Strong financial management requires comprehensive financial records. Without records, you won’t know if you’re profitable. You could run out of cash or let expenses spiral out of control. Before you know it, you are in financial trouble. If you need a business loan, investors or financial institutions will want to see accurate financial statements. Without accurate statements, you may make poor financial decisions that hurt your company.
Keeping accurate financial records is time-consuming. Most businesses use accounting software to help ease the burden of financial record keeping. Trying to maintain financial records while learning accounting software packages can take owners away from more crucial tasks. As a result, they often use bookkeepers to make sure that the information is up-to-date.
However, companies still need to understand the importance of accurate records and know when an accountant is needed to review company finances. Organizations need an accountant for their bookkeeping if they want an accurate financial picture.
Accountants and Bookkeeping
Bookkeepers record financial transactions. They enter accounts payable and issue invoices for accounts receivable. They may help with payroll and general ledger maintenance. There is no shortage of bookkeeping tasks in a well-managed enterprise. However, bookkeepers are not accountants. They are not versed in tax law or tax planning. They may not have the expertise to handle adjusting or closing entries or assist with budgeting. Bookkeepers need accountants to help them ensure financial records are correct.
As a business owner, you need to ensure that your accountant and bookkeeper form a team. Without collaboration, errors can result because neither party has a complete picture of your company’s finances. You can facilitate team-building through the careful selection of an accountant and a clearly-defined bookkeeping role. It’s essential for sound financial management to have an accountant for your bookkeeping.
Accounting Credentials
Many accountants are CPAs; however, accountants do not have to be CPAs to be licensed in all jurisdictions. A certified public accountant or CPA credential means the individual has passed an extensive exam on accounting, business law, taxes, and auditing. CPAs that pass the exam are considered licensed in the state where the exam was taken. The state’s licensing board ensures a professional standard of ethics is maintained and that continuing education requirements are met.
Having CPA after the name does not mean an accountant is right for your business. For example, pharmaceutical companies with extensive research and development efforts require a different level of expertise than a manufacturing firm that delivers prescribed components to the automobile industry. If you have a small business, you may want to find a CPA with experience in small or start-up businesses.
As a business owner, you may want to consider an accounting firm’s capabilities. Do they specialize in income tax preparation and tax planning? Can they help with budgeting and forecasting? What is their experience in your industry? Do you need in-depth state and local tax planning? These are critical questions to have answered if you want a strong contributor to your financial team.
Bookkeeping Roles
Bookkeepers can reduce your accounting costs. When you walk into an accountant’s office with a pile of receipts at tax time, someone has to sort through them before taxes can be filed. You can pay an accountant’s hourly rate to have the financial information organized, or you can have a bookkeeper do it instead — usually at a much lower cost.
Bookkeepers can record transactions as they happen. When it’s tax time, they have already sorted those receipts and deposit slips, making it much easier for your accountant to prepare your taxes. The less time an accountant spends on your taxes, the (smoother the process) lower your accounting costs.
Not every debit or credit is clear-cut. Should that item be expensed? What are considered travel expenses? How should discounts be entered? Bookkeepers may need to consult with accountants to ensure the information is being recorded appropriately. A quick call at the time of entry can save time later. Bookkeepers need to know they can call an accountant whenever they have a question.
If your bookkeeping is current, you can deliver financial information to an accountant quickly. If you use an accountant to close your accounting period each month, having the data in place at month-end makes the process move faster. If you’re paying quarterly taxes, organized records ensure that payments are made on time.
Enterprise Responsibilities
Companies cannot select accountants and bookkeepers and expect them to “work it out.” They need to take responsibility for creating an environment where both parties can work together for the financial health of an enterprise. For example, is your accountant familiar with your accounting software? Can your bookkeeper export data at tax time?
If your accountants are familiar with the software, they can provide assistance if a bookkeeper has questions on how to enter a transaction. They can also adjust or close entries directly if they know how to use the system. Having the ability to rely on each other makes it easier for everyone to maintain accurate financial records.
Organizations need to define accounting and bookkeeping roles. If they expect their accountants to calculate taxes, but want bookkeepers to disperse the funds, they must make that clear to everyone. Is bookkeeping to maintain an inventory record for the accountant or should the accountant contact the warehouse manager? Having clear roles ensures that the correct information is made available when needed.
Creating a strong financial team requires ongoing participation. Businesses need to touch base with both accountants and bookkeepers to identify areas that may need clarification or processes that need updating. As your business changes so do your accounting needs, that’s why it is critical to maintain an ongoing dialog between you, your accountant, and your bookkeeper. At DHJJ, our financial professionals work with clients to establish a collaborative environment where bookkeeping and accounting roles are clearly defined. We strive to understand our clients’ unique requirements to ensure frictionless interactions. If you’re looking for an accountant for your bookkeeping, contact us using our online contact form or call us at 630.420.1360.
