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Finance Learning Lab – Micro Course on Small Business Bookkeeping and Finance (Part 1 of 10)

In this video, I’m going to walk you through three really important distinctions between a bookkeeper, the person that does your taxes, and a CFO. When it comes to your bookkeeping, that is going to be solely focused on what happened in the past in your business. They’re going to be like your gopher where they run around and gather up receipts and paperwork. Their job is to make sure they’ve captured everything and plopped it all together in one spot. That one spot we sometimes call your accounting software, so your Quickbooks. When you’re hiring a bookkeeper, what you’re really looking for is someone with good clerical data entry skills. But fundamentally your bookkeeper is an administrative goal. So your bookkeeper focused on the past typically minimal analysis or if they’re doing any analysis is pretty rudimentary. So then how does that distinguish from your tax account? So your tax accountant and your CFO are both typically going to be a CPA, meaning that they’re a designated accountant whereas your bookkeeper probably won’t be. You could hire someone with the CPA designation to do that but it’d be probably far too costly for you. So typically with your bookkeeping you’re trying to find low-cost labor.

In some cases it’s going to make more sense for you to do your taxes yourself. In other cases it’s going to make sense for you to find a tax specialist. So the tax person fills out forms that the government requires. And what the government is going to require is to make sure that any of the money that you earned is actually the government is getting its cut on. So there’s very standard forms that need to get populated. Your tax accountant is going to be the one that’s populating those, making sure that it gets sent to the government. They can provide a little bit of what we call tax planning. So the distinction here is that most of what your tax accountant is doing again is looking at the past. They’re looking at what happened before. We’re not really looking at what’s happening next or what’s happening into the future. And when they are looking at what’s happening into the future it is strictly from the perspective of, “How do we help you minimize your overall taxes?”

The distinction now between your tax person and your CFO is if you were thinking of a great ginormous table, the top part is going to be all of your streams of revenue coming in and the bottom part is going to be all of your different expenses. Your tax specialist is looking at one of those expenses and that expense happens to be your tax liability and they’re going to help you minimize your tax liability. Your CFO is going to look at the entire paper top to bottom. So your CFO is going to take a broader perspective. They will obviously care about minimizing your taxes but they’re going to be more so looking at your revenue and saying you know what changes can we make to your business model to be able to boost that revenue? What are some different financial strategies that we can apply to be able to increase the amount of money the company is bringing in? And where the tax person is going to really really focus on that one tax line item, your CFO is going to look at the 100 things that you spend money on in your company and they’re going to put through kind of a thought process of saying well what is the best use of funds in order for us to maximize our profit this year, next year, five and ten years into the future? Your CFO also tends to be more looking into the future. Where your bookkeeper and your tax accountant are heavily focused on what happened before and what happened in the past, your CFO will look at that to a certain extent to kind of determine some trends. So they’re going to tend to be more focused on being informed about what happened in the past but really trying to help you say what plans do you need to put in place to be able to boost your profit? What do we need to test and iterate and see if you’re getting the biggest bang for your buck on all these things that you’re spending money on every single month? So I think those three distinctions are really important because a lot of times I’ll hear small business owners ask what they should look for in an accountant. Well it’s really important to know what is the task that you want help with. Do you want help with just someone rounding up some papers? Do you have some government forms you need to fill in at the end of the year for your taxes and you want someone to help you or give you advice on that one line item? Or you’re struggling with how to fill in that form? Then you’re going to want to seek for a tax accountant. Are you looking for an overall advisor and someone to partner with you to find ways to make more money? Then you’re more so looking in the realm of a CFO. So those are your three different distinctions!

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