Five Types of Accountants Your Business Needs

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    Article by Eddy Hood

    If you're going to create a profitable business, then you’ll need the help of an accountant. You may consider hiring in-house or you may prefer to save money by choosing virtual accounting services. But before you make a decision, it is important to understand the five different types of accountants and how they can meet your small business accounting needs.

     

    The Bookkeeper

    A bookkeeper is a data entry specialist whose job is to get data into the system accurately. They do not create reports or provide analysis, however, by offloading these daily tasks to another individual, you, as the entrepreneur can switch your attention to something much more valuable -- scaling your business.

    A bookkeeping service should provide the following to your organization:

    Bank reconciliations: Having a certified bookkeeper manage your bank accounts ensures that you have a much clearer picture of your company’s cash position, which allows for better decision making. Instead of hoping that a check will clear tomorrow, you'll know exactly where you stand with up-to-date bank account information. In this regard, a bookkeeper is responsible for the following:

      1. Daily, weekly, or monthly data entry from your bank accounts to your accounting software.
      2. Reconciliation of all cleared transactions, open deposits and open checks.
      3. Matching bank reconciliation balances to your trial balance for financial statement review.

    • Credit card management: Credit card reconciliations is an area that many businesses struggle to keep a handle on. And with good reason -- they can be tricky to manage in an accounting software platform potentially resulting in missed payments. Having a bookkeeper ensures that:
    1. All credit card transactions are entered into your accounting software on a monthly basis.
    2. Each credit card will be reconciled to its statement.
    3. Cards will be paid on time to avoid fees and interest charges.

    • Accounts receivable: Implementing a strong accounts receivable system will help to enhance cash flow, which is the lifeblood of any business. A good bookkeeper will help you to design an efficient invoicing system, send invoices and help you improve collections.

    • Accounts payable: Overall, an efficient accounts payable platform will help you to control your cash outflow. This goes hand-in-hand with creating a solid purchase order system to manage your vendors, become more organized and benefit from discounts.

    • Payroll services: Your bookkeeper can help you to manage, report and reconcile your payroll transactions with your accounting software.

     

    In-house cost of hiring a Bookkeeper (2017): Salary can fluctuate from $18,000 to $45,000 a year.

     

    The Accountant

    Many people think that bookkeepers and accountants provide the same function. However, there are significant differences between the role and this is reflected in the price point.

    To break it down, your bookkeeper is responsible for inputting data into the system all month long while it is the accountant’s job to oversee this process as well as carry out more of the “heavy lifting” at the end of the month as detailed below.

    An accounting service should provide the following to your organization:

    • Reconciling your trial balance: Creating a trial balance sheet and making sure the debit and credit columns are equal are two necessary steps involved in drafting an accurate financial statement. If there are discrepancies in a business' financial records, they will be revealed on the trial balance sheet and corrected before the information is transferred to a financial statement.

    • Making month-end journal entries: This is also known as journalizing. A journal chronologically lists transactions and other events in terms of debits and credits to accounts. Each journal entry consists of four parts: (i) The accounts and amounts to be debited (ii) The accounts and amounts to be credited (iii) The date of transaction (iv) A transaction explanation.

    • Accrual accounting: The accrual accounting system is generally thought to offer a more accurate picture of a company's current financial standing and is therefore more widely adopted as compared to cash reporting. This is so because it is increasingly rare for a transaction and its payment to occur simultaneously. That said, for many companies, the major drawback of the accrual method is its relative complexity. With the accrual method, it's necessary to record each transaction as it occurs, but it's also necessary to keep track of when each transaction is actually paid off. An accounting professional can give you peace of mind by ensuring that these transactions are recorded when they happen.

    In-house cost of hiring an Accountant (2017): Salary range will run from $30,000 to $60,000.

     

    The Controller

    This person is responsible for overseeing the entire accounting system in addition to creating financial reports. As you might imagine, the Controller must be highly qualified and should at the very least hold a Bachelor's Degree in Accounting while working towards their Master’s.

    Overall, the Controller will help you to understand the financial foundations of your business by developing a reliable reporting system for accurate analysis as well as building awareness of your company’s cash position, profit and other lifelines. All of these functions are critical to ensuring that your business avoids crises as you plan for future growth.

     

    Controller Services:

      • Establish Accounting Policies: Even small businesses must develop policies that guide the way the record and report financial transactions.
      • Cash Flow Forecasts: Working with a Controller to build a cash flow model to predict future cash positions of your business is vital so that you can understand how your decisions today will change the course of your business in 30 to 60 days.  
    • Oversight of Accounting and Bookkeeping Processes: Ensures your company complies with financial reporting requirements and laws.
    • Financial Management Reporting: With the right financial reports, you can make the most informed business decisions. These include the Balance Sheets, Income Statements, Weekly Cash Flow Forecasts, Accounts Receivable Reports, Accounts Payable Reports and Custom Internal Reports.

    In-house cost of hiring a Controller (2017): Expect to pay between $45,000 to $85,000.

