Keeping the books is a responsibility for every company, business owner or entrepreneur, either through a DIY approach or by hiring or contracting with financial experts. One of the options for contracting out this task is through a private accountant, also known as a corporate accountant. While certified public accountants (CPAs) and private accountants perform many of the same functions, there are significant differences between the two types of professionals. Depending on the nature of your company’s finances, you might need to work with a private accountant either in conjunction with or instead of a CPA.
Private Accountants versus Certified Public Accountants (CPAs)
Public accountants often work independently, contracting their services to various clients. Many public accountants work for accounting firms that assign them to various clients to perform specific assignments or contracts. For instance public accountants may be contracted to prepare a company’s federal or state income tax returns. In fact, the annual tax season represents the busiest time of the year for many CPAs.
Public accountants overwhelmingly hold certified public accountant (CPA) status. CPAs who work for accounting firms often aspire to partnerships within the firm, much like legal associates aspire to partner status within law firms.
Public accountants often develop specialties, such as tax accounting or consulting. Independent public accountants may focus their efforts on a particular industry, while public accountants who work for accounting firms may be assigned to a particular department or group of accountants, all of who share the same or similar specialties.
By contrast, private accountants work for a single company – often overseeing or maintaining all of that company’s financial records and performing management reporting. Private accountants work internally with their company’s management team to strategize about the costs of doing business as well as evaluating financial performance. While many private accountants hold CPA status, many others do not, although they frequently have obtained specialized post-secondary training in finance, accounting and bookkeeping. High-level private accountants often hold the rank of CFO, or Chief Financial Officer, within their companies.
Private accountants may prepare a company’s income tax returns. However, private accountants are also frequently responsible for overseeing a company’s payroll, controlling inventory and equipment spending and other aspects of a company’s financial dealings. Private accountants are frequently busiest at the end of a company’s fiscal year, which may or may not coincide with tax season or with the calendar year.
Private Accountants versus Government or Private Auditors
It’s not too much of a stretch to say that by definition, auditors are associated with financial challenges or trouble. Although some audits are performed as a matter of due diligence, auditors are routinely associated with correcting or reconciling errors in financial records.
Like public accountants, many private and government auditors hold CPA status. However, auditors also frequently possess an extensive knowledge of the law, especially laws related to the tax code or fraud in addition to their training in accounting and finance.
Private auditors, like private accountants, work with individual companies. However, private auditors are often tasked with determining the disposition of misappropriated or missing funds or dealing with other financially-related errors within a particular company.
Government auditors are often associated with the Internal Revenue Service, and are dispatched to deal with tax-related discrepancies found in individual or corporate returns.
Do You Need a Private Accountant?
If you are a solo entrepreneur or run a very small company, it’s unlikely that you will require the full-time services of a private accountant. In most instances, your financial needs can be met by contracting with the services of a CPA at tax time, or with a financial advisor (who may be a CPA or an attorney specializing in financial matters) with specific questions. If you are dealing with discrepancies, contracting the services of an auditor is likely called for.
On the other hand, if your company is large or has complex financial records, hiring a private accountant, either full-time or part-time may be viable option. Privacy is another significant consideration favoring hiring a private accountant. Of course, no reputable accountant would willfully disclose your company’s private information or maintain records in an insecure environment. However, with a private accountant, your company’s records remain within the company, where you have complete control over the security measures (physical or electronic) employed to limit unauthorized access.
Disclaimer: This article provides a general overview of the functions served by a private accountant. It is not intended to provide financial advice. Please consult with a financial advisor in your area with specific questions about private accountants or their services.