We get asked all the time to explain the different players on your business finance team. It can be confusing at first, because the roles can overlap; there are CPA bookkeepers and bookkeeping strategists. Below is a rundown on the three key pieces to seek out as you grow your business: Accountants, Bookkeepers, and Consultants/Strategics.
Accountant / CPA –
What they do: Primarily taxes! Federal, state and any local taxes. Most will approach your business finances from the perspective of taxes, rather than day-to-day operations. Your accountant will help you stay on the right side of the IRS, set up estimated taxes for the year, and ensure that you’re deducted all the right kind of expenses.
Some other things: Our go to accountant is great at valuations, talking through stuff around employees and taxes, and our clients also use him for partnership related issues, sales tax, and calling the city or state when they get a weird notice that they don’t know what to do with.
What they (usually) don’t do:
I think often business owners want too much from their accountant — there are a few that are great at business strategy and the operational side of financials, but mostly folks that try to get good business advice from their accountant come up dry. That’s just not what CPAs are generally trained for!
Some will do budgets and projections, mileage will vary. Some will do bookkeeping — though it’s usually not operational or helpful bookkeeping, and I’ve never met a CPA that liked doing it. I really think it’s better to separate the two functions longterm. It also provides a good check and balance for your financials not to have bookkeeping and accounting under the same roof.
Where and how to find: This is the one service provider that is best to find locally — especially in cities, as larger cities tend to have more complex local business taxes. Tax law is very specific to state and local levels, so you want someone familiar with your area.
The best way to find one is to ask other business owners who they use and if they love them. Or ask a good bookkeeper.
When you meet for the first time, it’s a good idea to come with at least one question that feels overwhelming and confusing to you, or a complex situation you’ve found yourself in, and see how they do at answering it. Here are our recommendations.
What to watch out for: I think accounting as a field often deserves it’s bad rap. There are a lot of mediocre accountants in the world! Watch out for mansplainers and folks that don’t take time to explain information to you. A lot of accountants like to keep information behind an opaque curtain, which is not a great sign.
Also, the folks that say they do taxes “anywhere”. Don’t fall for that. They can’t.
Just as an example from last week: the City of Philadelphia’s revenue department is a horrifying black hole of doom. My accountant knows exactly who to call there when I get weird notices saying I need to file a business return for 2011, which was before my current business even existed. He took care of the confusion immediately.
Also… I know this is a bit of a confusing red flag… but if your accountant’s primary strategy for everything is an attempt to lower your tax bill, you have a bad accountant! Trust us.
What they do: Organize the decisions you’ve made with your money and give you reports and data.
You make money, you spend money; bookkeepers keep track of all of those transactions and ensure they are organized and categorized correctly. They’ll make doing your taxes a breeze, and ensure that you have up to date financial information. They do this fancy thing called “Reconciling” your accounts, which is sort of like balancing your checkbook, but more complicated.
What they (usually) don’t do:
1) High level. Bookkkeeping is generally about all the details and organizing and tracking. This is not where you get your high level strategy and oversight.
When starting out, sometimes bookkeeping looks like a spreadsheet to track simple revenue and expenses, or having something like Freshbooks; or having your accountant clean it up at the end of the year. There are folks that DIY it, and if you have the aptitude or experience for Quickbooks or Zero, that can work (though, rarely. Most of the clients that have been DIYing their books and become our clients need extensive (expensive) clean up work; it’s just that hard to learn and keep up with.)
Eventually, I think every business owner needs to hire it out.
The #1 thing I hear from our bookkeeping clients and other’s we work with that finally hire our bookkeeping is that everyone wishes they’d gotten bookkeeping sooner.
Having someone hand you a clean P&L every month is a game changer and if you ever want to grow, is something you’ll need to get comfy with.
Good bookkeepers have a lot of experience (it takes 3-4 years to become a solid bookkeeping IMO) and a brain for detail-oriented problem solving.
2) Make decisions for you about your money.
Our team provides support around invoicing and bill pay and things like that, but at the end of the day, you still have to own your businesses financial decisions. If you bounce a check because there wasn’t enough cash in the bank, please don’t blame your bookkeeper. That’s not their job.
Where and how to find: Bookkeeping can be done well remotely; you don’t really need someone to come to your house or office.
What to watch out for: Similar to accountants, there are a lot of mediocre bookkeepers out there!
There are benefits to going with a firm rather than a solo person: you get more than one person’s brain and expertise behind your books, and your bookkeeping is not dependent on one person. However, I have some business owner friends who have found magical unicorn solo bookkeepers, and guard them with their lives!
If you have things like COGS, need to track by project/job/class, complicated equity situations & loans, sales tax, or things like that, make sure you find a bookkeeper that has that kind of experience. Different businesses have very different bookkeeping setups.
Our team members at Wanderwell have different areas of expertise, so we match new clients to the right bookkeeper, and there are certain kinds of businesses we don’t do, and will refer elsewhere. We work with a lot of product and retail businesses, which is a definite specialty area.
CFO / Consultant / Finance Strategist
What they do: Using this as a broad category for “People that help you understand, analyze, and make decisions in alignment with the financial realities of your business and your long term vision.”
There are a ton of different variations and flavors to this kind of service and support. I won’t get to into what and how to find and what to look for — because it really depends on what kind of support you need, and what size and type of business you have, and I need to go eat lunch.
As a base-line minimum, invest in getting yourself some sort of forward looking budget and understanding how to make basic projections and look at profitability.
Bookkeeping does very well housed within a practice that offers strategic consulting (hello! hi! That’s what we do), much better than under an accounting practice in my experience. Combining bookkeeping and higher level consulting + strategy is a great investment to get both the data and the analysis and support around what to do with the data in one place. If you pay a bookkeeper to get a P&L, and don’t know how to read it… then you’re only getting a fraction of the point.
Ultimately, if you get the right team in place ideally they’ll all work together — which is so, so helpful once your business gets larger and more complex. For example the past couple months we’ve been working with one of our clients on figuring out their year end cash flow and 2019 budget, as they’re trying to finalize a partnership buyout. It’s complicated, time-sensitive, and a beastly year end project that involves figuring out what to do with multi-six figure sums of money. However, since they’re also a bookkeeping client of ours it’s been really easy to get the right information from the team member that handles their books, request changes and know they’ll happen immediately; and then have near-daily calls with their accountant on my morning dog walks to check in– this takes a huge load off stressed-out client, because we’re doing all this heavy lifting without them having to manage or translate between the three of us.