Bookkeepers, Accountants and CPAs - What's the Difference and Does Your Business Actually Need One?

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If you're like most entrepreneurs, small business owners, contractors or other professionals in Canada, you probably use the words "bookkeeper", "accountant" and "CPA" interchangeably. 

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We get it.

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With all the different kinds of financial professionals out there, it can be difficult to keep track of what each one does, making it unclear as to whether adding one to your team is something your business actually needs. 

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One thing is clear though: careful financial management is essential for the success and sustainability of any small business, and without professional guidance, you risk financial mismanagement and missed opportunities for growth. 

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In this post, we'll explain the difference between bookkeepers, accountants and CPAs, their roles and responsibilities and when a business would typically hire one or all of them.

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First up:

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The Bookkeeper

The bookkeeper is responsible for keeping track of a business' day-to-day sales and expenses, providing timely, up-to-date and accurate information about the financial status of a business. Bookkeepers use specialized software to organize this information and share it with the business owner or accountant. 

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A professional bookkeeper will do more than just basic data entry. They will also organize receipts, reconcile bank statements and manage accounts payable and receivable. They may also run payroll, pay bills, collect on accounts receivable, and/or handle tax remittances.

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Essentially, a bookkeeper helps a business stay on top of its finances, and their complete and accurate records provide a strong foundation for financial growth.

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In Canada, bookkeepers are not required to have formal education or training, but many choose to pursue certification through organizations like Certified Professional Bookkeepers of Canada. Others work alongside CPA firms to gain the knowledge and skills necessary to provide accurate and reliable financial information.

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Business owners should consider hiring a bookkeeper when they start to see an increase in the volume of financial transactions, or when they don't have the time or knowledge to manage their financial records effectively.

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Up next:

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The Accountant

Accountants are like the financial strategists of your small business, working closely with your bookkeeper to analyze your financial data, identify trends and patterns, and develop a strategic financial plan for your business. While bookkeepers are responsible for the day-to-day financial transactions, accountants take a more holistic view of your business's financial health and can help you make smart financial decisions based on that bigger picture.

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Accountants use the data provided by bookkeepers to prepare financial reports, such as income statements, balance sheets, and cash flow statements. They will also prepare corporate tax returns and ensure that your business is compliant with tax laws. If you want to maximize deductions and write offs and need help with tax planning, financial forecasting, or strategic planning, an accountant can be a valuable asset to your business. They help you identify areas where you can save money and improve your financial performance. 

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Finally, this brings us to:

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The CPA

In Canada, CPAs are governed by the Chartered Professional Accountants of Canada (CPA Canada). Businesses may require CPA services for various reasons, such as being publicly traded, involved in complex financial transactions, facing a tax audit or dispute with CRA, seeking financing or investment or expanding into new markets or sectors. CPAs can provide financial analysis, due diligence, and regulatory compliance guidance to help businesses in these situations.in other words, if your business is large, complex, or subject to regulatory oversight, a CPA can provide the expertise you need to stay compliant and ensure that your financial records are accurate.

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Not all accountants are CPAs, but all CPAs are accountants. 

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For an accountant to achieve the Chartered Professional Accountant (CPA) designation, they must meet rigorous standards. In addition to a bachelor's degree, they must also earn 30 months of work experience at a CPA firm, as well as pass a three day long Common Final Examination, an exam that many hopefuls fail on their first attempt.

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CPAs are licensed and provincially regulated. After earning the designation, CPAs are required to complete 40 hours of continuing education each year to keep up their designation and stay up-to-date with changes in their field.

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Because of these stringent requirements, CPAs are highly regarded for their expertise in accounting, taxation, and business strategy, though their services come at a premium cost.

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So, bookkeeper, accountant or CPA - which one does your business need?

In summary, bookkeepers, accountants, and CPAs all provide valuable financial services to small businesses in Canada. Bookkeepers are responsible for recording financial transactions, while accountants analyze and interpret financial information. CPAs have the most advanced level of training and can provide a wide range of financial services to businesses.

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When deciding which professional to hire, consider the size and complexity of your business, your budget, and the services you need. If you're just starting out and have a limited budget, a bookkeeper can be an excellent choice. If your business is growing, and you need help with tax planning, financial forecasting, or strategic planning, an accountant may be the best option. And if your business is large, complex, or subject to regulatory oversight, a CPA can provide the expertise you need to stay on track and ensure compliance.

But of course, if you can't decide, we at Cayde Accounting and Tax give you access to a full team of financial experts made up of bookkeepers, accountants and CPAs with each of our packages, designed to help you grow and designed to grow with you. Contact us today!