The Difference between a Bookkeeper, an Accountant, and a CFO
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When most people think of an organization’s financial department, they think of accountants. But did you know there are a variety of financial professionals that are essential to the financial well-being of an organization?
Bookkeepers, accountants, and Chief Financial Officers (CFOs) all serve critical roles in managing an organization’s finances. This guide will walk you through the function of each role and how they compare to one another.
What is a Bookkeeper?
A bookkeeper is a financial professional responsible for recording and managing a nonprofit’s daily financial transitions. Their primary role is to ensure that all transactions are entered into the accounting system with accuracy and consistency. Common nonprofit bookkeeping tasks include:
- Recording donations
- Entering accounts payable and receivable
- Organizing and reviewing bank statements
- Maintaining the general ledger
These everyday financial duties help bookkeepers provide a clear and up-to-date picture of the nonprofit’s financial status. An accurate bookkeeper helps a nonprofit maintain financial transparency and accountability by making it easy to track how funds are received and spent.
What is an Accountant?
Accountants run reports to help determine if the bookkeeping is done correctly. An accountant’s role goes beyond simple record-keeping and might include:
- Creates reconciliations of account balances
- Reviews general ledger activities for accuracy
- Prepare basic financial reports
- Ensures that accounting follows generally accepted accounting principles (GAAP)
Nonprofit accountants use their advanced knowledge of accounting principles and regulations to ensure an organization’s financial practices are sound. They also help nonprofit leaders maintain compliance with legal standards and tax regulations. Properly managing an organization’s taxes helps ensure the nonprofit maintains its exempt tax status.
What is a Chief Financial Officer (CFO)?
A Chief Financial Officer (CFO) is a senior executive in charge of the strategic direction and goal setting of a nonprofit’s accounting and financial management. The CFO role generally includes:
responsible for the strategic direction and goal setting of a nonprofits accounting and financial management. Responsibilities typically include advanced analysis and reporting, budgeting, etc.
- Advanced analysis and reporting
- Budgeting and forecasting
A nonprofit CFO oversees all financial operations to ensure the organization’s financial practices align with its long-term goals and mission. As an executive-level role, the CFO is in charge of guiding the overall financial strategy of the organization.
Nonprofit CFOs are also responsible for clearly and accurately reporting financial data to the board of directors. They will also help guide and advise other key stakeholders such as the nonprofit executive director.
Comparing the Roles of Bookkeeper, Accountant, and CFO
Bookkeepers, accountants, and CFOs all play important roles in the financial health of an organization. Each role provides a unique set of skills and fills various financial needs of an organization.
Let’s take a closer look at the responsibilities, scope of work, and educational requirements for these nonprofit financial roles.
Level of Responsibility
Generally, a bookkeeper has the most direct responsibilities in an organization. Their job is to maintain accurate records of daily transactions. The bookkeeper’s focus on accuracy forms the foundation for all financial activities in the organization.
An accountant takes on a higher level of responsibility than a bookkeeper. Accountants interpret and analyze the financial data provided by bookkeepers to prepare reports and ensure the accuracy of bookkeeping.
The CFO is the top level of responsibility in the financial department of an organization. Thus, the nonprofit CFO carries the most significant responsibility out of the three by overseeing the entire financial strategy and management of the nonprofit. They’ll need to provide strategic planning, financial forecasting, and risk management while working with the board of directors.
Scope of Work
The scope of work for each financial role in a nonprofit reflects the role’s distinct responsibilities and expertise. A bookkeeper’s scope of work is primarily transactional and administrative. For example, recording the day-to-day transactions.
Accountants often have a broader scope of work that involves checking the bookkeeping for accuracy. If mistakes or inaccuracies are found, the accountant often is tasked with correcting issues.
At the highest level, the CFO’s scope of work includes strategic management and leadership. The CFO generally works on high-level projects, such as creating a yearly operating budget.
Educational and Professional Requirements
Most nonprofit bookkeeper roles require a high school diploma or similar, as well as proficiency in accounting software and attention to detail. Some organizations may prefer bookkeepers to have a degree in accounting or related fields. Many nonprofit bookkeepers complete additional on-the-job certification or training programs.
An accountant generally holds a bachelor’s degree in accounting or finance. Some nonprofit accountants are also Certified Public Accountants (CPA), though it’s typically not required.
Educational requirements for a nonprofit CFO often include a bachelor’s degree or higher in accounting, finance, economics, or a related field. However, possessing analytical and strategic thinking skills–along with extensive experience in the nonprofit financial industry–are often more important for CFOs than degrees. Leadership skills are also essential for a CFO, and some nonprofits look for a CFO with an MBA.
Which Financial Professional Does Your Nonprofit Need?
Finding the right financial professional–or combination of professionals–for your nonprofit helps ensure your financials are accurately and efficiently managed. So, do you need a bookkeeper, accountant, or CFO?
The answer is most nonprofits need all of the skills of a bookkeeper, accountant, and CFO in some capacity. Although about 80% of nonprofit accounting work is transactional and can be handled by a bookkeeper, only hiring a bookkeeper means losing 20% of their accounting needs. On the other hand, hiring a CFO to handle all of the day-to-day transactional work of a nonprofit typically leads to burnout and high turnover.
Hiring individuals for each role isn’t feasible for many nonprofit organizations. The solution for many organizations is to outsource their financial needs to a trusted nonprofit accounting firm.
Firms like The Charity CFO provide comprehensive bookkeeping, accounting, and fractional CFO services. Our service team includes an Accounting Associate to handle the day-to-day work and a CFO to handle the strategic side of things. We specialize in nonprofit accounting, so you can be sure we understand the needs and challenges of the nonprofit industry.
Learn more about our nonprofit financial services by contacting us today!
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