Bookkeeper vs. Accountant vs. CPA: Which One Should You Hire?

If you’re building your name as an esteemed accounting firm, getting the right talents onboard will greatly boost your credibility among your prospects. Among the bookkeepers, accountants, and CPAs in the field, which one should you hire? 

Let’s take it little by little. In the finance and accounting (F&A) arena, various professions are present. We have bookkeepers, tax accountants, management accountants, financial managers, financial analysts, and auditors, to name a few. 

But how do they differ from one another?  

In this article, we’ll be giving light on these titles: bookkeepers, accountants, and CPAs. What are their roles and what makes them different? 

Bookkeeper vs. Accountant vs. CPA  

When making hiring decisions, it is important to understand your specific needs in order to identify the right candidate who can meet those requirements. Here's a list of differences among a bookkeeper, an accountant, and a CPA 

Bookkeeper   

Bookkeepers are responsible for recording financial transactions and maintaining company records that reflect the money going in and out of the business. Bookkeeping services include, but are not limited to:  

• Entering transactions into the ledger (or in the accounting software),  
• Providing billing for rendered services,  
• Paying suppliers,  
• Handling payroll-related tasks, and  
• Creating financial reports. 

Accountant   

Accountants are required to have a degree, as it is the minimum requirement for the role.  

Their tasks are somehow similar to those of the bookkeeper, but in a way, they are ideal for higher level services such as reviewing business finances, and offering financial advice, so you know what areas of the business generates profits, and those that need improvement.  

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To put it simply, accountants attend to the more complex and analytical side of the job.  

Here are some of their main tasks: 

• Offering tax advice, 
• Preparation of financial statements, 
• Filing income tax returns, 
• Finding accounting discrepancies, and 
• Budget forecasting 

Related: What are the Responsibilities of a Small Business Accountant?

CPA   

Certified Public Accountants (CPAs) are not your regular accountants. They are professionals academically and professionally tested to carry out finance and accounting tasks, who have gone through rigorous training in school, and passed the CPA exam set by a professional regulating body established by the government. 

How does one become a CPA in the US?  

CPA title holders need to obtain an accounting degree from an academic institution and pass the Uniform CPA exam, and the state licensure exam. As they are bound by stringent industry standards, they are also required to take continuous professional education units to keep them updated on the latest developments in finance and accounting.  

CPAs stay on top of these matters regularly: 

• Preparation of tax returns for businesses and individuals 
• Sign tax returns 
• Represent taxpayers before the IRS for audits 
• Performing detailed audits 

How much does it cost to hire a CPA?  

Depending on your entity and your requirements, the costs in hiring a CPA to do your taxes can also vary. The complexity of your numbers and the amount of money you’re willing to spend on a licensed accounting professional help narrow down your options. 

According to Investopedia, hiring a CPA to prepare and submit your Individual Tax Return (ITR) or Form 1040 and state return with no itemized deduction averagely costs $220. Doing an itemized Form 1040 and a state tax return is an average of $323. However, for self-employed individuals, hiring a CPA to prepare your itemized ITR with Schedule C and state tax return form increases the average CPA fee to $457.  

While these are all at a reasonable level, you may want to note that these are only average fees. If you need special filings, or have more intricate financial needs, CPAs can charge more for consultation and overtime work.  

Benefits of hiring a CPA 

Aside from the level of expertise they have, what are the other advantages you get when you hire a licensed accounting professional? 

Licensing  

CPAs are licensed by the government and must keep up with the current tax laws and other regulations to maintain their license in that state. They do this by obtaining units of continuous professional education provided or accredited by the regulating body. 

Tax Expertise  

A CPA is more familiar with tax laws than non-CPAs. Knowledge of tax laws is a big part of the licensure exam that an accountant must take before becoming a CPA. Aside from which, updates on tax laws are also discussed during their continuous education. Lastly, CPA’s have a greater ability to represent clients before tax agencies (e.g. IRS, ATO, BIR) compared to the limited capacities of an accountant. 

Auditing  

As previously mentioned, CPAs are more capable of representing you before tax agencies should you be lucky to be selected for a tax audit. Pair that with their familiarity with the different standards during the preparation of financial statements and financial reporting, and you now have an all-in-one expert! 

Financial Analysis and Guidance  

CPAs are not just capable of maintaining books, proper tax filing and financial statements/reporting. As professionals, they can also give you suggestions on how to lower your tax liabilities, where you can better invest your money and where you can implement cost-cutting. 

Which One Should You Hire? 

You need the best help to chart the course of your business, and a big part of that is making sure your finances are on track. Before deciding to hire a Certified Public Accountant (CPA), it’s crucial to understand the specialization of the accounting firm or professional you're considering. Whether you’re a self-employed individual, a startup, or a corporation, knowing what specific services each firm offers is key: 

• Back-office Support: Does the firm offer robust back-office services to handle day-to-day accounting tasks? 

• High-Level Accounting Services: Are they capable of managing more complex financial strategies and audits? 

• Administrative Accounting Services: Do they provide services like bookkeeping, payroll, or other administrative financial tasks? 

Determining the specialization will help you choose the right professional for your specific needs, ensuring that your financial management aligns with your business goals 

A Cost-Effective Solution 

If you are seeking a cost-effective option for your firm, you might want to think about outsourcing to a specialized accounting outsourcing firm. Not only can you save a significant amount of money, but outsourcing accounting services can also serve as your back-office support.  

Here are the key factors to consider when searching for the right outsourced accounting services. 

1. Credentials and Experience

Ensure they have relevant certifications, expertise and a background in handling accounting tasks similar to your needs. Look for professionals with experience or understanding of your specific sector. 

2. Proficiency in Software and Technology

The right talent should be adept at using modern accounting software and technologies that are critical to your business operations. This includes not just the basics like QuickBooks or Xero but also any specialized software needed for your industry. 

3. Communication Skills

Effective communication is crucial, especially when dealing with outsourced services. Ensure they can convey complex information clearly and are responsive to your queries and concerns. 

Read: Outsourcing to the Philippines: Benefits & Tips to Consider 

4. Ethical Standards

Confidentiality and integrity are essential. Ensure your outsourcing service provider adheres to high ethical standards to protect your business's sensitive financial information. You also need to make sure they have robust cybersecurity in place. 

5. Flexibility and Scalability

 As your business grows or goes through seasonal peaks, your accounting needs may change. Look for a service provider that can adjust their offerings to match your requirements. 

6. Transparent Pricing

Clear, upfront pricing helps avoid unexpected charges. Look for outsourced accounting talents who offer a straightforward pricing model that matches your business's budget and needs. 

7. References and Testimonials

Check references and testimonials from their previous or current clients to gauge their reliability, efficiency, and the quality of their work. 

By focusing on these key areas, you can form a beneficial partnership with your outsourced accounting talent, ensuring your finances are in the right hands as mentioned above. 

Interested in having a CPA help your business? 

We’re here to help. You can contact our growing team of CPAs at D&V Philippines today, or download our latest whitepaper Finding the Right Talents: D&V Philippines Modern Accounting Firm Solutions to know how we can create a robust back-office support for your business. 

This article was first published on 03 April 2015 and updated on 20 May 2024. Edited by: Angelica Garcia