This post is part of the series, SmallBusiness.com Guide to Starting a Business: Information, resources and advice about starting a business. You can browse other posts in the series below.
On the internet, you will find more than you ever wanted (or needed) to know about whether or not your small business should have a bookkeeper, accountant or CFO. However, those guides usually end up being TL;DR–an internet slang acronym meaning “too long, didn’t read” or “just give me the answer, please.”
Also on SmallBusiness.com | This is part of a two-post feature on small business bookkeeping and accounting. On an accompanying post, you’ll find a comparison chart of ten online accounting software platforms.
The cut-to-the-chase answers
Bookkeeper | Do you need one? Yes, but a part-time or outsource provider will likely be all you need early on. Using software, you can likely do it yourself, but you should be doing other things that bring in revenue.
Accountant | Do you need one? Yes, but at first, just for helping you set up things, reviewing your books regularly (at least quarterly) and advising you on taxes.
CFO | Do you need one? No
The longer answer
Whether by accident (e.g., people really, really love those cookies you bake) or design (you dropped out from Girl Scouts at age 12 to launch a cookie distribution company), you find yourself operating a business with more money coming in than going out, you’ll need to add someone to your team to help you manage the flow of those dollars.
In managing your finances, there are typically two kinds of professionals you need on your team early on:
1 | A bookkeeper or bookkeeping service
2 | An accountant
Additionally, and for different reasons at different times, you’ll need other types of professionals to consult or assist you
3 | A business lawyer
4 | A banker or specialized type of banker or consultant
You won’t likely need a CFO, but we’ll get to why in a moment.
You need a bookkeeper for these responsibilities
Today, bookkeepers use online software that is more powerful than the software big corporations used just a few years ago. (On an accompanying post, we display a comparison of ten such software platforms.) With that software, bookkeepers can be connected to the internet and handle all sorts of responsibilities, including:
• Recording and categorizing transactions
• Managing payroll and payroll taxes
• Handling various types of government filings
• Managing bank reconciliations (balancing)
• Creating simple financial statements
• Recording and paying bills
• Issuing and collecting invoices
• And much more ( … )
You need an accountant for these responsibilities
Accountants (or “public accountants, Certified Public Accountants or CPAs) are licensed by states. Their ultimate responsibility is to provide you advice and guidance on things relating to your company’s finances.
They specialize in:
• Auditing (the internal kind, as well as the IRS kind)
• Corporate regulation
• Financial statements
They use the data that is produced from accounting software to help you better manage your financial and other resources.
A great accountant will help a business owner learn about the importance of using financial statements for daily economic business decisions. An accountant can also help you communicate with bankers. As a business grows, there are certain financial issues that only accounting professionals will understand. You’ll be glad somebody does.
Why you probably don’t need a CFO
If your company is a fast-growing business with complex financial needs, at some point, you’ll need a CFO. But unless you have VC investors (and did we also mention “complex financial needs”?) or specialized banking or financial services, you probably don’t need one.
Why you DO need accounting software
For anyone who has run a small business for over a decade, the power of a typical online software platform is amazing. On this accompanying post, we’ve included a feature comparison of ten online accounting management platforms.