Save Time, Stress & Money by Outsourcing to a Bookkeeper

The Accountant versus Bookkeeper question is one that I get a lot. Some people think these are actually the same profession. However, there are some important differences. And people often ask how hiring a bookkeeper saves the small business owner money. 

When choosing an Accountant versus a Bookkeeper for your small business, what you ultimately choose for your business depends upon the level of service you want or need as well as the budget you can allocate to Accounting or Bookkeeping services. If you are a small business owner, it might be a relief to know that a Bookkeeper can do much of what an Accountant does, but for a fraction of the cost. Do you have a pile of receipts and bank statements on your desk waiting for you to enter into your QuickBooks file? Do you know how to categorize your expenses so that your CPA can prepare your tax return? Do you keep track of your auto mileage? Does it really make fiscal sense to pay your CPA his or her hourly rate to do this part of the process, especially when they will most likely outsource the work to a bookkeeper? Do you end up having to file an extension because you don’t have your paperwork in order? This is precisely where a great bookkeeper can help you.

So what exactly does a Bookkeeper do?  Simply put, a Bookkeeper maintains a company’s books by entering data into an accounting system like QuickBooks or Peachtree and categorizing it properly for the best possible legal tax deduction. This is all done in coordination WITH your CPA (if you have one) to make tax planning and preparation smoother for all involved.  In more detail, a Bookkeeper then maintains the ledger accounts in all the various ledgers.  A Bookkeeper also maintains the subsidiary documents such as a cash book. A Bookkeeper keeps these books until the end of the accounting period, closes the ledger accounts, and produces a trial balance.  At this point, the trial balance is given to an Accountant for analysis and the generation of statements and reports. The Bookkeeper handles the day-to-day activity of the business and the Accountant reviews the bigger picture, including any personal tax implications.

Now let’s look at what an Accountant does. First off, every Accountant must have SOME knowledge of bookkeeping. Accountants or Certified Public Accountants (CPAs) require certification in any state they practice in. An Accountant is a well-educated financial analyst and tax preparer. A CPA has likely majored in accounting at an accredited university, sat for exams covering practice, theory, auditing, and law.  He or she will have worked for a well-established accounting firm, sometimes a public accounting firm, for a minimum of 2 years.  Additionally, 500 hours of auditing experience is required for certification.  A CPA will also have to complete a specified number of hours in continuing education courses in order to maintain a license.  Additionally, a CPA will stay current on all the changes in tax law and how they affect you.

Many businesses are able to keep the records they need with the help of a qualified Bookkeeper and only use a CPA when absolutely necessary for income tax planning and preparation. There are some financial statements that only a CPA can prepare. Only a CPA can prepare reviewed financial statements and audited financial statements. Bookkeepers generally DO NOT help with tax filing, although they are instrumental in preparing your records for the Accountant or CPA come tax time!

The majority of small businesses will never require audited or reviewed financial statements. However, an audited financial statement may be required for the approval of a bank loan. If this is the case, you will have no choice but to hire a CPA, and often your Bookkeeper can recommend a good one.

Most small businesses are able to use the services of a Bookkeeper about 90% of the time, enlisting the help of a Certified Public Accountant only when necessary. Because a CPA charges much more than an experienced Bookkeeper, most small business owners either outsource their bookkeeping to a freelance Bookkeeper like Magical Bookkeeping Solutions or, if they have full-time needs, hire a full time Staff Accountant. Outsourcing your bookkeeping on a part-time basis is the most affordable option for most small business owners as this can save up to 40% of the cost of hiring a full-time Bookkeeper or Staff Accountant, saving the business owner time, stress and money.

Monthly Bookkeeping packages with Magical Bookkeeping Solutions start at $250 per month and include all categorization and reconciliation of one bank account and one credit card account, as well as help with invoicing, collection calls and a review with you of your financial picture. Special projects can be as low as $50 per hour and I always offer a free initial consultation.

If you are ready to find out more about outsourcing your Boulder or Denver Bookkeeping needs or to get a great local CPA referral, give Joy and Magical Bookkeeping Solutions a call at 303-974-6997!