Are you working towards profit? If so, your business should be a well-oiled machine with automated financial workflows. For that to happen, you need an accountant and a tax preparer who can work together in harmony.
What you don’t want is an accountant VS tax preparer situation which could cost you more in the long run.
Sometimes, your accountant and your tax preparer may be in-house. Other times, one or both are outsourced. We advise on the latter for these reasons.
Whichever arrangement you have, collaboration is necessary for the desired end result — a happy client (you!)
Bookkeeper vs Accountant vs Tax Preparer? — What Are The Differences?
Many people don’t know the difference between an accountant and a bookkeeper. Let’s simplify.
What does a bookkeeper do?
Think of a bookkeeper as the person who handles the day-to-day financial transactions of the business. Bookkeepers will:
- Collect data
- Send invoices
- Record payments
- Manage payroll
- Reconcile bank accounts
They might also prepare reports at regular intervals. These reports might then be used by your accountant or tax preparer.
An accountant looks at the bigger picture of your business and:
- Analyze your financial standing and give you advice for the long-term
- Manage your cash flow
- Handle sales tax filings
- Assist with tax planning
- Provide financial projections and budgeting analysis
What Is The Difference Between An Accountant And A Tax Preparer?
A tax preparer is usually a certified public accountant (CPA) or an enrolled agent (EA). An EA specializes in tax matters for businesses and individuals and is required to pass a qualifying exam by the IRS. CPAs typically have more expertise in accounting in addition to being specialized in tax policies and preparation. One needs to pass a special exam to become a licensed CPA, then renew their license on a yearly basis. CPAs will:
- Do everything an accountant does
- Perform audits, reviews, or compilations
- Legally represent your business in front of the IRS
- Provide advanced tax advice
Mutual Trust Leads To Mutual Benefits
On a day-to-day basis, accountants save you tons of time and allow you to do what you love. Meanwhile, your tax preparer has more of a birds’ eye view. They’ll provide you with a strategy to ensure long-term success.
To achieve this, your accountant and tax preparer need to trust each other, just like you trust them as your team of experts.
Plus, accountants and tax preparers benefit from each other when they actively work to get along. How? By referring each other to clients who need their services. It’s a win-win.
When Do Accountants And Tax Preparers Experience Conflict?
In a perfect world, accountants and tax preparers work together harmoniously to provide the best possible outcome for you, their client — cost-effectiveness, increased profit, and efficient systems. However, sometimes they may have conflicting goals.
For example, your tax preparer might advise you to make an investment because they argue it will provide tax advantages on your annual return.
On the other hand, your accountant will look at your current cash flow and profitability and try to justify if such an investment is beneficial. They do not want your short-term finances or your long-term plans to suffer.
How To Make It Work
You need both an accountant and a tax preparer to find true success in your business. So, how can the two avoid conflict and work together for your success?
From the start of the accountant and tax preparer relationship, you will need to establish each party’s priorities.
Since you want your business to be around for the long run, with the input of your financial team, you can prioritize the order of things based on your long-term financial goals, and outline the roles each person will play in achieving the goals. By ensuring open lines of communication, your accountant and tax preparer can easily sort out any overlaps or issues which arise.
The Benefits of Having Both An Accountant and Tax Preparer
Once accountants and tax preparers understand that they are both working towards the benefit of the client, you will see financial growth through:
Although there’s usually some overlap, your accountant and tax preparer each specialize in their respective roles for good reason. Typically, once their roles in your business are clearly defined, they can perform their jobs quickly and efficiently without wasting your valuable time and money — and while optimizing your processes.
When the two join forces join together, you’ll enjoy a powerhouse of efficiency.
You already know that accountants and tax preparers don’t do the same tasks. However, each should have a basic understanding of the other’s field.
What this means is that your accountant and your tax preparer can collaborate and avoid potential errors for your business.
Both your accountant and your tax preparer rely on each other to properly maintain your business’ finances. As long as the two can commit to focusing on their mutual goal — you — they will compliment each other and grant you success.
Here’s the bottom line:
Just like any other relationship, accountants and tax preparers should treat each other with respect. I have witnessed relationships go sideways when the CPA doesn’t see or treat the accountant as an equal partner.
Be open. Keep it professional. Share information. The end game is to have a collaborative relationship that creates value for everyone.
Ready To Make Things Work?
Looking for an accountant that knows how to work with your tax preparer? Book a consultation with us for more information on how you can win by having an experienced, professional accountant in your corner.