Do Small Businesses Need a CPA?

When it comes to money matters, your smaller business may have just as many moving parts as a larger company and may even have more, if your small business accepts cash for payment of goods or services.

Since you’re offering your service or products in exchange for compensation, you’ll want to feel confident about the way you manage your financial matters. While some small business owners do manage their financial recording on their own, there are other avenues to consider. You could:

  • Hire a bookkeeper
  • Hire an accountant
  • Hire a CPA

We’ll look at how these professionals are different to give you a few things to consider when making the decision for your business.

Should a Small Business Hire a Bookkeeper?

Think of a bookkeeper as the primary person responsible for data entry. A bookkeeper will most likely have strong computer skills and they may have already been trained on a bookkeeping software. A bookkeeper can generally work without having licensure. A more skilled bookkeeper might also be savvy enough to work with payroll and sales tax filings.

Bookkeepers generally record compensation your small business receives, they record who owes you money, and who you pay. Some small business owners, with the aid of software, may be able to handle this kind of work on their own. However, bookkeepers generally have more experience with data entry, are usually quicker, and tend to be more accurate.

Because most bookkeepers may not have a finance-specific degree, they are typically not equipped to handle the more complex money matters that an accountant or CPA can manage, and their fees are generally lower.

Would an Accountant Be Appropriate for a Small Business?

Accountants who have dedicated time to studying the practice of accounting, should have a better understanding of business accounting rules than a bookkeeper without the degree or certification.

An accountant for a small business can analyze your transactions, rather than just track them, as a bookkeeper would do. An accountant can also manage business assets and liabilities and create financial projections and budgets. Often, an accountant will also advise on company spending. In addition, accountants can help with tax preparation, even when the records are more complex. If your small business has capital assets that need to be depreciated, your accountant should be able to manage the assets on the books year-over-year as well as when filing taxes.

Does a Small Business Need a CPA?

A common misperception about Certified Public Accountants (CPAs) is that small businesses should only rely on them when they have complicated tax filings. However, you may want to consider the benefits of working with a CPA before making your decision, in particular if you have significant growth plans for your business.

How Much Different is a CPA than an Accountant?

A Certified Public Accountant (CPA) has taken the extra steps required to meet the requirements to be licensed. This means they passed a rigorous assessment that demonstrates their knowledge of accounting. The CPA designation also signifies their personal commitment to ethics and continuous education in the field of accounting.

Each state has their own jurisdiction over CPA requirements; however, all CPAs must complete between 20-40 hours of continued education every year. For example, in the state of California, an accountant must first qualify to take the exam. Then, to maintain the license he/she must take 20 hours of continuing education each year. Of those 20 hours required annually, 12 hours must be in the technical subject matter. Check the National Association of State Boards of Accountancy (NASBA)* for the requirements in your state.

When thinking about whether your small business needs a CPA, consider also that a CPA can help define “downturn cycles” so you can be better prepared, and lessen the impact a downturn could have on your accounts and cash flow. Forecasting and projections can be helpful in setting a value for your business, should you ever decide to sell your idea or retire from the effort entirely.

Another key difference is that only a CPA can write an audited financial statement, such as an income statement or a balance sheet. Once your business goes public, you will need a CPA to provide audited statements so investors can determine the value of your stock. All these elements may make a CPA essential, should your long-term growth goals include a need for valuation for the purpose of selling or going public.

Each of these professionals - a bookkeeper, an accountant, and a CPA - bring value in their own way. You, as the small business owner, get to decide if one, or a combination of financially skilled contributors, will make sense for your small business goals.

The content provided in articles are suggestions only and based on best practices. Dun & Bradstreet is not liable for the outcome or results of specific programs or tactics. Please contact an attorney or tax professional if you are in need of legal or tax advice.

*The National Association of State Boards of Accountancy link will take you to a third-party website not governed by the Dun & Bradstreet privacy policy. Dun & Bradstreet is not responsible for products, services, or content located on third party websites.

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