As a small business owner, it is critical to ensure the financial accuracy of daily transactions and use that data to make decisions for the future. As your small business grows and you take on more customers, vendors, and employees, keeping track of how much money you have coming in and going out of your business can become complex and time-consuming.

When you can no longer handle the accounting tasks for your small business, it’s time to think about outsourcing. There are two types of financial professionals to consider: an accountant and a bookkeeper. When you are making a decision as to whose services you need, it’s important to start by understanding the differences between these two functions.

Bookkeepers Handle Daily Transactions

Bookkeepers are responsible for maintaining accurate records of daily financial transactions. The scope of this job can vary depending on the size and type of business, but it generally includes recording sales transactions and purchases, processing payments, completing the payroll, handling petty cash, and balancing the books at the end of the month.

Bookkeepers may also manage accounts payable and accounts receivable. This can involve handling vendor bills and invoice payments as well as customer invoicing and follow up and recording payments. If your business uses accounting software, the bookkeeper can assure that everything has been entered and recorded correctly so that your financials are ready for tax time.

Accountants Analyze the Big Picture

Bookkeeping is designed to generate data about the activities of an organization. An accountant looks at the big picture, turning that data into information that helps them analyze your financial situation and offer strategic business advice.

The role of an accountant may include reviewing your books to look for discrepancies, analyzing sales trends, completing end-of-year financial statements, and filing taxes. An accountant’s analysis of your financial data can provide information for forecasts, business trends, managing cash flow, and identifying opportunities for potential growth. They can be an invaluable resource when you need to make financial decisions that impact your short and long-term business goals.

In fact, many small business owners consider their accountants as outsourced chief financial officers. They can advise you on financial strategies such as whether or not to secure working capital financing to cover cash flow gaps or purchasing a new product line. If you apply for a business loan, they can help pull together the necessary paperwork.

When it comes to tax preparation, your accountant will make sure your business is in compliance with tax laws and your return is accurate. They will determine the credits and deductions for which you qualify and make sure you have the records to support each claim. In the event that the IRS audits your business, your accountant can guide you through the process.

Define Your Business Needs

Deciding whether to hire a bookkeeper or an accountant depends on your business needs. For example, if you’re a startup company, you may need an accountant to help you choose a business structure and establish a record-keeping system. If your business has outgrown your personal efforts to manage daily transactions, it may be time to delegate this responsibility to a bookkeeper.

According to Entrepreneur, the typical service business can often outsource its CFO and bookkeeping tasks until it has about 30 employees or its revenues rise above $1 million. Until then, there may not be enough work to warrant hiring a full-time employee.

Growing businesses often continue to work with an accountant outside the company, but you may reach the point where you need to employ a bookkeeper or have a small accounting department with data-entry staff. If your financial transactions become more complex, it may be necessary to bring in an accountant on a part-time basis to provide additional oversight.

Tap Available Resources

Once you’ve identified your priorities, look for an individual or firm that can provide the services you need. Use every available resource and connection at your disposal. Organizations like The American Institute of CPAs and the National Society of Accountants have website links to directories and state accounting associations. Seek referrals from professional networks, business-centric online sites like LinkedIn, and social networks.

Ask other small business owners if they would recommend their bookkeeper or accountant and, if so, why. While someone who is right for a friend’s recruiting firm may not be ideal for your manufacturing business, you may get valuable leads that will help you in your search.

It is critical that you choose a financial professional who has experience working with companies that are similar in size and revenue to yours. For instance, an accountant who has other clients in your market sector will be more likely to understand the unique needs of your business and provide valuable insights. You also want to be sure you hire someone who is familiar with the accounting or business software you use.

The process of tracking and analyzing financial transactions provides small business owners with a solid foundation on which to make day-to-day decisions and plan for growth. Enlisting the help of skilled professionals is a wise investment in your company’s future.

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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.