Bookkeeper vs. CPA: What's The Difference?

Why bookkeepers and CPAs can be your business's secret weapon

If you're overwhelmed by invoices, receipts, and bank statements, deciding whether to employ a bookkeeper vs a CPA is difficult.

Financial transactions are the building blocks of every business, but keeping them organized can be a nightmare if you don't have the right help.

Knowing the difference between a bookkeeper and a CPA helps to cut through the financial jargon and utilize the expertise of these two key professionals.

Key Takeaways

• Bookkeepers focus on data entry, record-keeping, and day-to-day financial transactions.
• CPAs analyze this data, provide strategic financial advice, and handle complex tasks like tax planning and auditing.
• Bookkeepers require less formal education, with certifications like bookkeeping certificates being common.
• CPAs require a bachelor's degree in accounting, passing the CPA exam, and ongoing continuing education.
• Bookkeeping services are typically less costly than CPA services.

However, CPAs generally have a better understanding of a range of financial issues facing a business and are better able to provide strategic advice that can dramatically impact profitability.

Understanding bookkeepers' and certified public accountants' different roles and responsibilities is critical to making the right choice when deciding whom to employ.

So, let's now look at the main differences between the two roles, who is best suited for your needs, and why there's a cost difference in engaging them.

Bookkeeper Vs CPA - What's The Difference?

The main difference between a CPA and a bookkeeper is the level of education and experience the CPA has achieved, together with the ongoing professional education they receive.

As an accounting professional, a CPA possesses an in-depth knowledge of what managers and boards of directors need to make critical financial decisions.

To provide this insight, the CPA relies on the expertise of bookkeepers, who handle the day-to-day accounting and process the transactions needed to produce accurate reports.

Bookkeepers may have a bachelor's degree in accounting or a bookkeeping certificate and experience processing transactions using accounting software like Xero or Quickbooks.

With the move to remote work, the gig economy offers increasing opportunities for accountants to work from home.

What Is A CPA?

Certified public accountants (CPAs) are licensed professionals who have passed their state's Board of Accountancy exam and adhere to The American Institute of Certified Public Accountants (AICPA) guidelines.

Once an accountant has sufficient professional experience, they can sit the Uniform CPA Exam, which covers the following areas of competence.

• Auditing and Attestation
• Financial Accounting and Reporting
• Taxation and Regulation
• Business Analysis and Reporting
• Information Systems and Control
• Tax Compliance and Planning

To sit the CPA exam, accountants need to check the required work experience (usually two years) in their state and the credit hours (usually 150 hours) required as undergraduate or graduate students.

We found that most states require one to two years of accounting experience, though not necessarily in public accounting. 

Georgia requires candidates to accumulate 2,000 hours of experience in a single year under the supervision of an active CPA.

This experience may be obtained in public accounting, industry, or business, where the candidate receives instruction and support from a registered and current CPA.

Becoming a CPA is one of the most rewarding and profitable career options, with gig economy trends indicating that demand continues to rise.

Different Rules For Each State

In Arkansas, accountants must provide one year of advice or service in accounting, financial advisory, tax, attestation, management advisory, or consulting in a public practice.

An accounting professional may also meet the required hours by working in government, industry, and academia, so long as they provide advice or service.

There's a big difference between learning something in academia and putting it into practice in the real world, and in-service training allows CPAs to pass on their practical skills and knowledge.

Roles & Responsibilities Of CPA

Becoming a CPA is an arduous and demanding task, so not all accountants become CPAs, passing the Uniform CPA Exam and registering with their state's Board of Accountancy.

One of the main tasks that CPAs fulfill is verifying a business's financial records and preparing reports that help management assess the company's financial position and health.

They may specialize in preparing tax returns for businesses and individuals and providing advice to help clients minimize their tax liabilities.

CPAs are usually senior members of a company's management team or board and are tasked with looking after the business's financial health and strategic planning.

They achieve this by conducting internal audits of the accounting records and highlighting any areas of concern for the owner or shareholders.

The biggest gig economy companies employ CPAs to minimize risks and help them remain competitive in the years ahead.

Processing Financial Data

CPAs rely on accurate and reliable financial data bookkeepers produce to create financial statements, tax returns, and other reports for their clients and employers.

They detect errors and mitigate risk by implementing financial controls that help to identify inconsistencies and anomalies that could result in potential errors in financial records.

Their skill and experience help with early detection, minimizing the risk of fraud, and ensuring compliance with SEC and tax regulations.

CPAs focus on streamlining data processes, which allows them to analyze and interpret financial information in-depth and provide advice and strategic recommendations.

