Hiring the wrong financial professional costs more than their fee. Paying a CPA $200/hour for transaction entry wastes money on routine work, while relying on a bookkeeper for tax strategy could mean missing deductions worth thousands annually. The titles sound similar, but these roles serve fundamentally different purposes.
This guide breaks down what each professional actually does, ten key differences that matter for hiring decisions, and how to determine which one fits your current business stage.
Bookkeeper vs CPA
Both professionals handle financial work, but they serve fundamentally different purposes in your business.
What is a Bookkeeper?
A bookkeeper maintains your day-to-day financial records by recording, classifying, and organizing transactions. Their work creates the financial data infrastructure your business runs on: recording sales and expenses, reconciling bank statements, managing accounts payable and receivable, processing payroll, and generating basic financial reports.
According to the Bureau of Labor Statistics, bookkeepers don't need formal licensing, though many pursue professional certifications like the Certified Bookkeeper (CB) from the AIPB or Certified Public Bookkeeper (CPB) from NACPB. These voluntary credentials demonstrate verified experience and competency but aren't legally required to practice.
What is a CPA?
A Certified Public Accountant holds a state-issued professional license that typically requires 150 semester hours of college education (roughly a master's degree equivalent), passing the Uniform CPA Exam, and supervised experience verified by a licensed CPA. This rigorous licensing process grants CPAs legal authority for external financial statement audits and many higher-assurance attest services.
CPAs perform everything a bookkeeper does, but their core value lies in services bookkeepers cannot legally provide: conducting financial audits and reviews, providing unlimited representation before the IRS, signing attestation reports, and offering strategic tax planning. State accountancy boards govern CPA practice through statutory licensing with explicit disciplinary power, while bookkeeper certifications come from private professional organizations without government enforcement mechanisms.
Bookkeeper vs CPA: 10 Key Differences
Understanding how these professionals approach the same business needs reveals when each one provides the most value.
1. Education and Certification Requirements
Bookkeepers can practice with a high school diploma and on-the-job training. Professional certifications like the CB from AIPB require passing a four-part examination and demonstrating either two years of full-time bookkeeping experience or 3,000 hours of part-time work. These certifications remain voluntary.
CPA licensure typically requires 150 semester hours of education in many states, though alternative pathways now exist allowing licensure with a bachelor's degree plus additional work experience. The current Uniform CPA Exam follows the Core + Discipline model with three core sections plus one chosen discipline section. After passing, candidates complete supervised experience before receiving their license, then maintain it through continuing education.
2. Scope of Daily Services
Bookkeepers handle transactional work: entering daily sales and expenses, matching bank statements to accounting records, tracking what you owe vendors and what customers owe you, processing routine payroll, and producing monthly financial statements for internal use.
CPAs typically delegate daily transaction work to bookkeepers to focus on analysis and strategy. Their scope often includes preparing financial forecasts, analyzing profitability by product or service line, evaluating business structure for tax efficiency, and advising on major financial decisions. Bookkeepers maintain data accuracy by recording transactions, while CPAs interpret that data for strategic decisions.
3. Tax Preparation vs Tax Planning
Both bookkeepers and CPAs can prepare tax returns with a Preparer Tax Identification Number. The critical difference lies in what happens beyond filing the forms.
Tax preparation is reactive: compiling last year's data into required forms. Tax planning involves year-round proactive strategy, analyzing business structure for tax efficiency, projecting liabilities under different scenarios, and recommending timing strategies for income and deductions. The difference between reactive tax preparation and proactive tax planning can mean thousands in annual savings.
4. IRS Representation Authority
Under IRS Circular 230, CPAs are authorized to practice before the IRS in matters such as audits, appeals, and collections. Bookkeepers have limited representation rights only for returns they personally prepared and signed, and only before revenue agents and customer service representatives, not before appeals officers, revenue officers, or counsel.
If the IRS audits your business, a bookkeeper cannot represent you or negotiate on your behalf. You'd need to hire a CPA, enrolled agent, or attorney separately.
5. Financial Statement Authority
Both professionals prepare internal financial statements for management use. The distinction emerges when third parties need assurance about those statements.
