Most people know accountants work with financial information and prepare reports to help their individuals and small business owner clients. However, many are unaware of what accountants actually do day in and day out.
Accountants perform various duties that help individuals and businesses better understand their cash flow needs, prepare their income tax returns and work towards achieving their financial goals.
Let’s discuss the roles and responsibilities of accountants, what you can expect if you decide to work with one, and what education and training are required to become an accountant.
What Does an Accountant Do?
Roles and Responsibilities of an Accountant
While an accountant’s job description depends on their specific position and employer, there’s a good chance they prepare, examine, and maintain financial records. Several of the most common roles and responsibilities of an accountant include:
- Ensure financial documents and accounting records are accurate and compliant with the applicable laws and regulations.
- Identify and address accounting discrepancies.
- Compute sales and income tax returns and make sure taxes are paid on time.
- Review financial operations to identify problems and recommend solutions.
- Suggest strategies to increase revenue, reduce costs and improve profits.
- Ensure that bookkeeping processes are accurate and reliable.
- Organize payroll and payroll taxes.
- Prepare financial statements for shareholder reports or pitch decks.
- Offer audit services for individuals and business owners.
Key Skills of an Accountant
There are specific skills that an accountant must have to be successful in their job. The most important ones include:
- Analytical Skills: An accountant’s strong analytical skills will empower them to gather and analyze financial information accurately.
- Attention to Detail: Since an accountant typically analyzes a significant amount of financial data, they need to pay close attention to the details. Even one error can lead to serious problems down the road.
- Communication Skills: An accountant must have solid written and verbal communication skills to present their findings to their clients. They should know how to speak to everyday people and address their questions and concerns in easy-to-understand language.
- Technical Expertise: In today’s tech-savvy world, an accountant must know how to use advanced accounting software like QuickBooks and other technical tools such as Microsoft Word and Excel. Manual accounting processes are no longer practical or efficient.
- Organizational Skills: Excellent organizational skills are essential as an accountant will need to keep track of many documents and prioritize various tasks. A lack of organization can lead to inaccuracies and confusion.
- Problem Solving Skills: An accountant usually helps clients solve certain financial problems. It’s often their job to not suggest the appropriate solutions but to discover the issues as well.
- Business Acumen: An accountant should be well versed in other business matters like marketing, sales, and operations. This way, they’ll know how their work will benefit other initiatives within the organization they’re servicing.
- Critical Thinking Skills: Strong critical thinking skills allow an accountant to analyze complex situations and look at different angles before making a decision or recommendation.
Types of Accountants
Those who wish to pursue an accounting career can decide which type of accountant they’d like to be. A few of their options include:
- Managerial Accountants: Managerial accountants record and analyze financial data for organizations. They have an extensive understanding of how the data relates to business operations and prepare reports for upper management and other key parties.
- Public Accountants: Public accountants work with tax forms and other important financial forms that must adhere to regulatory requirements. They hold a CPA license and often work at public accounting firms or have their own businesses. Some public accountants focus on forensic accounting and investigate white-collar crimes.
- Government Accountants: Government accountants keep and examine records of government entities. They also audit individuals and businesses who are subject to taxation or other government regulations.
- Internal Auditors: Internal auditors review the processes of the businesses they work for objectively. They also evaluate and revise risk management procedures as needed. Also, they protect against theft and fraud.
- External Auditors: External auditors perform similar duties as their internal counterparts. The main difference is that they work for an outside organization instead of the one they audit for. They analyze their clients’ financial statements and inform investors and other important parties that they’ve been prepared and reported correctly.
Should I Hire an Accountant?
You don’t need an accounting background to record your income and expenses. This is particularly true if you have a fairly simple financial situation. However, an accountant may be a good investment in the following circumstances:
- You Own Your Own Business: If you’re an entrepreneur, self-employed, or a small business owner, there are special tax and financial considerations you may not be equipped to handle on your own. You can count on an accountant to minimize your taxes and depreciating assets.
- You Plan to Start a Business: You’ll find an accountant helpful if you have plans to take the plunge and eventually become a business owner. They can recommend the best business structure (sole proprietorship, LLC, partnership, etc.) and offer valuable tax planning advice.
