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Berkonomics

Do you really need an accountant?

First, let’s be sure we define our terms.

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.

We need to repeat this distinction on occasion, because there is a considerable difference between the cost of a bookkeeper and an accountant.

Why bother with this?

[Email readers, continue here…]    Many early-stage founders and CEOs believe they can delegate design and creation of metrics, flash reports, analytical reports and more from their bookkeepers.  And at some early stages, a bookkeeper can prepare 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.

On the other hand,

Many early-stage CEOs 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.

  • Marc Kelley

    Good piece. Glad you distinguished between Bookkeeper and Accountant.

    However, I would respectfully disagree about most accountant’s ability to provide analytical planning and anything heavily forward thinking. It has been my experience that many start up CEO grab their personal accountant and start with him/her. They are great at looking in the rear-view mirror and handling taxes. But maybe 1 in 4 have the ability to act and think like a forward-looking CFO.

    Naturally I am biased but I believe the best combination is a fractional CFO with heavy up-front work that a good bookkeeper or even a basic accounting service can maintain the Dashboard and KPIs along with financial statement generation which a fractional CFO can review and approve.

    Just my 2 cents.

    Marc

  • Solid advise, Dave, with insights from the trenches we’ve seen over the years:
    First, founding CEOs often assume they can read and understand financial statistics, and even sometimes personally create them, mostly because they don’t want to spend money that isn’t going to marketing or R&D. The reality is that’s a poor use of their time and usually with substandard results.
    Second, the distinction between an accountant and a bookkeeper is also often lost on founding CEOs. There is a huge difference, even if a bookkeeper thinks of themselves as accountants, and perhaps calls sthemselves an accountant, they may not be with the proper skills (which the CEO is usually not quaified to determine).

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