What is the difference between a bookkeeper and an accountant?

The basic differences between a bookkeeper and an accountant are skill sets and rates. A bookkeeper charges less, but may have limited skills. Many bookkeepers have taken only high school courses and have held data entry positions. An accountant usually has a 4 year degree and, if certified, must participate in continuing education. An accountant's rates, however, can be triple that of a bookkeeper.

Take advantage of the rate differential by using a bookkeeper with a higher skill set to maintain your financial records. This will minimize the amount of time and money you spend on a tax accountant. Look for a bookkeeper that has a college degree in accounting and related experience, as well as pertinent certifications. Ask for the resume. When you talk to references, ask what the accountant has said about the bookkeeper.

If you use QuickBooks, hire a bookkeeper that is a Certified QuickBooks ProAdvisor. At a minimum, you know that person has passed the tests for particular versions of QuickBooks. Even better, hire a ProAdvisor that has passed the Advanced Certification test, which includes questions about accounting and payroll.

If you are not sure how competent your current bookkeeper is, ask your accountant. You can also find a bookkeeper that offers a free initial consultation to review your books and give an opinion. Having a good bookkeeper saves money in the long term by ensuring that your financial records are in order.

The Value of Non Billable Hours

I have spent most of today on non-billable work. Now it could be viewed as wasted time since I didn't get paid for anything I did. However, focused non-billable work can reap future earnings. All small business owners must perform some administrative work, such as bookkeeping, making appointments, ordering materials. These tasks are more apt to save future time rather than earn future dollars, so it's important to complete them as efficiently as possible.

My time today was spent in marketing tasks. I created a Holiday Card to send to my current clients (I prefer to put my own touch on such contacts rather than purchasing stock cards); I created a Marketing letter to send to potential customers; I reviewed my Facebook advertising performance; I'm updating my blog; I answered an e-mail from an unknown contact that may turn into a potential referral source. This type of non-billable work is crucial. You must always keep in contact with current and potential customers, through varied sources.

My next focus for non-billable time is education. I will be taking the certification for the 2011 edition of QuickBooks and reading some networking materials. The certification will provide a direct result of allowing me to become an Advanced Certified QuickBooks ProAdvisor. Continual learning of industry specific and general business subjects can only make your business stronger.

And yes, I will also be putting in some billable hours. Gotta keep the money coming in!

Is it a vendor or an employee?

As you are reviewing your vendors for 1099 data, review each subcontractor closely to ensure you are classifying them correctly. There is much scrutiny from both the Federal and State level on the difference between a subcontractor and an employee.

Here is a good resource from the IRS: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

And from the State of Maine:
http://www.maine.gov/labor/misclass/employer_brochure_single.pdf

The biggest "tell" for an independent contractor is if this person does the same type of work for multiple businesses. I, as an accountant/bookkeeper, have multiple clients and am correctly classified as an independent contractor. However, if I had only one or two clients, I would have more difficulty proving this requirement.

If the situation looks gray, err on the side of employment. It may cost you more in employment taxes, but may cost you much less in the long run.

Year End is getting close!

Are you ready for the end of the year tasks? A quick checklist:

Reconcile all bank statements, including credit card statements. This will help ensure that all expense and revenue is recorded.

Review your vendors. Have you paid anyone for a service? Make sure you have their Tax ID for preparing the 1099.

Do you have employees? Even if you use a payroll service, it is important to review the W-2's and make sure they reconcile to the quarterly 941's.

Keep all tax related documents for your accountant. Start a file specifically for these items.