The difference between a CPA and an accountant is a conversation that has come up often with business owners and individuals seeking out the right professional for their needs.
It is a great question and had us thinking about the proper answer to help you understand that there are many ways a professional in the industry plays a part in building a financial foundation for individuals and businesses.
From bookkeepers to accountants to CPA’s, they all play an important role in the financial function, yet offer a wide range of skills, experience and knowledge that can help or hinder your ability to grow and hit your business and personal financial goals.
These terms get interchanged often, but there are distinctions to be considered when hiring a CPA or accountant. For example, not all accountants become CPAs. CPAs must sit and pass an extensive exam (4 parts with a 50-60% pass rate) to obtain licensing and attain a certain amount of higher education hours. They must perform continuing education reported to their state board on an annual basis.
This doesn’t mean a CPA is always better than an accountant. We’ve worked with many accounting professionals and tax preparers over the years that were exceptional and truly understood accounting and taxes. With that said, we want you to be informed of the difference, so you know which is right for your situation.
Does it Matter to Have a CPA?
CPAs can provide services that non-CPAs cannot. According to the AICPA, CPAs are some of the business world’s most trusted advisers. The designation enables them to provide audited financial statements and represent taxpayers before the IRS.
Comparatively, an accountant’s qualifications can range from little experience to highly qualified. Determining the type of work and analysis that needs performed can be the first step in deciding if a bookkeeper, an accountant or CPA is needed.
Once the CPA designation is obtained, continuing education requirements must be completed to maintain the license. CPAs must follow a strict set of ethical standards holding them to a higher standard than non-designated professionals.
Does Everyone Need a CPA?
Business and investing are team sports and there is a lot that goes into compliance whether you own a business or only file your individual taxes. Add to that life planning such as major events, putting kids through college, paying off debt, retirement strategies, estate planning and other important matters and you’ll quickly get overwhelmed trying handle these aspects alone or cost you by utilizing the wrong adviser.
CPAs aren’t just bean counters. They offer advice and guidance surrounding challenging situations as life happens. CPAs can be a part of your advisory team to help with tax planning, starting and growing a business, selling or buying a business, raising capital, connect you with other professionals, financial analysis, help navigate trust and estate matters, assist in audits, and provide assurance for financial statements to banks.
Bottom line is many individuals won’t need ongoing CPA services, but there will be times and/or complications in life that consulting with a CPA makes sense. You will typically know when sitting down and having a conversation with a CPA is the next step.
Why Hire a CPA?
Hiring a CPA provides you with proven technical skills and an expertise that you may not find in other professionals or accountants. You will feel confident knowing the CPA keeps up with current economic conditions and regulatory matters. A good CPA will help consult on major decisions to help you determine the best approach by providing proper analysis and advice.
CPAs can compile, review or audit financial statements that are often required by banks, lenders and state or government regulators. CPAs can assist in obtaining and reviewing financing options and work with lenders to ensure you’re able to raise capital.
CPAs are experts at becoming experts and must be very resourceful. They offer troubleshooting advice to both businesses and individuals, by providing an additional set of eyes, knowledge, and experience to help navigate challenging issues.
The main role of a CPA is to provide solutions to problems and not just in the financial sense. It’s not just about performing tasks and being reactive. Good CPAs are proactive in their approach and provide analysis and guidance along with the tasks that need to be performed. This guidance can make big differences in the direction you take in your business or personal affairs.
Bottom Line…
Understanding the difference between an accountant and CPA can help you make the right decision for your business or personal affairs. A high-quality CPA can assist you in getting to the next level based on your goals. The more you utilize your team of professionals, the more apt you are to be successful.
Maybe you think you do not need a CPA and only need someone to handle ordinary accounting matters. However, there are situations when a CPA is the right choice for the job and will save you time and money. If you don’t know when it makes sense to hire a CPA, you can always sit down with one and have that conversation.
Schedule a free consultation and receive a free tax review with one of our CPAs at BGMF.