In the August Issue:
“Do I need an accountant, a bookkeeper, or CFO?”
This is one of the most common questions entrepreneurs ask me. Let’s consider the differences, so you can figure out where your business is, and what your needs might be.
The Bookkeeper
A bookkeeper can be anyone from Aunt Millie, who’s been “doing the books in your company for 20 years,” to a professional, outsourced, certified bookkeeper.
Bookkeepers aren’t required to have a two- or four-year accounting degree, but they must understand the basics of the accounting equation, and what at least two of the three main financial reports reflect -- the Profit & Loss Statement and the Balance Sheet.
The bookkeeper’s job is to pay every vendor, invoice every client, collect every dollar, book every business transaction in your financial records, and create your Profit and Loss Statement and Balance Sheet, as mentioned above.
They tend to be less integrated with the overall business. They record transactions based on a fixed process and then pass a download of those transactions to a tax accountant at year-end. The tax accountant then files the tax returns.
The critical piece that a bookkeeper doesn’t, and shouldn’t be expected to perform, is management accounting.
Management accounting is the function that translates bookkeeping data into higher level information that can be used to drive business decisions.
Sometimes smaller companies don’t have an accountant in the organization, to extract the key information from the monthly closing process, that will help the business leader understand, and adjust, the business levers that drive the organization.
If there’s no internal accounting function within an organization, or it’s not outsourced, this critical analysis is often overlooked.
The Accountant
An internal accountant is the team member who usually performs management accounting. They book some entries to the books of record, and generate the monthly financial reports. From there, the responsibility levels vary from simply distributing reports, to performing complex financial analysis, depending on the organization’s needs and the accountant’s experience and capabilities.
In larger organizations, this is what finance groups and internal accountants usually do; they capture the bookkeeping information and turn it into meaningful management reporting.
BUT – even small businesses deserve to have this level of business reporting available, even if they don’t have a full accounting department…or even an accountant.
And it’s not always as costly as you may think to have someone set up a process to extract this value for you.
The CFO
A CFO (Chief Financial Officer) combines the story and numbers of the business into a compelling deliverable. A CFO might use that story to attract a client, explain something to a banker, talk to an auditor, or lay out a growth plan.
You need a CFO if you need someone to extract meaning from your numbers, strategize with you, and communicate those strategies on your behalf.
An example would be when your business is at the point of needing to secure outside funding for growth.
The CFO would make sure that your reporting and bookkeeping are correct, well-controlled, reliable, and consistent, so that you could proceed confidently in deciding the best source of funding.
Once that is determined, the CFO would prepare all materials necessary to tell your story, and attend and support your presentation to that funding source.
A Chief Financial Officer is the interface between the books and the strategy.
Which Finance Role Do You Need?
The right level of finance support for your business depends on the size of your company, its complexity, and your goals for the future. Do you need someone to record your expenses, or do you need help securing a round of funding?
Take a look at the questions you need answered, or the service you need supported, to start figuring out your next step with your business finances.
You can think of these finance roles in terms of writing a book: The bookkeeper puts the words on the page; the accountant organizes the words and groups them into chapters; the CFO crafts the story and ensures alignment with company strategy.
Which stage is your business in?
Meet pam prior
FOUNDER OF PROFIT CONCIERGE
The dynamic opposite of every green-eyeshade accountant you’ve ever imagined, Pam is the author of “Your First CFO: The Accounting Cure for Small Business Owners”; a best-seller that makes finance fun and accessible for entrepreneurs; she is also the entertaining and informative host of the “Cash Flow” Podcast on iTunes; and founder of the novel new Profit Concierge™ experience for entrepreneurs.
With Profit Concierge™, Pam weaves together all of the components – bookkeeping, accounting, forecasting, cash flow - into one seamless and totally new Finance Experience for entrepreneurs, clearing away the muck, and allowing them to focus on their goals with full peace of mind.
Find Pam Prior HERE!
