Bookkeeping vs. Accounting vs. CFO: Who Does What
Many business owners use the terms bookkeeping, accounting, and CFO interchangeably. In reality, they serve very different roles within your financial system. Bookkeepers record transactions, accountants review and file, and CFOs interpret and plan. Knowing where each fits helps you build a lean, efficient finance stack. This guide breaks down the differences, responsibilities, and timing for adding each role as your business scales.
What a Bookkeeper Actually Does
A bookkeeper focuses on the day-to-day flow of money. Their responsibilities include:
- Recording transactions from bank and credit card accounts
- Reconciling balances monthly
- Categorizing income and expenses
- Managing accounts receivable and payable
- Producing standard financial reports
The goal is to maintain clean, accurate books that support decisions and compliance.
The Accountant’s Role
Accountants take over once the bookkeeping is complete. They:
- Review the books for accuracy and compliance
- Adjust entries for depreciation or accruals
- Prepare and file tax returns
- Provide year-end financial statements
- Advise on compliance and tax optimization
Accountants rely on clean bookkeeping to do their work efficiently. Without it, they spend billable hours cleaning up data.
What a CFO Adds to the Mix
A Chief Financial Officer (CFO) focuses on financial strategy rather than data entry. Their role includes:
- Budgeting and forecasting
- Cash flow planning and capital allocation
- Performance dashboards and KPIs
- Fundraising, lending, and investor relations
- High-level financial decision support
Most small businesses do not need a full-time CFO. Virtual or fractional CFOs can fill the gap when growth or funding conversations begin.
When to Add Each Role
- Start with a bookkeeper as soon as you have recurring transactions or payroll.
- Add an accountant when you are ready for tax filings and periodic reviews.
- Bring in a CFO once revenue grows and forecasting or fundraising becomes essential.
Building in this order ensures cost efficiency while keeping financial oversight strong.
How to Avoid Overpaying for Finance Help
Match skill to need. Many small businesses pay CPA rates for work that belongs with a bookkeeper. The key is clear separation of duties. Let your bookkeeper handle the daily details, your accountant handle compliance, and your CFO handle long-term planning. This structure saves thousands each year.
FAQs
What is the main difference between a bookkeeper and an accountant?
Bookkeepers record and reconcile transactions. Accountants review those records and prepare tax filings.
When does a small business need a CFO?
Usually once it starts forecasting, budgeting, or raising capital. Early on, a bookkeeper and accountant are enough.
Can one person do bookkeeping and accounting?
It is possible in very small operations, but separation improves accuracy and oversight.
What does a virtual CFO cost?
Fractional CFOs often charge between $1,500 and $5,000 per month depending on engagement level.
