- A bookkeeper records and reconciles every transaction; an accountant or CPA files taxes and gives tax and financial advice.
- Most small businesses need a bookkeeper monthly and a CPA mainly at tax time and for planning.
- Paying a CPA to categorize a year of receipts is usually the most expensive way to get bookkeeping done.
- The two roles work best as a relay: clean monthly books make the CPA's job shorter and cheaper.
Should I hire a bookkeeper or an accountant for my business?
Most small businesses need a bookkeeper for the day-to-day records and an accountant, usually a CPA, for tax returns and tax planning. A bookkeeper keeps transactions categorized, accounts reconciled and monthly statements current. An accountant uses those books to file returns and advise you. SmartGrowth Bookkeeping handles the first job and hands tax-ready books to your CPA, so you pay accountant rates only for accountant work.
| Bookkeeper | Accountant or CPA | |
|---|---|---|
| Main job | Records every transaction accurately, all year | Interprets the records, files taxes, advises |
| How often | Weekly or monthly | Mostly at year end, plus planning check-ins |
| Typical tasks | Categorizing, reconciling, invoices and bills, monthly reports | Tax returns, tax planning, entity advice, reviews and audits |
| What you receive | Current books and monthly financial statements | Filed returns and tax guidance |
| Credentials | Training and software skill; no license required | CPAs pass the CPA exam and are licensed by a state board |
In practice the two roles are a relay. The bookkeeper runs the long leg all year, and the CPA takes the baton at tax time. When the first leg is done well, the second is shorter, cheaper and far less stressful.
For the details of that handoff, read how your bookkeeper and CPA work together.
What a bookkeeper does
A bookkeeper is responsible for the accuracy of your records. The work is steady and detailed, and it is the base everything else stands on.
- Records sales, deposits and expenses in QuickBooks, Xero or similar software.
- Categorizes each transaction so your reports mean something.
- Reconciles bank, credit card and loan accounts to the statements every month.
- Tracks unpaid customer invoices and vendor bills.
- Records payroll from your payroll provider and tracks contractor payments.
- Produces the monthly profit and loss, balance sheet and cash flow statement.
The result is a set of books you can trust on any day of the year, not only in April. Here is what ongoing monthly bookkeeping typically includes.
What an accountant or CPA does
"Accountant" is a broad job title. For small businesses it usually means a CPA or another tax professional who works from the books rather than keeping them.
- Prepares and files business income tax returns, and often the owner's personal return.
- Plans taxes during the year, such as estimated payments and the timing of large purchases.
- Advises on structure, for example whether an LLC should be taxed as an S corporation.
- Represents you if a tax authority asks questions.
- Performs reviews or audits of financial statements when a lender or investor requires them.
Many CPAs can do bookkeeping, but their rates reflect the license and the tax expertise. Paying those rates to categorize coffee receipts is rarely the best use of a small business budget.
Which one to hire first
| Your situation | What you likely need |
|---|---|
| Just formed an LLC, few transactions | Good software setup, light bookkeeping, a CPA for the first return |
| Growing and behind on records | A bookkeeper first (often starting with catch-up work), then your CPA |
| Books current, tax bill feels high | A CPA for tax planning |
| Applying for a loan | A bookkeeper for current statements; a CPA if the lender wants reviewed financials |
| Several LLCs or a more complex structure | Both, working together from the start |
If you are just getting started, bookkeeping for startups and new LLCs covers the minimum a new business needs and what can wait.
If the work is about recording what happened, it is bookkeeping. If it is about what the tax law allows or what you should do next year, it belongs with your CPA.
Two quick examples
A real estate team
A real estate team with several agents has commission income, marketing costs, transaction fees and agent splits. The bookkeeper records each closing, tracks the splits and reconciles the operating account every month. The CPA decides how the team is taxed, prepares the returns and advises on estimated payments. Neither could do the other's job efficiently.
A small restaurant
A restaurant has daily card deposits, a point-of-sale system, food and beverage invoices, tips and payroll. The bookkeeper matches deposits to sales reports, records payroll from the provider and keeps food costs in their own category so the owner can watch them. The CPA works from those clean records at year end and advises on equipment purchases and tax timing. More on this in bookkeeping for restaurants.
What to ask each one
Questions for a bookkeeper
- Which software do you work in, and will the file stay in my name?
- How often will you reconcile my accounts and send reports?
- How do you work with my CPA at year end?
- What happens if my books are already behind?
Questions for a CPA
- Do you want monthly reports during the year, or only at year end?
- Will you advise on estimated taxes and entity structure, or only prepare the return?
- What do you need from my bookkeeper to file on time?
- Who do I call if a tax notice arrives?
Common mistakes when choosing
- Expecting your CPA to sort out a year of uncategorized transactions in March. It can be done, but it is the expensive route.
- Hiring a bookkeeper and assuming tax planning is included. Bookkeepers keep records; tax advice comes from a tax professional.
- Running both roles out of one spreadsheet with no reconciliation, which leaves the CPA guessing at year end.
- Choosing only on price without asking who reviews the work and how errors are caught.
The clearest way to see where one job ends and the other begins is to compare bookkeeping and tax preparation side by side.
How SmartGrowth works alongside your CPA
SmartGrowth Bookkeeping does the bookkeeping side in QuickBooks or Xero: monthly categorizing and reconciliation, financial statements, and tax-ready books handed to your CPA. SmartGrowth does not sign or file federal income tax returns. That stays with your CPA or tax preparer.
No CPA yet? Mention it on the free call. The books can be kept in a clean, standard way that any tax professional can pick up without a cleanup charge.
More questions
Can a bookkeeper do my taxes?
A bookkeeper prepares the records your taxes are built from, but preparing the return and giving tax advice belong to a CPA or other tax preparer. SmartGrowth focuses on the books and works with your tax professional.
Is an accountant the same as a CPA?
Not always. Accountant is a general job title, while a CPA has passed the CPA exam and holds a state license. For tax returns and representation, many small businesses use a CPA or an enrolled agent.
Do I need both if my business is very small?
Often yes, but the mix changes with size. A very small business may need light bookkeeping help and a CPA once a year. As transactions, staff and accounts grow, monthly bookkeeping becomes the larger need.
What does a CPA need from my books at year end?
Usually a reconciled profit and loss and balance sheet for the full year, plus detail on equipment bought, loans, payroll and contractor payments. Your CPA may send a specific list, and a bookkeeper can prepare most of it straight from the books.
Which should I call first if my books are a year behind?
Usually the bookkeeper. Catching up a year of transactions is bookkeeping work, and it goes faster and costs less at bookkeeping rates. Let your CPA know it is underway so they can plan for the return and any extension they think is needed.