As your business becomes more established, staying on top of your finances becomes more challenging. As a result, you are likely to find yourself considering hiring someone to offer expertise and guidance to help manage your finances efficiently. But who exactly is the best person to hire? A bookkeeper or a Chartered Professional Accountant (CPA)? The answer is both. Here we look at what CPA-led bookkeeping offers and why it is the best solution to help your company maintain financial health.
The main difference between bookkeeping and CPA-led bookkeeping is that bookkeeping focuses on maintaining a record of your purchases and sales, while CPA-led bookkeeping also includes some analysis to determine what those records mean to your business and financial health.
Also, when considering CPA-led bookkeeping vs. accounting, while an accountant can be a bookkeeper, a bookkeeper does not have the credentials to act as your accountant. CPAs require special certification in Canada to provide additional accounting services such as financial reporting, forecasting, tax accounting, financial planning, and more. With CPA-led bookkeeping, therefore, you gain more value for your services.
A bookkeeper maintains complete records of your cash flow — recording transactions and creating easy-to-read ledgers. Ledgers can be maintained manually using Excel spreadsheets or using software to make it even easier to keep track of cash flow.
Tasks a bookkeeper completes are typically objective and include:
- Recording financial transactions, purchases, profits, settlements, etc.
- Posting debits and credits
- Producing invoices
- Managing payroll and GST/HST
- Maintaining and balancing ledgers and accounts
- Providing accurate data for you or your accountant
- Basic data entry of your detailed business records
- Tracking day-to-day financial events
The bookkeeper’s tasks are important because they provide concise, accurate, and up-to-date records to understand your financial health. Their records also support the information you submit to the CRA at tax time. Although, in theory, bookkeepers don’t require a specific certification, most employers prefer bookkeepers with a formal education in hand with relevant experience.
Accountants analyze financial data maintained by a bookkeeper to help you make informed, data-based decisions. Their tasks are typically more subjective and complex and include the following:
- Financial data analysis and verification
- Financial reporting, such as Statement of Cash Flow, Breakeven Analysis, Forecasts and Budgets, Balance Sheets, and Profit/Loss Statements
- Performing audits
- Tax planning and strategy
- Using business trends to spot growth opportunities
- Providing guidance on financial decisions
- Adjusting entries when required
With a CPA, your business becomes more sustainable and scalable because you have insights that facilitate financial forecasting, tax planning, and strategy. They also identify opportunities for growth and potential threats that require rethinking your strategy. As a result, you always know what your next steps should be to maintain financial health and achieve your growth goals today and in the long term.
A CPA is the highest designation of accountant in Canada and must meet professional standards and certifications. As well, they must be awarded a license from CPABC before serving the general public. This is to verify that the CPA is in good standing with the association and that the CPA’s professional development and work experience is in line with the services being offered to the public. As a result, they provide the skills and expertise needed to help your business become more viable.
When you consider the two distinct roles of a CPA and bookkeeper, you can see why CPA-led bookkeeping offers the ultimate financial management solution.
A bookkeeper serves a different purpose within a business than an accountant. While accountants do the “heavy” more strategic work, a bookkeeper keeps things organized and up to date. When you work with a CPA-led bookkeeping service, you strike the perfect balance, as you aren’t investing as much money in full-out CPA services, but still gain the insights of a CPA.
The bookkeeping element is more refined, as it is performed under the management of a CPA, so your financial records become more meaningful, with general analysis that helps you make informed decisions. If you hire a CPA, you are paying for services that are no doubt very beneficial but perhaps not as relevant for a small-to-medium business not concerned with multiple locations, shareholders, extensive and complicated financial obligations, or complex business structures.
While corporations rely on accounting to ensure they meet financial, legal and shareholder obligations, a smaller business simply needs the oversight of a CPA to assist with accuracies and create a more forward-thinking mindset. As a result, you remain financially sound and take advantage of growth opportunities.
Advantages Of CPA-Led Bookkeeping
Your business will gain several advantages using CPA-led bookkeeping, including:
- Analysis: CPA-led bookkeeping offers a far more comprehensive view of your financial state, providing effective strategies to make sound financial decisions.
- Expertise: Accountants can’t practice in Canada without completing schooling, certifications, and relevant work experience, while bookkeepers in theory don’t need specific education at all. Through CPA-led bookkeeping, you see more value in a bookkeeper’s services with additional expertise.
- Legal assistance: With certifications and expertise, accountants have a clear understanding of legal implications in financial management, including complicated tax law. As a result, you can avoid serious legal issues and time-consuming audits through CPA-led bookkeeping.
CPA-led bookkeeping firms are headed by accounting professionals. They must pass a Common Final Examination once they have completed their CPA program and relevant practical experience to qualify for the exam. However, CPAs also must meet ongoing education requirements to maintain their CPA accreditation.
Hiring an in-house bookkeeper will prevent you from gaining the advantages of a CPA-led bookkeeper. Unless you already have a full-time or even part-time accountant on board, your internal bookkeeper, although sufficient, is not qualified to provide the same level of accounting services. Instead, the best approach to finding a CPA-led bookkeeper is hiring a company-based bookkeeping service to get the best of both worlds.
Keep in mind that to guarantee you get experienced and knowledgeable bookkeepers, the accounting service should be managed by CPAs with verified credentials and experience. Also, when you outsource your bookkeeping function, you only use them as required. Hence, you save money without the worry of having full-time or part-time team members on your payroll.
Bookkeeping is necessary for your business operations, yet is not as effective without the insights of a CPA. CPA-led bookkeeping provides the services you need to manage your “books” with the advantage of a CPA’s insights and management.