A Bookkeeper, a CPA, and a Fractional CFO - What's the Difference?
Updated: Nov 30, 2020
What is the difference between a CPA, a Bookkeeper, and a Fractional CFO? Many people see no difference between the three. They are all accountants, aren’t they? Actually, they are three very distinct and specialized professionals that can each help your business achieve specific goals.
A bookkeeper is primarily responsible for keeping track of all business transactions within your firm and keeping the data in the accounting system accurate and up to date. Their responsibilities typically include maintaining timely and accurate records of financial transactions, basic financial statement preparation, basic management of accounts payable (paying bills) and basic management of accounts receivable (collecting customer payments). If your company is struggling with one or more of these items, you should hire a bookkeeper or engage an outsourced bookkeeping firm. You should also hire a bookkeeper if the amount of time you are spending on bookkeeping is keeping you from growing the company or performing client work.
CPAs are highly skilled accounting professionals. They usually specialize in audit and tax functions. Their responsibilities generally include and preparing and submitting state and federal tax reports and inspecting and auditing financial statements (to ensure their compliance with applicable laws). CPAs help companies manage their tax strategies and plan to maximize their legally allowed deductions. Many business owners meet with their CPAs quarterly or semi-annually to discuss estimated tax payments and plan their tax strategies for the remainder of the year. They can also help ensure your books are audit ready and, if you are audited, they can help manage the tax audit. If you do not already have a CPA, you should hire one if you need help with:
ensuring your accounting records are accurate and in compliance with tax laws,
preparing and filing taxes, tax planning and reduction
managing a tax audit.
CFOs primarily deal with long-term planning and strategy - they focus on the future more than the past. CFOs analyze and discuss your financial performance with you and your management team. They understand the story behind the numbers and translate this into meaningful analysis and actionable insights. Great CFOs are your secret weapon for growth and understand your company’s strengths and weaknesses and how to capitalize on them. They combine this understanding with financial expertise to create models exploring various scenarios to aid in decision making. Often, they are considered the right-hand of the CEO, serving as advisor and confidant. Occasionally, CFOs will also take on the responsibilities of a Controller, ensuring accurate and timely reporting is available to management and other stakeholders. You should hire a CFO if you need assistance with:
reducing and managing expenses
maximizing use of your existing assets
managing cashflow and working capital
measuring and improving profitability
establishing systems, processes, and internal controls
developing and tracking performance benchmarks and key performance indicators
budgeting and forecasting
strategic planning and management
financial modeling and decision making
managing investor and financial relationships
While it is common for larger companies to employ all three of these professionals, many smaller companies lack the resources to hire all three. Luckily, many companies provide these services on an as-needed basis. Outsourcing some or all of these services can give small businesses the expertise they need at a price they can afford.
Augelli Consulting, LLC provides Fractional CFO services for small to midsized companies. Contact us today at firstname.lastname@example.org or call us at 608-352-3332 for a free consultation. We can recommend which of these professionals is right for your firm.