They also provide advice on how to file taxes to individuals and companies, using their knowledge of the tax code to minimize liabilities.

Difference Between Certified Public Accountants (CPA) & Accountants

Certified Public Accountants have passed the Uniform CPA Exam and fulfilled all the requirements of their state Board of Accountants, while non-CPA accountants have not.

CPAs are held to a strict set of standards and a code of ethics, whereas non-CPA accountants do not operate under the same restrictions.

Most importantly, the CPA license means that CPAs must put their client's interests before their own in terms of their fiduciary responsibilities.

Finally, CPAs must follow a structured program of ongoing professional education that requires a set number of hours each year.

This ensures that they stay up to date with changes in legislation as well as expose them to new technology and potential risks.

This ongoing education provides them with accounting tips they can pass on to their clients and employers, saving them time and money.

Less Than 50% Of Accountants Are CPAs

According to the Bureau of Labor Statistics, as of May 2023, 1,435,770 accountants and auditors, excluding self-employed accounting professionals, were employed in the USA.

According to information we received from the National Association of the State Boards of Accountancy (NASBA), 672,587 were registered CPAs in September 2023.

So, less than 50% of the accountants and auditors currently employed in the United States are CPAs qualified to provide you with professional advice.

Accountants usually have a bachelor's degree in accounting and, like bookkeepers, are responsible for a business's day-to-day transactions.

However, an accountant's higher educational level usually means earning more than a bookkeeper and having greater responsibilities within the accounting department.

Rather than providing strategic inputs, non-CPA accountants are responsible for accounts payable, accounts receivable, depreciation, journal entries, and collections.

Depending on their experience, they may be involved in analyzing financial statements, reporting on cash flow, and preparing operating budgets.

It is best that you engage a CPA when accounting for startups, as they have the experience and knowledge to provide the best advice.

Now that we've covered the work of CPAs and accountants, let's examine bookkeepers' roles in the financial picture.

What Is A Bookkeeper?

Bookkeepers capture a company's financial transactions from start to finish, filing supporting documentation to reference each entry.

They follow basic accounting principles to ensure consistency in record keeping, which follows generally accepted accounting practice (GAAP).

At a fundamental level, purchase orders, bills, receipts, invoices, and other financial transactions are entered manually into a spreadsheet or ledger.

However, many businesses choose to organize their financial records using accounting software such as Quickbooks, Xero, or Zoho, with most choosing a cloud-based option.

Many bookkeepers learn on the job and progress from department to department, learning each stage of the accounting process from more experienced colleagues.

Using double-entry or, in rare cases, single-entry bookkeeping, bookkeepers capture transactions to produce a trial balance from which an income statement and balance sheet are created.

Roles & Responsibilities Of A Bookkeeper

If you're starting your business, you need a basic system to control your income and expenses, which a bookkeeper can handle.

Depending on the number of transactions, you may only need to employ a part-time bookkeeper who can ensure that your books are up to date.

Once the transactions are captured and the bank reconciliations are completed, the trial balance can be handed to your accountant to produce financial reports.

If your bookkeeper has the experience, they can produce a basic set of financial reports under the guidance of an experienced, professional accountant.

The best bookkeepers pay attention to detail, ensuring that every book entry is accurate and that the supporting documentation is correct.

Bookkeepers in larger companies may often focus on one area, such as accounts payable or accounts receivables, becoming intimately involved in these departments.

Bookkeeper Vs. CPA - Top Similarities

While accounting covers a wide range of tasks and responsibilities, bookkeepers' work differs substantially from that of certified public accountants.

However, the focus of attention is always on producing complete, error-free accounts that reflect the actual state of the business, categorizing income and expenses correctly each time.

This means that CPAs check that the bookkeeper's work is accurate, which entails following an audit trail of all documentation related to an entry in the accounting system.

Where necessary, the CPA will enter transactions in the ledger to ensure accuracy or to provide guidance on how a particular transaction should be captured.

CPAs and bookkeepers have a strong foundation in accounting principles and understand debits, credits, financial statements, and various accounting methods.

They are proficient in accounting software and utilize it to automate tasks, generate reports, and streamline financial processes to save time and money.

CPAs and bookkeepers communicate financial information to clients, colleagues, and tax authorities, explaining complex economic and financial data clearly and concisely.

Both CPAs and bookkeepers are aware of relevant accounting standards and tax regulations, ensuring compliance with all state and federal legal requirements.

Bookkeeper Vs. CPA: Top Differences

The most apparent difference between a bookkeeper and a CPA is that CPAs are licensed professionals with bachelor's degrees and have passed the CPA exam.

