The finance industry loves to serve us up impressive-sounding terms and acronyms. When you are just starting out in the business world, these terms can be somewhat disorienting, to put it mildly.
When it comes to our partners, we at Areti put transparency and collaboration before everything else. Your team needs unencumbered access to the information and tools required to make your Canadian business hum. And you yourself, as the most crucial person in your business, should not have to fight your way through pages of jargon to find the insights you are looking for.
So let’s start by clearing up a commonly misunderstood issue: the difference between bookkeepers, accountants, and CPAs. In everyday parlance, these terms are often used interchangeably. They’re all accounting roles, right?
While it’s true there are main points of overlap; there are nonetheless differences between the three that are important to understand.
Ready? We promise this won’t be painful. Well, not too painful.
Bookkeepers have existed ever since the dawn of commerce – i.e. when people started paying each other for things. Bookkeepers may have transitioned from Babylonian cuneiform to QuickBooks, but the job is still essentially the same: track the money coming in and out.
Most bookkeeping positions don’t require a bachelor’s degree, but it is still a role that involves training. Responsibilities typically revolve around:
- Recording transactions: purchases and sales, accounts receivable, accounts payable, and inventory;
- Providing reports: regarding these items on a monthly, quarterly, and annual basis.
Couldn’t the head of the business do all these things, you ask? In the early days, the owner might well do. But as time goes on, the additional labour, time, and stress make it more effective to delegate the task to a trained, dedicated contractor or employee.
An Accountant can be considered the next step up from a Bookkeeper. Though some accountants perform bookkeeping duties, this is not typical. Responsibilities typically revolve around:
- Reviewing transactions: ensuring accuracy from the bookkeeping team;
- Reviewing reports & presenting information: taking the reports prepared by the bookkeeping team and communicating the result to internal stakeholders.
A Charetered Professional Accountant is one who has sucessfully completed the CPA Certification Program. The current CPA program requires each member to hold an undergraduate degree (not always in the area of business and accounting), complete extensive courses and workshops, a minimum of 30 months of relevant work experience and the Common Final Examination. After becoming a member of the Chartered Professional Accountants of their revelevnt province, CPAs must continue to invest in their professional knowledge through professional development hours each and every year.
Responsibilities might include:
- Externally Prepared Financial Statements: this could be a compilation, review or an audit level set of financial statements. If you’re interested in learning more about these engagements read here;
- Assistance with Tax Matters: although anyone could be authorized to represent a taxpayer, we have the expert knowledge around the Income Tax Act;
- Consulting and Strategic Thinking: since many CPAs enter the CPA program with a degree in areas outside of business, we leverage our unique persectives to guide business owners towards their definition of success.
And the list goes on!
CPA Canada’s guidelines state that all those designated must be “highly qualified professionals who demonstrate an ongoing commitment to providing the highest standards of accounting, ethics, and best business practices.”
In the case of those who fail to uphold these standards, the CPA Board of Directors can decide whether or not to suspend or terminate an individual’s CPA certification. As such, CPAs are held and hold themselves to a high level of professional conduct and quality of output.
Which one is right for you? Clearly, there is no single right answer.
If your financial affairs are relatively straightforward, hiring a CPA may be excessive. For the same reason, a large and/or complex business will likely need to hire more than just a bookkeeper, or even an accountant, to manage its reporting needs. In fact, it is likely this type of business would need all three! Bookkeepers, accountants and CPAs work together to support your business.
Hopefully, the above has shed some light on how these three roles differ, how they can support you, and how to make the right choice for your business. Now, since you’ve put up with our ramblings, please enjoy these accounting jokes, and when you’re in Vancouver, do not forget to drop by.