Do I Need a Bookkeeper, an Accountant, or Both?
One of the most common questions business owners ask is whether they need a bookkeeper, an accountant, or both professionals. Understanding the differences between these roles and when you need each service can save you money and ensure your financial needs are properly met.
Understanding the Roles
What Bookkeepers Do
Daily Financial Tasks: Record transactions, categorize expenses, manage accounts payable/receivable
Bank Reconciliation: Match bank statements to accounting records
Payroll Processing: Calculate wages, withhold taxes, process payments
Financial Organization: Maintain organized financial records and documentation
Basic Reporting: Generate profit & loss statements, balance sheets, and cash flow reports
Software Management: Set up and maintain accounting software systems
What Accountants Do
Tax Planning and Preparation: Develop tax strategies and prepare complex returns
Financial Analysis: Interpret financial data and provide business insights
Advisory Services: Offer strategic financial guidance and planning
Audit Support: Prepare for and represent clients during audits
Compliance: Ensure adherence to tax laws and regulations
Advanced Planning: Estate planning, retirement planning, business structure advice
When You Need a Bookkeeper
Business Indicators:
More than 20 transactions per month
Multiple bank accounts or credit cards
Employees requiring payroll processing
Inventory tracking requirements
Struggling to keep up with daily financial tasks
Spending more than 10 hours per month on bookkeeping
Benefits of Hiring a Bookkeeper:
Time Savings: Free up time for revenue-generating activities
Accuracy: Reduce errors in financial records
Organization: Maintain systematic financial documentation
Cash Flow Awareness: Stay current on business financial position
Tax Preparation: Simplified year-end tax preparation
Cost Considerations:
Local Bookkeepers: $30-$80 per hour
Online Bookkeeping Services: $200-$800 per month
Part-time In-house: $15-$25 per hour
Full-service Packages: $300-$1,500 per month depending on complexity
When You Need an Accountant
Business Situations:
Annual revenue over $100,000
Complex business structure (partnerships, multiple entities)
Significant tax planning opportunities
Facing IRS audit or tax problems
Major business decisions (buying/selling, financing)
Estate planning needs
Individual Situations:
Multiple income sources
Investment properties or complex investments
High income with tax planning opportunities
Multi-state tax issues
Previous tax problems or audits
Types of Accountants:
Certified Public Accountants (CPAs)
Education: Bachelor's degree plus additional coursework
Licensing: State licensing with continuing education requirements
Services: Full range of accounting, tax, and advisory services
Regulation: Subject to professional standards and state oversight
Enrolled Agents (EAs)
Specialization: Tax-focused practice
Licensing: IRS licensing with continuing education
Representation: Can represent clients before the IRS
Expertise: Deep knowledge of tax law and procedures
Tax Attorneys
Legal Training: Law degree with tax specialization
Services: Complex tax issues, legal disputes, tax court representation
Attorney-Client Privilege: Legal protection for communications
Cost: Generally most expensive option
The "Both" Scenario
Optimal Division of Labor:
Bookkeeper: Handles daily transactions, maintains records, processes payroll
Accountant: Reviews financial statements, handles tax planning and preparation, provides strategic advice
Benefits of Using Both:
Cost Efficiency: Bookkeeper handles routine tasks at lower cost
Expertise: Accountant focuses on high-value strategic work
Year-round Support: Bookkeeper provides ongoing support, accountant available for complex issues
Better Service: Each professional focuses on their area of expertise
Coordination Requirements:
Clear definition of roles and responsibilities
Regular communication between bookkeeper and accountant
Consistent accounting methods and software
Organized handoff processes for tax season
Choosing Your Professional Team
Bookkeeper Selection Criteria:
Experience: Relevant industry experience and client references
Technology: Proficiency with your accounting software
Communication: Responsive and clear communication style
Credentials: QuickBooks ProAdvisor, bookkeeping certifications
Services: Match their services to your specific needs
Accountant Selection Criteria:
Credentials: CPA, EA, or appropriate professional certification
Specialization: Experience with your industry and business structure
Services: Full range of services you need (tax, planning, advisory)
Communication: Proactive communication and strategic thinking
Reputation: Strong references and professional standing
Service Models and Pricing
Bookkeeping Service Models:
Hourly Services:
Pros: Pay only for time used, flexible arrangement
Cons: Unpredictable monthly costs, potential for scope creep
Best For: Businesses with variable transaction volumes
Monthly Packages:
Pros: Predictable costs, comprehensive service
Cons: May pay for unused services during slow months
Best For: Businesses with consistent transaction patterns
Online/Remote Services:
Pros: Lower costs, convenient access, scalable
Cons: Less personal attention, potential communication delays
Best For: Tech-comfortable businesses wanting cost efficiency
Accounting Service Models:
Project-Based:
Examples: Tax return preparation, financial statement compilation
Pros: Clear scope and pricing
Cons: No ongoing relationship or support
Retainer Arrangements:
Benefits: Ongoing access to professional advice
Structure: Monthly fee for specified services and consultation hours
Best For: Businesses needing regular strategic guidance
Comprehensive Service:
Includes: Bookkeeping, tax preparation, planning, and advisory services
Pros: One-stop solution with integrated services
Cons: Higher cost, potential over-servicing
DIY vs. Professional Services
When DIY Makes Sense:
Very small business with minimal transactions
Strong financial and technical skills
Limited budget for professional services
Simple business structure and tax situation
DIY Limitations:
Time-intensive and takes away from business activities
Higher error risk without professional oversight
Missing optimization opportunities
Stress during tax season and financial deadlines
Signs You've Outgrown DIY:
Spending excessive time on financial tasks (more than 10 hours per month)
Making costly errors in bookkeeping or tax preparation
