Savvy business owners know that a critical piece of running a business smoothly, effectively, and with as few hiccups as possible is managing the books. That task can be taken on by existing team members, or the business might decide to hire an accountant.
But wait: what type of accountant should you hire? Should you look for a general or staff accountant? Can that person cover all your accounting needs, or do you need someone more specialized like a forensic accountant or an auditor?
Determining which accounting disciplines your business should look for is kind of like deciding which doctor to call when you’re not feeling well. You can always call your general practitioner, but there are specialists available if your GP isn’t able to address your specific health concern.
Before we get started on different types of accountants, let’s make sure we’re clear on what we’re looking for. An accountant (of any type) is:
Accountant: “A practitioner of accounting or accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources.”
An accountant uses financial data from a business to create models and make recommendations. Accountants work on things like preparation of financial statements, tax returns, and cost analysis, as a means to advise business leaders on financial projections and tax planning.
However, Accountants Are Not to Be Confused With…
- Bookkeepers, who record daily transactions and are the keepers of the general ledger. They own the upkeep of the master list of transactions. Accountants take the data bookkeepers create and use it to make financial models and recommended actions for the business.
- Chief Financial Officers (CFOs), who are responsible for the broader financial strategy of a company, including management of staff, risk assessment, budgeting, and staying abreast of financial legislation. Accountants generally report up to the CFO, who would make decisions on whether or not to take action on an accountant’s financial models and recommendations.
- Consultants, who are not employed by the company but may be retained on a contract basis to provide accounting advice, in lieu of a permanent hire. A consultant may have the same skills as an accountant.
- Accounting software, which is generally cloud-based and can automate the work associated with accounting tasks. However, there is still human oversight required with accounting software, whether it’s an accountant or another staff member. Many accountants (regardless of discipline) use accounting software to reduce the manual effort involved in daily accounting.
Your ultimate guide to SMB accounting
Let’s get those books in order.
So What Types of Accountants Are There for Businesses?
There are many sub-disciplines of accounting, but rest easy: the likelihood that your business would need more than a couple of them is quite low. And even if you do need more than one, you may not need all of them in a full-time capacity. Auditors can be employed (or contracted) as tax time approaches. Forensic accountants can be engaged only in the case of an investigation. And so on.
With that said, here’s our hit-list of types of accountants:
General or Staff Accountants
General or Staff Accountants are the general practitioners of the accounting field. They cover a wide range of responsibilities, including the preparation of a business’s financial statements, maintenance and reconciliation of company accounts, payroll and cash management, and the supervision of clerical staff.
Why hire one? If you’d like to have an employee dedicated to the accounting side of your business, a general or staff accountant is the best place to start. Their broad knowledge of accounting can support your business as it grows. And general or staff accountants can also provide a dual function and cover your business’s bookkeeping work.
Auditors specialize in maintaining tax compliance for businesses, individuals, and government entities. They are the fact-checkers of the tax world, and they can be retained externally or hired internally. External auditors provided an additional layer of credibility since they are not employed by the company and are considered unbiased.
Prior to tax time, auditors will review all of a business’s records to make sure they are correct and review tax payments to ensure accuracy and on-time payment. After an audit, auditors may also recommend process changes to make next year’s tax season run more smoothly.
Why hire one? An external auditor can give business leaders a higher level of confidence that their records are accurate and they are complying with all tax laws. Beyond that, they allow for feedback on internal processes and oversight of any internal auditors. If you’re looking for more confidence in your business’s tax compliance and ways to improve, consider hiring an external auditor.
Forensic Accountants are the private investigators of the accounting world. They are primarily retained on a contract basis, and their main goal is to find fraud. Like auditors, forensic accountants comb through a company’s accounting records looking for compliance violations.
Sometimes they are asked to rebuild accounting records that have been destroyed or were found to be fraudulent. The main difference between forensic accountants and auditors is that forensic accountants are performing their investigations for criminal or civil court proceedings.
Why hire one? A business would only need a forensic accountant in the event of a criminal or civil court proceeding.
Management Accountants use accounting data to provide a 360-degree view of the business’s financial health, thus enabling the company’s executives to make well-informed decisions. They are responsible for understanding and communicating the profitability of the company, making budgeting recommendations, projecting future risk, and creating financial reports for external consumption.
Why hire one? If your company is in high-growth mode and needs decision-making support above and beyond what a general or staff accountant can provide, consider hiring a management accountant. Management accountants can also be retained on a contract basis if you don’t have a consistent, full-time need.
Cost Accountants do just what you’d expect. They analyze all costs and expenses incurred by a company to understand where spending is happening, and then make recommendations for cost reduction to managers and leaders throughout the company.
Why hire one? A cost accountant is one to consider if you sense that your business costs are too high and could use an overhaul. Like management accountants, they can be retained in-house or on contract.
Project Accountants are the micro-version of general accountants. Where general accountants manage accounting data across the company, project accountants will work on one project at a time. This includes invoice preparation, expense approval, budgeting, and reviewing billable hours. Project accountants may also make recommendations for cost reduction on future projects.
Why hire one? If your business manages high volumes of projects, you may stand to gain from having a project accountant engaged in either a contract or full-time basis. A project accountant can help your business reduce costs and streamline work.
Your ultimate guide to SMB accounting
Let’s get those books in order.
Does My Business Really Need More Than One Accountant?
At the outset, the answer is probably no. Small businesses that are not in highly-regulated industries can manage with a general accountant or even accounting software.
As the company grows, there may be a need for more specialized accounting. Make sure to check in with company executives frequently to determine their financial concerns for the company—and share your own. You can use them as your guidepost for when to engage specific types of accountants.
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