A bookkeeper keeps the books right month to month: recording and categorizing transactions, reconciling accounts and producing monthly reports. A CPA prepares tax returns, gives tax advice and can provide reviewed or audited statements. A fractional CFO uses those numbers to plan: forecasting, cash strategy, pricing and fundraising. Most small service businesses need a bookkeeper and a CPA. A fractional CFO usually comes later.
The bookkeeper: the numbers are right
A bookkeeper does the recurring work that keeps your financial records accurate.
- Records and categorizes every transaction.
- Reconciles bank, credit card and loan accounts to their statements each month.
- Records payroll and tracks contractors for 1099s.
- Produces monthly reports such as a profit and loss and a balance sheet.
- Hands the CPA a clean, reconciled file at year end.
A bookkeeper does not prepare your tax return or give tax advice, although a good one knows what the CPA will need.
The CPA: taxes and assurance
A certified public accountant is licensed by the state. For a small business, the CPA usually:
- Prepares and files business and often personal tax returns.
- Advises on tax planning, entity structure and estimated payments.
- Represents you with tax authorities if questions come up.
- Provides compiled, reviewed or audited statements when a lender or investor asks.
Many CPAs will do bookkeeping, but it is often priced at their tax rate. Many businesses get more value when the CPA starts from books that are already clean.
The fractional CFO: what to do next
A fractional CFO is a part-time senior finance leader. They build forecasts and budgets, plan for cash, advise on pricing and hiring, and prepare for fundraising or a sale. A CFO relies on accurate books, so they do not replace a bookkeeper.
Which ones do you need?
- Solo or very early: good software, a CPA at tax time, and perhaps a bookkeeper a few times a year.
- Small team, steady revenue (roughly 3 to 20 people): a monthly bookkeeper and a CPA. This is where most service businesses sit.
- Growing fast, raising money or planning big decisions: add a fractional CFO on top of the bookkeeper and CPA.
How they work together
The bookkeeper closes each month by the same date. The CPA gets a reconciled file at year end and answers tax questions during the year. If there is a fractional CFO, they use the monthly reports to plan. Each role is cheaper and more useful when the one before it has done its job.
Common questions
Do I need a bookkeeper if I have a CPA?
Often, yes. Many CPAs focus on tax work and price bookkeeping at their tax rate. A bookkeeper keeps the books right all year so the CPA can start straight on the return.
Can a bookkeeper do my taxes?
Generally a bookkeeper does not prepare tax returns. They keep the books accurate and ready for the CPA or tax preparer who does.
When does a small business need a fractional CFO?
Usually when accurate monthly books are already in place and the business faces bigger decisions, such as raising money, rapid hiring, pricing changes or planning around tight cash.
Want someone to look at yours?
We are the bookkeeping piece: reconciled books every month and a clean file for your CPA. A free Books Checkup is a quick way to see where yours stand.
Get a free Books CheckupThis guide is general information about bookkeeping, not tax or legal advice. Rules change, so check the details with your CPA before you act on them.