these transactions. Bookkeepers usually focus on routine, more simplified financial transactions.
5. Compliance. Part of a CPAs job is to stay on top of constantly changing legal and regulatory compliance requirements. They help businesses navigate their compliance responsibilities, which is something bookkeepers may not have the experience to do. CPAs are also required to take continuing education courses for the life of their license.
6. Representation before tax authorities. CPAs are able to represent businesses before tax authorities like the IRS during audits. Bookkeepers are not able to provide this type of representation.

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Why You Should Use a CPA for Your Bookkeeping

There are many benefits to having a CPA handle your bookkeeping. For one, they have a great degree of expertise and professionalism. CPAs have to go through years of schooling and pass a series of difficult exams. The result is a thorough understanding of tax laws, accounting principles, and financial regulations. It takes a certain type of individual to complete the rigorous process, which is one of the many reasons why CPAs are trusted and respected in business.

Another benefit is that a CPA can help you determine whether your business is eligible for certain deductions and credits. The ability to come up with strategies to minimize your tax liability is especially advantageous as it allows you to keep more money that can be reinvested in your business.

Although bookkeepers can also generate financial reports, a CPA can provide insights that go beyond record keeping. These insights are then used to gain a deeper understanding of your financial statements and make educated decisions based on the numbers.

There is also reduced financial risk when a CPA is managing your financial records due to their expertise. The likelihood of running into errors or omissions that could result in financial or legal issues is lowered.

For new or growing businesses that are looking to attract investors or obtain financing, the ability of CPAs to certify financial reports is another important consideration.

Finally, there is time and cost efficiency to using a CPA for your bookkeeping. CPAs are usually more expensive than bookkeepers, but their knowledge and efficiency can save you money long term. They will free up valuable time for you to focus on running your business rather than spending hours each month on your books or needing a CPA to fix your books later on.

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