- You Earn a High Income: The higher your income is, the greater your chances of being audited. Therefore, it’s in your best interest to work with an accountant who can reduce this risk if you earn $200,000 or more.
- You Plan to Leave an Inheritance for Your Loved Ones: If you hope to save for your children’s college or create a trust for them, for example, an accountant may help you figure out which vehicles to use.
- You Anticipate a Significant Capital Gain: With an accountant’s help, you can create a plan to ensure your capital gain is taxed at the appropriate rate and find ways to reduce your tax burden.
- You Have a Complicated Tax Situation: While you may not need an accountant if you have a simple W2 tax situation, they can be a great resource if you have a side hustle, perform freelance work, own rental properties, or have a complicated tax situation for other reasons.
- You Went Through a Major Life Change: A major life change such as marriage, divorce, or adoption can change your finances and taxes, making an accountant well worth the investment.
- You are Busy: Even if your financial and tax situation is fairly straightforward, you may lead a busy life and warrant the need for an accountant. An accountant can save you hours upon hours and ensure accuracy.
An accountant will help you navigate through specific issues that others may not have. They can review your situation and potentially save you a great deal of time, money, and headaches in the future.
Should I Hire an Accountant or Financial Advisor?
Contrary to popular belief, an accountant is not the same as a financial advisor or planner. Unlike an accountant, a financial advisor can help you create a budget, get out of debt or invest. You can count on them as your go-to resource for all your money planning needs. With a financial advisor’s expertise, you may:
- Improve the way you spend your money.
- Plan for retirement.
- Save for your children’s college.
- Select the right insurance products.
- Plan for your estate.
Put simply, a financial advisor is a great option if you’d like to build your wealthofgeeksth over time and learn about the pros and cons of your investment plans. On the other hand, an accountant can help you analyze your income and expenses, pay your state and federal income taxes, and keep your financials in order.
In many cases, you may benefit from both an accountant and a financial advisor. For example, if you’re a business owner, both professionals can work together to ensure you succeed financially. It’s no surprise that many accountants collaborate with financial planners regularly.
How to Become an Accountant
According to the U.S. Bureau of Labor Statistics, accountants’ job growth is projected to grow by 4% from 2019 to 2029. Several factors, including a growing economy and increasing tax laws and regulations, will likely contribute to these professionals’ strong demand.
There are specific steps an aspiring accountant must undergo to enjoy a successful and fulfilling accounting career. These include:
- Earn a Degree: The majority of accounting positions require at least a bachelor’s degree in the field. Some, however, prefer a master’s degree too. A master’s degree or advanced coursework in subjects like taxes, auditing, and financial reporting is often necessary for those who plan to sit for the Certified Public Accountant (CPA) license. Fortunately, most accredited colleges and universities offer degree programs in accounting.
- Choose a Specialty: As stated, there are several different types of accounting professionals. An aspiring accountant should select one that aligns well with their interests, strengths, and educational background.
- Decide Between an Accountant or CPA: Accountants don’t have to sit for the CPA exam but are more limited in the duties they can conduct. If they wish to prepare tax returns in the United States, they must pass an IRS exam or receive a Preparer Identification number. Only CPAs can perform audits and represent clients before the IRS. Prospective accountants should figure out whether they wish to become a Certified Public Accountant.
- Pass the CPA Exam: Those who hope to become a Certified Public Accountant must pass all four national CPA exam sections. These sections include Audit and Attestation, Financial Accounting and Reporting, Regulation and Business Environment and Concepts. It’s wise for CPA candidates to take test preparation courses as the CPA exam is challenging and comprehensive.
- Secure an Entry-Level Job: Most accountants don’t work for themselves right off the bat. Many of them gain experience through an employer like an accounting firm, startup, or large corporation. Eventually, they may gain the expertise, confidence, and desire to begin their own venture.
This article originally appeared on Wealth of Geeks and has been republished with permission.
With over 25 years in the financial services industry, Brian Thorp is the founder and CEO of Wealthtender, a leading personal finance website helping thousands of people each month find the best financial advisors, coaches, and educational resources to enjoy life with less money stress.