“We are fine with our part-time bookkeeper as an employee, where I am in control.” There is some truth to this, there are risks and missed opportunities.
We are going to review the basic difference between an accountant and a bookkeeper and a look at ‘employee’ vs ‘contractor’. Hopefully you will learn something new to make the necessary changes to preserve your cash and protect your business. You may find this information helpful in making new decisions regarding hiring an employee or reaching out to us to talk about how to remove a few headaches.
Bookkeeper and Accountant Defined
Employee Status of Bookkeepers and Accountants
Status of bookkeepers and accountants as
Bookkeepers and accountants are independent contractors when they:
Dual Status of Bookkeepers and Accountants
Quite often, the bookkeeper and accountant render services under conditions that are a combination of employee and independent contractor. For example, they may be an employee on one job and an independent contractor on another job.
A self-employed accountant may occasionally accept a job under conditions that make him or her an employee.
An employer-employee relationship exists if the storeowner:
· sets the hours;
· pays an hourly wage;
· furnishes the necessary materials; and
· changes or sets the order of the services.
Many bookkeepers and accountants who work 8-hour workdays as employees may also work for small firms on a contractual basis. They usually work at home, for a specified fee, and must complete the job by a certain time.
When hiring bookkeepers or accountants, it is important to understand these differences to avoid any misunderstandings.
Principal Factors That Indicates an Employer-Employee Relationship
The principal factors that indicate an employment relationship are:
The first point, referencing either party may end the relationship without liability, is not 100% accurate since there are potential consequences for the employer in regard to unemployment.
An employer has more ‘control’, but also incurs the expenses for supplies, safety, training, equipment, facilities, space, etc.
Consider the Nature of the Job to Determine Worker Status
As an employer, the nature of the worker’s job affects the degree of direction and control that is necessary to determine worker status.
For instance, highly trained professionals (accountants in particular) may require very little direction and control. When analyzing the status of professional workers, evidence of control or autonomy with respect to financial details is important, as is evidence concerning the relationship of the parties.
Examine the parties’ agreement and actions with respect to each other to determine the relationship of the parties. Pay close attention to the facts that show how the parties (and others) perceive the relationship.
The following facts may reflect the intent of the parties:
This becomes important when thinking about whether to hire an “employee” or a company such as Accounting Solutions Partners. Hiring a bookkeeper as a “contractor” but treating them as an employee has come back to haunt many companies.
Because the role of an employee as a bookkeeper or accountant can become ambiguous when and where work is performed (this is especially true for employees who work both onsite and in their home), it leaves the employer open to fines, litigation and increases the potential for fraud.
We hear stories in the news of bookkeepers embezzling hundreds of thousands of dollars. Here is a recent story about a bookkeeper stealing $500,000 by falsifying the records. In both cases, an audit, or adding a company like Accounting Solutions Partners on a part time basis would have limited the risk to avoid the pain. Hiring a bookkeeper or accountant as an employee is not a guarantee of being safe and secure.
Take a look at the many bookkeeping services we offer. You might have questions or frustrations with payroll or payroll tax reporting. You may feel “We are always short cash” and need help with setting up and managing a system to improve your cash management.
Regardless of what your goals or barriers to success happen to be, we have a long track record of working with companies with both bookkeeping and accounting.
Contact Eric by phone or by email here to learn more.
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Closing The Books