     

    The CFO

    Every role we’ve discussed up to this point has been very task-related, but the Chief Financial Officer (CFO) function is distinctly unique. This C-suite position requires much more business acumen than a regular accountant. In a nutshell, strategic thinking must be the cornerstone of this individual’s skills set. They must be able to see the big picture and create plans that are business-development related.

    In essence, the CFO helps to turn your vision as an entrepreneur into a financially possibly venture.

    A CFO service should provide the following to your organization:

    • Budget-to-Actual Reporting and Analysis: A good CFO will help you to build, manage and maintain your budget against your actual results. In short, budget-to-actual analysis helps small businesses know whether they are on the right track with their business finances, allowing them to make adjustments in a more proactive way.  

    • Break-Even Analysis: At Ignite Spot, we talk about break-even analysis a lot because it is one of the most foundational ratios that every entrepreneur needs to understand. More specifically, break-even analysis tells small business owners how much money they need to make in order to keep the doors open after operating expenses like leases, equipment, vehicle expenses, employee costs and more. The insight that comes from an analysis of your cost structure, gross margin and overhead requirements will help you get closer to your goals of profitability.

    • Labor Cost Management: This analysis includes how much of the budget is consumed by overtime and whether the business is on target to achieve predetermined goals. With the help of a CFO, you'll know how much you have to offer a new employee and what it will mean for your company's bottom line.

    • Variable v. Fixed Expenses Analysis: A variable vs. fixed expenses analysis goes beyond producing a company-wide expense report that breaks your costs out into two buckets. It also focuses on cost management -- making sure your fixed or variable costs don’t slowly get out of hand before you realize it.

    • Debt Planning and Reduction: With business debt planning, you’ll receive an analysis of your debt, creditors, and payment plans but also a customized plan to pay off your debt much sooner than you imagined.

     

    In-house cost of hiring a CFO (2017): Expect to pay between $75,000 to $250,000 for this role.

     

    The CPA

    Your Certified Public Accountant (CPA) is responsible for managing your tax strategy and, if needed, may serve as an auditor for your small business. It is important to note that while all CPAs are accountants, not all accountants are CPAs. In other words, not every person who can be hired to “do the books” is certified. Uncertified accounting professionals don’t have to hold themselves to the same professional standards as Certified Public Accountants. When you partner with a CPA you can be more confident in their credentials.

    A CPA service should provide the following to your organization:

    • Income tax preparation: Without an experienced CPA in your corner, there’s a good chance that tax deductions could go unclaimed, while paper trails go awry resulting in costly penalties.
    • Tax planning: CPAs provide advice on reducing tax burden for businesses e.g. deferring income.
    • Entity creation and organization: Tax season will look much different for each small business--depending on what kind of entity they are. Your CPA can help you decide on the best structure to fit your needs.
    • IRS representation: CPAs will communicate with the IRS on your behalf at hearings or meetings. They can also prepare, file, or submit documents and provide audit support strategies in the event of an IRS audit.

    In-house cost of hiring a CPA (2017): Expect to pay between $125 per hour to $450 per hour.

     

    Consider Virtual Accounting Services

    More and more entrepreneurs are choosing virtual accounting services for their small business accounting needs instead of hiring in-house. Here are several benefits of choosing Ignite Spot for your small business accounting needs.

    Cost. With an in-house accountant, you will be responsible for paying a salary and payroll taxes in addition to providing benefits such as health insurance. As mentioned above, this adds up to tens of thousands of dollars per year. On the other hand, virtual accounting firms usually charge a fraction of the cost. For example, Ignite Spot is typically 60% more affordable than hiring in-house staff.

    Easy setup. We make the onboarding process as seamless as possible to ensure that you can get up and running as quickly as possible. For example, depending on the condition of your books, it could take as little as 2 weeks to set up your bookkeeping services online. During this setup phase, we will help you maintain your current accounting tasks as well.

    Technology. Ignite Spot invests in state-of-the-art technology to meet your needs. In most cases, we will host your accounting software on our servers so that you can gain access to real-time information regardless of your location.

    Flexibility. You don’t have to worry about getting locked into a contract with Ignite Spot. We offer a month-to-month service to meet your needs. This is especially useful as you look toward future business growth. You can scale up or down your outsourced accounting service as your business needs change.

    Qualified Team. By outsourcing your accounting needs, you will have access to an entire team dedicated to making your success a priority. We offer a full-range of services to meet your needs including bookkeeping, financial reporting, tax advice and profit coaching.

    Profit Coaching. At Ignite Spot, our mission is to help your business get out of debt and reach profitability quickly. In fact, our CFO services are built on actionable steps that you can put into place immediately. We’ve coached hundreds of businesses and have identified the specific areas that will matter most to your profits. Once you master these concepts with your Ignite Spot profitability coach, you’ll begin to see a noticeable difference in your income statement.

    Overall, by making the switch to Ignite Spot, you can transform your business finances. Let us help you to improve collections, maximize cash, save time and become profitable. Contact us today to see how we can meet your small business accounting needs.