When you need someone to look after your company’s financial records and handle your taxes, an accountant and a Certified Public Accountant perform almost the same duties. They can both monitor your equity, cash flow, chart of accounts and balance sheet and tell you how these factors are affecting your business.
While most people use the terms interchangeably, the two are not the same. Not all accountants are Certified Public Accountants. A CPA is a professional whose licensing is regulated by the state. Though the requirements to become a CPA vary from state to state, in general they must take 150 hours of business courses at their college or university, put in a year of corporate experience under the supervision of a CPA, then pass a test of business, auditing, and general accounting skills. Every year a CPA must complete 40 hours of continuing professional education (CPE) to keep up with the new rules and regulations in the financial, accounting, and business world.
CPAs can provide more services than an accountant. They often serve as business and financial strategists who help chart the paths of businesses. They can analyze information, determine effective financial and business strategies, advise on the profitability of new product lines, seek creative financing opportunities, help diversify investments and provide a variety of other consulting and business services.
So which financial professional do you need?
Both can manage your finances and taxes, but the difference may come into play when dealing with the government. Accountants can prepare detailed financial reports, perform audits of the books of public companies, and prepare reports for tax purposes, but they have no standing with the IRS with regards to signing tax returns or representing clients at tax audits. A CPA can do everything an accountant can do plus sign your tax returns, and also represent you before the IRS for audits and other matters.
If you hire an accountant, find a firm that is run or supervised by CPAs. This will ensure that you will have good records all year long so that you can make good financial decisions about your business. Also, your tax bill will be much lower as your records will be in order. If you hire a CPA, be prepared to pay more. CPAs generally charge more because they provide more in-depth services.
Remember, the cost of hiring either professional is usually canceled out by the savings they provide.