AICPA standards establish four service levels: preparation, compilation, review, and audit. Bookkeepers are generally prohibited from performing audits or reviews. Banks requesting reviewed statements for commercial loans, investors seeking audited financials, or government contracts above certain thresholds often necessitate CPA involvement.
6. Continuing Education Requirements
CPAs must complete continuing professional education (CPE) to maintain their license. Most states require around 40 hours annually or 120 hours over three years, with specific requirements in areas like ethics, accounting standards, and taxation varying by jurisdiction. State boards track compliance and can suspend licenses for non-compliance.
Bookkeepers face no mandatory continuing education requirements. Voluntary certifications like CB and CPB require ongoing professional development to maintain the credential, but these remain optional for practicing bookkeepers.
7. Professional Liability and Insurance
CPAs typically carry errors and omissions (E&O) insurance because of their attestation authority and legal representation responsibilities. Some state boards may require proof of professional liability coverage for license renewal, though requirements vary by jurisdiction. Claims can reach hundreds of thousands of dollars when audit opinions or tax advice prove incorrect.
Bookkeepers generally carry lower limits of professional liability insurance or none at all. Their transactional work creates lower liability exposure than advisory services or attestation work, making insurance less critical but still recommended for protecting against data entry errors or missed deadlines.
8. Software and Technology Expertise
Bookkeepers specialize in mastering accounting software platforms like QuickBooks Online, Xero, and FreshBooks. They navigate transaction entry screens, reconciliation tools, and report generation daily. Their software knowledge focuses on data input efficiency and maintaining clean records within these systems.
CPAs work across multiple software platforms but tend to focus more on data analysis tools, tax software, and financial modeling applications. They extract data from accounting systems to perform strategic analysis rather than spending time on routine data entry. Their technology expertise centers on interpretation tools rather than transaction processing platforms.
9. Cost Structure
Bookkeepers earn a median hourly wage of around $23.66, with freelance rates typically ranging from $43 to $80 per hour. Monthly bookkeeping services commonly average around $300, which ranges from $250 to $700 depending on transaction volume and location.
CPAs commonly charge $150 to $400 or more per hour. Monthly retainers for ongoing CPA services often range from $600 to $2,000+. Business tax preparation commonly starts around $250 to $400 for simple sole proprietorships, while S-corporation and C-corporation returns often range from $900 to $1,850+ depending on complexity.
10. Client Service Models
Bookkeepers typically provide ongoing, regular services on monthly or weekly schedules. They work with clients consistently throughout the year to maintain current records. The relationship focuses on operational support: keeping the books clean, reconciling accounts, and producing routine reports.
CPAs often work on project-based or quarterly engagement models, with intensity varying by tax season and business needs. They might review financials quarterly, meet annually for tax planning, and handle tax return preparation during filing season. The relationship emphasizes periodic strategic guidance rather than continuous operational support.
What's Right for You: Bookkeeper vs CPA
The choice depends on your business complexity, growth trajectory, and specific financial needs at this stage. Neither professional is universally "better." Each serves different purposes.
Consider your transaction complexity and business legal structure. Single revenue streams with few vendors suggest bookkeeper services may suffice, while multiple revenue streams, inventory, or multi-location operations often benefit from CPA involvement. Sole proprietorships and single-member LLCs typically function well with bookkeepers initially, while partnerships, S-corporations, and C-corporations often benefit from CPA expertise for compliance and tax optimization.
Evaluate whether you need strategic financial guidance for major decisions like expansion, hiring, or seeking investors. If so, CPA advisory services provide value beyond what bookkeepers offer. Consider whether you'd benefit from year-round tax strategy rather than just annual preparation.
Choosing the Right Financial Professional
The right financial professional depends on where your business stands today. Bookkeepers maintain accurate daily records; CPAs analyze that data for tax savings and strategic planning. Most growing businesses eventually need both working together.
Both professionals work faster when bank transactions are already organized. Relay's purpose-built accounts let you separate operating expenses, tax reserves, and payroll before your bookkeeper reconciles or your CPA reviews, cutting down the time they spend sorting through a single cluttered account.
Open a Relay account to give your financial professional clean, categorized data from day one.
Relay is a financial technology company and is not an FDIC-insured bank. Banking services provided by Thread Bank, Member FDIC. FDIC deposit insurance covers the failure of an insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply.
