Many business owners know exactly what they want to get out of their finances. But it can be a struggle knowing exactly who is in charge of what when it comes to actually managing those finances.
Do I need a bookkeeper? Maybe an accountant? What about a virtual CFO? Most business owners don’t have a financial background so it can be hard to know who you need to hire, what it’s going to cost, and when you actually need each of these in your business.
If you notice that your business is growing and think it’s time to explore expanding your financial operations, it’s important to understand what each role is and how they can benefit your business. I get asked these questions all the time by small business owners trying to get a handle on their finances so I want to clear up what each of these roles does for your business, when you need each, and what financial advice they can give.
What is a Bookkeeper & When Does My Business Need One?
A bookkeeper keeps track of your business finances, including expenses, invoices, payments, and other financial documents in your business. It’s all about tracking the day to day transactions your business makes.
A bookkeeper is in charge of the basic accounting paperwork of a business. Depending on the size of your business will determine what kind of bookkeeping services you will need or use. Bookkeepers may oversee paperwork such as:
- Accounts payable and bills you need to pay
- Accounts receivable and invoices to clients
- Balance sheets
- Income statements
Bookkeepers may also provide you with other financial statements as well but that largely depends on the bookkeeper and their specific services. Attention to detail is a big key to bookkeeping and great bookkeepers have systems to help them maintain accuracy and records. Bookkeepers tend to be more concerned with the accuracy and completeness of your financial data.
If you’re struggling to keep your tracking expenses and invoices or just set aside a giant stack of receipts instead of using a financial management software, you’re probably in need of a bookkeeper. They tend to be the first financial position most small businesses hire, although many bookkeepers are outsourced.
What is an Accountant & When Should I Hire One for My Business?
While bookkeeping and accounting don’t seem that different from one another, bookkeepers manage information while accountants interpret it. Most businesses tend to use an accountant for end of year accounting tasks, like tax preparation or understanding how their business did that year.
Some accountants may check books and clean up issues that bookkeepers may leave behind to create an accurate and complete accounting record of a business. This will depend on whether or not the firm is in charge of doing the bookkeeping. In most cases bookkeepers reconcile your business while accountants are in charge of calculating data as it gets reported to them.
They focus on the bigger accounting picture for the business and make sure that the finances match the overall budget but accountants tend to focus on the past and here and now, rather than the future.
What is a CFO & When Does My Business Need One?
CFOs, or a chief financial officer, is in charge of steering the company towards financial success and is in charge of the financial department of a company. In most cases, however, CFOs are often outsourced for small businesses so it can be harder to understand the benefits of a fractional CFO.
The role of a CFO is to work with management to figure out the overall roadmap of the business and look for areas of sustainability and growth. They may perform task that include but are not limited to:
- Reviewing financial statements, Cash Flow projections, Balance sheets, etc.
- Interprets numbers to help drive decision making processes
- Focuses on staying lean and uses resources effectively
- Works to manage debts
- Focuses on the effectiveness of the operations and looks for areas of improvement
Unlike a bookkeeper, a CFO looks at the big picture of your business financials to help you look towards the future and solve specific financial and operational problems. They focus on the overall financial strategy of your business and find areas of improvement to meet your business goals.
Typically, you need an outsourced CFO for your small business after you’ve achieved some financial success and are looking to scale successfully. Outsourced CFOs can also be beneficial to businesses who feel like they’ve hit capacity on their growth and are not sure what more they should fix to be able to grow. Because most small businesses don’t need a full-time CFO, they find it’s much more cost effective to hire a virtual CFO.
Which One Do I Need?
If you need help with your finances but don’t know where to start, figuring out who you need can be a great place to start. Depending on the size of your business, your financial needs may look a little different than others.
In most cases, you’ll start with a bookkeeper after you’ve decided you don’t want to manage your own books because it’s too time consuming, hire an accountant when you need tax prep or help with your first big financial decisions, and then hire an outsourced CFO when it’s time to scale your business.
If you find that your business is growing and becoming more complex, you may be ready for high-level financial operations. As a virtual CFO, I have worked with companies of various sizes, from small retail stores to large million dollar companies. If you’re looking to take your financial well being to the next level, let’s talk in a Good Fit call!