In business or not, we all need to manage our finances. Even if you have proficiency with finances, getting an extra hand to know how to file tax returns or make investments is important. Engaging the services of an accountant or a financial planner can assist tremendously.
Whether it is personal or business finance, when in need of financial advice, you have the option of choosing between an accountant and a financial planner. However, it may be hard to identify which services you need and at what point of time. You might need to hire both at a given time.
To help determine which service you need best, you need to understand their line of specialization. This article will guide you to differentiate the functionality of the both so you can make the right choice when needed.
Fundamentally, an accountant can be said to be backward-looking while a financial planner is forward-looking. The accountant prepares tax returns reporting to the government on the activities that already took place. Whereas, a financial planner works on your goals.
Qualified Accountants must have a degree in accounting with the most crucial credential of Certified Public Accountant CPA. They take care of your business records and bookkeeping with expertise in handling financial details for you. They ensure that statements of accounts like the day-to-day cash flow statements are updated, put your taxes in order and deal with HMRC.
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Qualified Certified Financial Planners CFPs must have a bachelor’s degree in financial planning. They offer services that help you with investment and business growth issues. They assess the risks in future investment plans. CFPs also provide guidance on significant business decision making that is likely to cause cascade changes in the business.
Both professionals immensely assist in making various strategic decisions for you and your business;
A Financial Planner helps with strategic decisions such as;
- Long-term risk assessment and management
- Business growth and expansion in line with the life-long business goal
- Identifying investment opportunities and making strategic investment decisions that will enable you to achieve your financial goals
- Identifying and getting out of bad debt
- Safeguarding your company assets
- Planning out what to do with your wealth. They will identify the right insurance for your family, properly save for and plan your retirement or your children’s trust fund.
- Overall wealth accumulation and protection.
On the other hand, an accountant assists with issues such as;
- Coordinating audits for reporting and meeting regulations
- They create and report on company financial statements such as ledger books, balance sheets, profit and loss statements, etc.
- Depreciation and capital expenditures management
- Understanding tax trends and advising on tax benefits like deductions
- Understanding and identifying revenues and expenses the impact profitability and growth
- Proper preparation of tax returns and documentation. The accountant makes dealing with taxes easier and efficient ensuring you meet your tax obligation.
- Budget creation and monitoring
- Business expansion. They will advise and recommend active business structures and help you strategize business growth with regard to your taxes including limited company set-up.
In a business setup, the roles of both an accountant and a financial planner complement one another. For example if you want to expand your business and open another outlet, you will require both services.
The financial planner will advise on the investment opportunity and assess all risks involved. He/she will also guide on how to acquire good debt for the investment.
On the other hand, an accountant will advise on other items affecting your plan. The items such as expenses, payroll, revenue, tax implications can derail your plan if not addressed.
Choosing an Accountant or Financial Planner
You now understand the differences between an accountant and a financial planner. Therefore, you can decide who is better at giving you financial advice. However, you need to know how to identify and choose a qualified professional and to do that, ask yourself these questions;
Are they qualified with the necessary credentials?
Professional qualification with relevant certification gives an indication of whether the accountant or financial planner is a fit for what you want.
What type of work do they do for their clients?
From their previous work, you can tell the kind of work they have experience in and how well they fit your need
How busy are they?
At the point of engagement, will they have time for you? A simple test as to whether they respond to your communication in time and in a satisfactory manner can guide you.
What is their area of expertise?
With a knowledge of their client base, you can tell their area of expertise and how they rhyme with your unique business.
What software do they use?
The accountant or financial planner must have knowledge of the software you use.
With answers to these questions, you can comfortably choose the service provider that best suits your need.