Bookkeepers do not need formal education to perform their role, which means they do not have the depth of knowledge and understanding that a CPA has.

Bookkeepers focus on recording financial transactions and the business's day-to-day operational activities, while CPAs are more strategic, focusing on financial reports.

CPAs in public practice usually offer bookkeeping services but focus on internal audits and internal revenue services while often managing payroll, too.

They are also best placed to provide tax prep checklists to individuals and businesses so that they meet the IRS deadlines.

Education

Beyond a high school degree, bookkeepers have no formal educational requirements, but CPAs require at least a bachelor's degree.

In most states, they must spend one to two years under the guidance of a certified public accountant before they are eligible to write their CPA exams.

Bookkeepers may have studied accounting at school, but the knowledge needed to work in many industries is beyond the skills they might have acquired in high school.

To bridge the gap, bookkeepers can enroll in a bookkeeping certification course to help them create income statements and balance sheets and track debits and credits.

New bookkeepers often undergo six months of on-the-job training to master these and other skills, including utilizing databases, spreadsheets, and bookkeeping software.

While college degrees are not required, bookkeepers who have completed an undergraduate degree may find it helps boost their income.

Specialization

Bookkeepers are generalists who can fulfill numerous tasks within an accounting department, while CPAs usually focus on specific areas of accounting, such as tax.

CPAs receive ongoing professional training and attend seminars and other courses, while bookkeepers usually don't receive further education.

Software

Bookkeepers are usually proficient in one or two accounting packages, while CPAs must thoroughly understand a wide range of accounting software.

Aside from accounting software, CPAs also require advanced Excel and other reporting software skills, such as Caseware, NetSuite, SAP, and Sage Intacct.

Regulations

Bookkeepers are not subject to any regulations regarding their duties, but CPAs must follow a strict code of conduct and ethics.

They also act in a fiduciary capacity, putting their client or employer's well-being and financial health before that of their own.

Fees

CPAs cost more than bookkeepers due to their greater knowledge and skill as well as their impact on the businesses in which they work.

Therefore, depending on the industry and state, a CPA's hourly fee may vary drastically—much more so than that of bookkeepers.

For some professionals, hourly rates range from $18 to $58, but most CPAs in the United States charge between $30 and $42 per hour.

Tax Preparation

Depending on your circumstances and the tax forms you must file, engaging a professional accountant to handle your taxes will cost different amounts.

Employing an accountant could be less expensive if your tax position is straightforward, such as when you work for a corporation and must file your W2s.

If you are self-employed or own a business, then using a CPA to file your taxes can cost you a lot more due to the complexity of your financial affairs.

It is important that you understand accounting terms as well as the implications of making decisions before finalizing your tax submissions. 

Accountability

Bookkeepers do not have a professional body to whom they are accountable, while CPAs must fulfill the requirements of their state accounting board.

Should they fail to maintain a certain level of professional conduct, a CPA may lose their license and face other disciplinary action.

Due to the long and arduous process involved in becoming a CPA, you can expect a very high level of service from a licensed professional accountant.

Do You Need A Bookkeeper Or A CPA?

Deciding on whether you need a bookkeeper or a CPA comes down to cost and what sort of accounting assistance you need.

Hiring a certified public accountant is necessary when you need high-level assistance with your financial planning rather than basic bookkeeping.

A bookkeeper is the best person to sort out your financial documents and capture transactions, whereas CPAs are best for generating financial reports.

If your business is growing rapidly, appoint a CPA as your chief financial officer, and they can help you select professional bookkeepers to process daily transactions.

Approach an accounting firm for help with financial management, and they can recommend someone who can assist you with your financial tasks.

This is one of the best small business accounting tips, as it can save you a large amount of time and money getting good advice upfront.

Benefits of Bookkeeper

The main benefit of appointing a professional bookkeeper is that you will have someone who can handle your daily transactions and any other financial reports you require.

They are cheaper than a CPA, but experienced candidates can handle most of the essential bookkeeping functions that affect your business's financial health.

Benefits of CPA

However, if you have more complex accounting issues, tax planning, or regulatory compliance problems, then it is best that you appoint a CPA.

Public accounting firms can point you in the right direction and may also have a certified public accountant available to assist you immediately.

CPAs also come with loads of experience, especially if they have other clients in the same industry, and can assist with financial management based on this knowledge.

Summary

While bookkeepers focus mainly on data entry and the day-to-day financial business, CPAs are more strategic and excel at planning and reducing business risk.

CPAs can also handle the more complex tasks of running your business, such as tax planning, and come with years of experience and knowledge.

It is best to consult an accounting professional if you're in any doubt about who to assist you with your accounting problems.