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Accountants “plan-alyze”. Bookkeepers count beans.

This is a distinction we need to repeat on occasion, especially for new CEO’s looking to pay a low wage for advanced financial analysis, whether with an independent contractor or an employee.  Accountants are trained, certified and usually quite experienced in financial analysis, both creating and reviewing data.  Bookkeepers are often trained on the job although sometimes more formally, and handle the physical work of accounting for the transactions.  To expect a bookkeeper to provide analytical planning is to ask for something they often cannot provide, except in a cursory way.

Why the discussion?  Many early stage CEO’s believe they can delegate design and creation of metrics, flash reports, analytical reports and more to their bookkeepers.  And at some early stages, a bookkeeper is capable of preparing such information.  It does not take long for a growing business and a knowledgeable CEO to quickly outgrow the lack of depth and sophistication such reporting usually offers, looking instead for deeper analytical tools.

[Email readers continue here…] On the other hand, many early stage CEO’s are not trained and ready for such tools even if available.  The lesson here is twofold.  There is a benefit to using a good accountant to help devise critical reports for a corporation; and CEO’s must quickly become financially savvy in the analysis of financial statements and metrics that measure the health of a business.  To fail to have this skill is to reduce the corporation’s capability to discover problems early and take advantage of growth opportunities.

  • I wonder how you would describe the role me and my fellow financial advisers might play? Often, I am the one saying you need to get a “real accountant”, i.e. a CPA hopefully also with an MBT and some big 5 experience. Now I can share your article with them as back up.

  • John T

    Agreed – and brings up a (recurring) question – when to hire a ‘real’ CFO when starting up? I hear different answers from different VC/Angel communities. The entrepreneur/CEO may accountable – but as the emissary/missionary/visionary of the NewCo, may also be the last one capable of creating unbiased review of financial data.

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