What Business Owners Actually Need for Financial Reporting

Differences between a CPA – Controller – Bookkeeper

There is some confusion by business owners on what financial professionals do and

which one they should pick to handle their business financial reporting. Since financial

reporting is the monthly report card to determine the progress and success of your

company, it is vital to make this decision early in the process of opening your company.

Here is a short synopsis of the differences to help you determine what you need.

What is a CPA? And what services do they provide?

A CPA is a Certified Public Accountant who has met specific State and Education

licensing requirements and passed the CPA exam. The CPA needs to do continuing

education requirements every 2 years to keep their licensing active in that state. Some

states have reciprocity, but each state requires a license. This license is not Federal.

Before sitting for the CPA exam, a candidate has to complete at least 150 credits in

college courses with specific high level upper-level accounting, auditing, and business

core classes. After graduation and a year of experience under the supervision of a CPA,

candidates must pass a comprehensive test of business, tax, auditing, and general

accounting skills.

A CPA can conduct a financial statement audit or a financial statement review. These

reports require the CPA to take a look at a companies financial reports and provide

an objective independent examination of the financial statements, which increases the

value and credibility of the financial statements produced by management, thus

increase user confidence in the financial statement, reduce investor risk and

consequently reduces the cost of capital. Generally these reports may be required for

large bank loans, government contracts and if the company is publicly traded. Most

small businesses do not need an audit or review.

CPAs can also be considered fiduciaries with legal duty and power to act on behalf of

and in the best interest of their clients with the IRS.

Because of continual education requirements, CPAs may be more knowledgeable in

current everchanging tax codes and can benefit business owners with tax savings

strategies through tax planning. A CPA is also eligible to represent you before the IRS

in an audit if needed. Generally, the CPA uses information given to them by the

business owner to compute the business tax returns. They do not necessarily

determine whether the information was recorded properly.

What is an Enrolled Agent?

An enrolled agent is a tax advisor who is a federally

authorized tax practitioner empowered by the U.S. Department of the Treasury. Enrolled

agents represent taxpayers before the Internal Revenue Service for tax issues including

audits, collections and appeals. They do the tax returns from the financial information

that business owners provide to them once a year. They do not necessarily determine if

the information is recorded correctly.

What is a Financial Controller?

A financial controller in accounting is the chief accounting officer of a business. The controller is responsible for supervising all of the accounting activities within the organization.

A financial controller will oversee is the drafting of financial statements, updating the general ledger, processing cost accounting, completing payroll, processing accounts payable and receivable, budgeting expenses, treasury and cash flow management, staying compliant with tax laws, and analyzing financial data. In addition to supervising all these activities, the controller will coordinate with management in other departments to interpret management accounting information and to address areas where the company can save on expenses and stay within budget. In addition to the procedures, a controller needs to have extensive

knowledge on the software that goes into the financial business. Clearly the job of

a controller is an extensive one.

What is a BookKeeper?

A bookkeeper is an accounting professional primarily responsible for maintaining a

detailed record of purchases, sales, and other financial transactions. The kind of

transactions accounted for and how they are recorded can vary significantly depending

on the preferences and practices of different institutions or individuals. They record all

transactions and post debits (costs) and credits (income). They can also produce

financial statements and other reports for supervisors and managers depending on their

level of expertise and experience.

Ensuring the financial records are correctly organized and finances are balanced out,

coupled with smart financial strategy and timely tax filing directly contributes to the long-

term success of every business.

Certain business owners manage their finances on their own while others may opt to

hire a professional so that they can focus on sections of the business they are

interested in. Either of the options will help in their business to grow. Additionally, with

the advent of technology, multiple software systems are getting updated for executing

the tasks automatically. Business owners should take into consideration software

implementation and operational experience of the financial professional they hire.

If you have any questions on any of this information, please contact me at

vdebonis@validsolutionsconsulting.com. I will be happy to clarify or make any

recommendations.