Giving Thanks for Your Finance Team

Posted 11/15/2024

Hello everyone! It is almost Thanksgiving, and I hope you are all getting ready for a safe and fun holiday. Or holidays might be more appropriate, since Black Friday has become something of a holiday itself. I know that I look forward to all the deals, and I like to have the peace of mind that all my family gift shopping is done well in advance. 

Anyways, this Thanksgiving, I thought it would be appropriate to pay thanks to all the people who make up a good financial team. As a bookkeeper, I often get lumped in with other “finance people” who actually have very different jobs. But a full team of specialized professionals is needed for finances to run smoothly. So let’s celebrate them by reviewing all the different titles and positions that us “finance people” may have, and how those roles overlap and differ. 

A CORNUCOPIA OF ROLES:

Bookkeeper - Hey, that’s me! Yes I am biased, but I do believe that bookkeeping is the foundation of all the other professions listed below. That is because they all rely, in some way, on data that is produced by bookkeepers. Bookkeeping is about the organization and tracking of financial data. Bookkeepers will generally answer questions like, "How are our expenses for the year comparing to our budget?" and "Do we have enough money in the bank account to run payroll next week and avoid overdraft fees?". The data that bookkeepers work with is then presented to accountants. 

Accountant - Accountant is a general term for someone who will take the data from a bookkeeper and interpret or present it in a particular way. Accountants answer questions like, "Can I write such and such expense off on my taxes" or "How much fixed asset depreciation should I record for this year?". Accounting is split into financial accounting and managerial accounting. 

Financial Accountant - Financial accountants focus on the presentation of financial data to outside parties, such as investors or the IRS. Financial accountants are past-oriented, concerning themselves primarily with transactions that have already happened. The most notable of these is the CPA (certified public accountant. This is probably the role you think of first when you think of an accountant, as these are the people you probably reach out to during tax season.  

Managerial Accountant - A managerial accountant focuses on accounting as it relates to a company internally, emphasizing performance evaluation, meeting financial goals, and making recommendations for the future of a company. They may be a certified managerial account (CMA).  

Controller - If a company has multiple people working in an accounting department, then the head of that department is called the controller. They report to the CFO. 

CFO - The chief financial officer (CFO) is a member of the top management in an organization who is chiefly responsible for all financial matters. They are likely not involved in the day to day decisions and bookkeeping for the company. Rather, they take a long term view for how an organization can best manage its money. 

Fractional CFO - A fractional CFO is a part-time or contract basis CFO that may work with multiple companies.  

Enrolled Agent - Enrolled agents are authorized to represent people before the IRS on a wide variety of matters. Enrolled agents are not necessarily CPAs. Enrolled agents deal exclusively with taxation related matters, whereas CPAs may have a more diverse field of work. 

Financial Advisor - Financial advisors provide guidance to clients so that they can meet their long term goals for financial growth. While financial advisors may work with one client over a long period of time, they also may have a client bring them a snapshot of their current portfolio and advise them on what to do going forward. 

Financial Planner - Financial planners help to create holistic plans for their clients’ finances. They typically work with clients over a long period of time. Their goal is to make sure their client is happy with their financial situation. This means they may deal with everything from saving money, retirement plans, end of life care expenses, and investments.  

Fiduciary - A fiduciary is someone who manages another person's money or assets on their behalf. Critically, they have a legal obligation to manage these assets in the best interests of their client, and not themselves. Because of this, they typically work only for a set fee, and do not earn commissions for any transactions. A financial planner, financial advisor, or stock broker all may or may not be a fiduciary. The only way to know is to ask each individual if they are a fiduciary.   

Stock Broker - Stock brokers are the intermediaries between those looking to buy stocks and those looking to sell. They typically earn their money based on commission for sales, and through various fees. 

WORKING TOGETHER: 

There is a degree of overlap between many of these different roles. For example, a CPA should know the fundamentals of bookkeeping, though a bookkeeper may be more specialized and knowledgeable of particular software. Some of what a bookkeeper can do might be considered accounting work, but a bookkeeper’s job is ultimately to manage data rather than interpret it. Similarly the lines between financial advisor, financial planner, or managerial accountant can be blurred somewhat. 

It is important to note that even when there is overlap between the jobs, individuals’ licenses or certifications may be different. Many of these roles are also not mutually exclusive. It is entirely possible that someone could be a fiduciary financial advisor and a certified public accountant.  

Ideally, all members of a financial team collaborate on behalf of the client. Let’s look at a hypothetical. Let’s say your bookkeeper categorizes your business transactions and uses that info to produce financial reports. Those reports may then get interpreted by your fractional CFO, who may advise you on how to maintain a consistent cash flow for your business. They may also suggest that investing more in the business is a good move right now. You might then go to your financial planner and ask if your finances are such that you can afford to invest more in your business. They will look not only at your business reports, but your bank accounts and real estate portfolio to determine the viability of your investment. If they agree it is a good idea, then you may call your stock broker and instruct them to liquidate some stocks so you can finance your business investment. And at the end of the year you may submit your reports to your CPA or enrolled agent, who will manage your taxes on your behalf.

At any stage of this process, it helps to have communication between different members of your finance team. As a bookkeeper, I often communicate with accountants about their preferences for their clients, and their plans for how to minimize tax liability. A financial planner may want to speak with an enrolled agent about estimated tax liability for the upcoming year, as this information may assist in determining how much money to spend vs save. And so on and so on.

I hope this guide has been helpful. Remember, there are a lot of moving parts to financial management. It can seem overwhelming, but the experts are there to make the process easy for you. Just make sure you get the right professional for the job, and then let them thrive in their role as an expert. In other words… don’t ask me for investment advice. I would love to help, but I don’t handle that kind of thing, even for myself. I have a financial planner for that. 

But if you want bookkeeping expertise for your small business, then I’m the man for the job! Click here for a free consultation!