What is the difference between a bookkeeper, a CFO, a CPA and an EA?

by Denai Wolfe

What is the difference between a bookkeeper, a CFO, a CPA and an EA?

What is the difference between a bookkeeper, a CFO, a CPA and an EA?

These are all terms you might have heard when it comes to looking after your finances. But a lot of entrepreneurs aren’t too clear on the differences.

I want to discuss these various professionals one-by-one to help you decide who you need in your financial corner.

What is a Bookkeeper?

This is the most essential financial wizard you can have on your team. A bookkeeper is a professional organizer for your bank account. 

Have you seen those beautiful instagram feeds of home organizers, where everything is tidy and perfect? A bookkeeper is that, but for your money!

A bookkeeper’s main job is to make sure your finances are organized logically and easily. Bookkeeping can be done simply using a spreadsheet. If you outsource to a pro, they’re likely to use specialist software, such as QuickBooks Online.

What do they do?

A bookkeeper will log in to your financial systems and categorize all your expenses, making life a lot easier for you come tax return time.

Their job is to take your financial data and make it look ‘pretty’; to keep it all neatly tracked. This is where you’ll see expenses set out as ‘Marketing’, “Office Expenses’, ‘Payroll’ etc.

Basically put – Bookkeeping is Data Entry. And you need it!

Hiring a Bookkeeper

I highly recommend outsourcing to a bookkeeper once you hit a certain point in sales – $350K per year (if not before).

That’s a lot of money to be bringing in and tracking, and you absolutely don’t want to be making any mistakes. Nor do you want organizing your money to become another full-time job!

If your financial reports aren’t accurate, nor will your taxes be, and you could end up seriously out of pocket – or in hot water with the IRS!

Keeping track of your finances isn’t a luxury; it’s a necessity. Bookkeeping is the foundation of your financial system.

CFOs

As you know, I am a virtual CFO. I don’t organize your finances – your bookkeeper does that.

My job is to help you utilize that information.

Having financial reports just because the IRS tells you to isn’t enough in business. When your bookkeeper has gone to the trouble of organizing your numbers, a CFO will help you do something with it.

A CFO is there to:

  • Review your bookkeeping data, 
  • Analyze the numbers 
  • Help you strategize operational improvements in your biz to increase your profits.

What is a CPA?

I’m sure this is another acronym you’ve heard throughout your business life. A CPA is a Certified Public Accountant – and they’re here to file your taxes!

CPAs are the guys who really jam with Math! They studied accounting at school then took an exam to become certified. 

A CPA looks at your business through a very specific lens: filing your tax returns.

They take your completed bookkeeping reports, feed it into their software and deduce whether you owe taxes or you’re due a refund.

A lot of times, entrepreneurs come to me with the complaint that they aren’t getting any strategy help from their CPA. But that’s not what they do – CPAs are your Tax Guys. They can help strategize your taxes, but not anything outside of that.

Outsourcing to professionals is a game of playing to people’s strengths. 

You need to make sure you’re hiring people who can help you get the best in their specific Zone of Genius!

Alternatives to CPAs

Some of you may have heard of Enrolled Agents (EAs). They’ve been certified through the IRS to prepare tax returns, similar to a CPA, but they’re not required to have an accounting background.

That doesn’t mean they won’t do a great job – they’re certified as EAs, after all. They are going to be hyper focused on filing your tax return. But since they don’t have the same educational background as a CPA, you might find they charge a bit less…

Similarly, you might come across a Certified Tax Preparer. They don’t have the accounting background of a CPA, but have been certified by their state (rather than the IRS) to file tax returns.

Again, you might find their rates are a bit lower than a CPA…

Do I need someone with an educational background to prepare my taxes?

Absolutely not! There is A LOT to be said about real life experience.

I learned my skills in the trenches, dodging grenades… I didn’t learn from sitting in a classroom.

The study and education that goes into achieving a CPA certification is a lot, which is why they tend to charge more. But an EA or Certified Tax Preparer isn’t any less good at what they do – they just learned on the job.

Takeaways

I know that was a lot of information, but there are a few key takeaways I want you to remember from this post:

  • Every business needs bookkeeping – it’s essential, not a luxury
  • Outsource bookkeeping if you can
  • If you want guidance and support in increasing profits, reach out to a CFO (like me!)
  • For filing tax returns, you want a CPA, EA or Certified Tax Preparer
  • THESE ROLES DO NOT OVERLAP!

I go through the differences in detail in this YouTube video, so I definitely recommend you check it out.  I would love to hear your thoughts around the different types of financial wizard. 

If you need help with maximizing your profits then I also have a whole heap of Done For You services over at The Chic CFO.

Just reach out and I will be happy to talk more!

Check out my website to learn more!

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Denai Wolfe with laptop

My name is Denai Wolfe and I’m dedicated to helping big thinking entrepreneurs increase their profits and decrease their stress. I’m laser-focused on turning your passion into profits. When it comes to business I have one core truth – If it doesn’t make money, it doesn’t make sense.
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