When we have the opportunity to speak to groups of entrepreneurs, the phones come out, and the pictures get snapped of a slide where we outline the different types of accountants.
Educating business owners to the different roles that accountants serve has become extremely valuable. Once business owners learn how different accountants can work with their business, their eyes are opened to possibilities.
Every book on starting a business says you should hire a good accountant and a good lawyer. When your business is new and/or small, you may have one person filling more than one of these accounting roles, but as your company grows, and your profits grow as well, it's time for your team to start specializing.
What follows is a description of the different types of accountants, and how they can serve your business.
Bookkeeper
Role: Maintains accurate records of financial transactions. They typically enter your transactions into quickbooks, and categories the various types of revenue and expenses.
Responsibilities
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Records income, expenses, and other financial data.
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Prepares financial reports like profit and loss statements.
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Reconciles bank accounts.
Focus: Day-to-day financial tracking.
Importance: Without good bookkeeping, you cannot run a successful business. You cannot make good decisions (consistently), or even rely on the accuracy of your tax returns and financial statements without a competent bookkeeper.
Payroll Company
Role: Handles employee payroll and related compliance tasks.
Responsibilities:
- Processes employee paychecks and direct deposits.
- Manages tax withholdings, benefits deductions, and employer contributions.
- Files payroll tax reports and ensures compliance with labor laws.
Focus: Paying employees accurately and on time while ensuring compliance.
Importance: Ensuring your employees (and often your vendors) are paid on time, in the correct amounts. Filing your payroll tax returns, and remitting the correct amounts to the various taxing authorities. Fortunately, this is a simple task for your business to outsource so you can focus on activities that add more value to your business.
Financial Accountant
Role: Prepares financial statements for internal or external use. This role has a historical focus, with an emphasis on accurately reporting what has happened in the past.
Responsibilities:
- Creates balance sheets, income statements, and cash flow statements.
- Ensures compliance with accounting standards (e.g., GAAP or IFRS).
- Prepares reports for investors, lenders, or regulatory agencies.
Focus: Historical financial performance and compliance.
Importance: the financial accountant will generate reports that are populated by the bookkeeper. If you go to a bank, or look for investors, they will want to see financial statements.
Managerial Accountant
Role: Provides financial insights for internal decision-making. Titles typically include Controller or CFO.
Responsibilities:
- Analyzes financial data to guide budgeting and forecasting.
- Tracks performance metrics and identifies cost-saving opportunities.
- Supports strategic planning and operational decisions.
Focus: Improving business efficiency and profitability.
Importance: Assisting the owner with making data-driven decisions, and making projections for the business.
Tax Preparer
Role: Prepares and files tax returns.
Responsibilities:
- Completes tax forms for individuals or businesses.
- Ensures compliance with tax laws and regulations.
- Typically utilize software to simplify the filing and reporting process.
Focus: Filing accurate tax returns with the required authorities such as state, federal, and local.
Importance: Accurate and timely tax returns help you avoid penalties, interest, and potential jail time.
Tax Strategist
Role: Develops long-term strategies to minimize tax liability.
Responsibilities:
- Analyzes tax laws and business structures for optimization.
- Plans transactions to maximize tax benefits (e.g., entity structuring, retirement planning).
- Guides clients in proactive tax-saving measures throughout the year.
- Generate documentation as evidence of tax positions.
Focus: Strategic planning to reduce taxes over time.
Importance: Help you keep more of your hard-earned money.
Summary of Key Differences
Scope
Bookkeepers and payroll companies focus on routine tasks; accountants analyze or report financial data; tax professionals focus on compliance or strategy.
Timeframe
Financial accountants focus on the past; managerial accountants and tax strategists focus on the future.
Impact
Tax preparers ensure compliance; tax strategists proactively reduce liabilities.
To see how you can proactively reduce your tax liability, get in touch with Pennywise.