Missing tax deadlines or filing extensions repeatedly
Unable to generate timely financial reports for decision-making
Feeling overwhelmed during tax season
Business growth making financial management too complex
Building Your Professional Support Team
Phase 1: Startup/Small Business
Revenue: Under $50,000
Typical Setup: DIY bookkeeping with annual tax preparation by professional
Cost: $500-$2,000 annually
Focus: Basic compliance and getting systems established
Phase 2: Growing Business
Revenue: $50,000-$250,000
Typical Setup: Monthly bookkeeper plus annual tax preparation and planning
Cost: $3,000-$8,000 annually
Focus: Accurate records and proactive tax planning
Phase 3: Established Business
Revenue: $250,000+
Typical Setup: Full bookkeeping services plus comprehensive accounting support
Cost: $8,000-$25,000+ annually
Focus: Strategic planning, optimization, and advanced compliance
Making the Investment Decision
Cost-Benefit Analysis Framework:
Calculate Your Time Value:
Hours spent on financial tasks monthly × your effective hourly rate
Compare to cost of professional services
Factor in opportunity cost of not focusing on revenue generation
Consider Error Costs:
Potential penalties from tax mistakes
Lost deductions due to poor record-keeping
Interest on missed payments
Cost of fixing errors and amendments
Value of Professional Expertise:
Tax planning strategies that reduce liability
Business insights from financial analysis
Peace of mind and reduced stress
Professional representation in audits or disputes
Red Flags: When You Need Help Immediately
Bookkeeping Red Flags:
Bank accounts not reconciled for several months
Unable to generate current profit & loss statement
Mixing personal and business expenses
No systematic approach to tracking expenses
Payroll tax issues or late filings
Tax and Accounting Red Flags:
Received IRS notices or audit letters
Significantly overpaid or underpaid taxes in recent years
Complex business transactions without proper advice
Multi-state tax issues
Considering major business structure changes
Questions to Ask Potential Professionals
For Bookkeepers:
What accounting software do you recommend and why?
How often will you update my books and provide reports?
What's included in your monthly fee vs. additional charges?
How do you handle expense categorization and questions?
What's your backup plan if you're unavailable?
How do you communicate with my accountant during tax season?
For Accountants:
What's your experience with businesses like mine?
How proactive are you with tax planning throughout the year?
What's your availability for questions and planning sessions?
How do you stay current with tax law changes?
What's your audit support and representation policy?
Can you provide references from similar clients?
Integration and Communication
Setting Up Successful Professional Relationships:
Clear Expectations:
Define scope of work and responsibilities
Establish communication preferences and frequency
Set deadlines and turnaround times
Agree on pricing and payment terms
Regular Communication:
Monthly or quarterly check-ins with bookkeeper
Annual planning meetings with accountant
Mid-year tax planning sessions
Immediate communication for complex transactions
Documentation and Access:
Provide access to necessary accounts and information
Maintain organized records and receipts
Use cloud-based systems for easy collaboration
Keep professionals informed of business changes
Technology Integration
Software Considerations:
Choose accounting software both professionals can use
Ensure cloud-based access for collaboration
Consider integrated payroll and expense tracking
Plan for scalability as business grows
Popular Business Accounting Software:
QuickBooks Online: Most widely used, extensive integration options
Xero: Strong bank integration, user-friendly interface
FreshBooks: Good for service businesses, time tracking features
Wave: Free option for very small businesses
Transitioning Between Service Levels
From DIY to Professional Help:
Organize existing records before transitioning
Choose professionals who can work with your current systems
Plan transition during slower business periods
Budget for setup costs and learning curve
Upgrading Service Levels:
Evaluate needs annually as business grows
Consider seasonal needs vs. year-round support
Plan for additional costs in business budget
Maintain relationships even if reducing services temporarily
Special Industry Considerations
Service-Based Businesses:
Focus on time tracking and project profitability
May need less inventory management
Emphasis on accounts receivable management
Professional liability and insurance considerations
Retail/E-commerce:
Complex inventory management needs
Multi-channel sales tracking
Sales tax compliance across jurisdictions
Seasonal fluctuations in volume
Manufacturing:
Cost accounting and inventory valuation
Complex depreciation and equipment issues
Multi-state tax complications
Environmental and regulatory compliance
Making Your Decision
Assessment Questions:
How much time do I currently spend on financial tasks?
What's my effective hourly rate for business activities?
How comfortable am I with financial software and concepts?
What's my current error rate and associated costs?
How complex is my business structure and tax situation?
What are my growth plans and how will they affect financial complexity?
Trial Periods and Guarantees:
Consider starting with project-based work to evaluate fit
Ask about satisfaction guarantees or trial periods
Start with basic services and expand as relationship develops
Evaluate results after first full tax season
The Bottom Line
The decision between bookkeeper, accountant, or both depends on your business size, complexity, and growth stage. Most successful businesses eventually use both professionals in complementary roles—bookkeepers for day-to-day accuracy and efficiency, accountants for strategic planning and tax optimization.
Remember, professional services are an investment in your business success, not just an expense. The right professional support can:
Save you significant time for revenue-generating activities
Reduce costly errors and missed opportunities
Provide valuable business insights and strategies
Give you peace of mind and reduced stress
Support your business growth and success
Start with your most pressing needs and build your professional team as your business grows. The cost of good professional help is almost always less than the cost of going without it.