Do your own books while the business is simple, and bring in help the moment the admin starts costing you money or you are making decisions blind. As a rough rule: hire a bookkeeper when reconciling and invoicing fall behind or start eating your billable evenings, and hire a CPA when you take on employees, weigh an S-corp election, carry long jobs across year-end, or owe more tax than you understand. A bookkeeper keeps the records straight; a CPA does the strategy, the tax, and speaks for you if the IRS comes calling. Both pay for themselves when what they save you, in tax, in penalties, and in your own billable hours, beats what they charge. Here is how to know when you are at that point.
Bookkeeper, CPA, tax preparer: who does what
These get lumped together and they are not the same:
- A bookkeeper handles the day-to-day records: entering and categorizing transactions, reconciling your accounts against the bank, sending invoices, tracking who owes you, and often running payroll. They keep the books clean and current so you always know where you stand. This is ongoing, month-to-month work.
- A CPA (Certified Public Accountant) is licensed and does the higher-level work: tax planning and strategy, preparing and filing your returns, advising on entity choice and the S-corp election, setting up the right accounting method, and representing you before the IRS in an audit. You lean on a CPA at decision points and at tax time.
- A tax preparer files your return but may be neither a bookkeeper nor a CPA. A preparer without construction knowledge can file a technically correct return that still leaves money on the table or misses a trade-specific issue. Fine for a simple situation; not a substitute for a CPA when real money or strategy is involved.
Many trade businesses end up with both a bookkeeper keeping the records and a CPA for tax and strategy, and the two working together is the ideal.
When to hire a bookkeeper
Bring in a bookkeeper when the record-keeping is costing you more than it would to hand off:
- The books are falling behind, so you cannot tell where the business actually stands.
- You are spending billable hours on data entry that you could spend earning at your trade rate. If an hour of bookkeeping displaces an hour you could bill on the tools, a bookkeeper is often cheaper than doing it yourself.
- You have payroll running, which adds regular, deadline-driven work.
- Invoices and follow-ups are slipping, which directly costs you cash flow (see The invoice that gets paid).
A bookkeeper does not have to be full-time. Many small contractors use a part-time or monthly bookkeeper who keeps things current without a full salary.
When to hire a CPA
Bring in a CPA at the decision points where getting it wrong is expensive:
- You are hiring employees, so payroll, withholding, and the tax and entity picture get more complex (see Taking on your first employee).
- You are wondering about an S-corp, because the election only pays off above a certain profit and only if the reasonable-salary and payroll pieces are done right (see Should I become an S-corp and Sole prop, LLC, or S-corp).
- You carry long jobs across year-end, which can force a specific accounting method and needs setting up correctly.
- Your profit is growing, so the tax stakes and planning opportunities grow with it.
- You got a letter from the IRS, or you owe more than you can explain. That is a CPA moment, not a Google moment.
The pattern is simple: a CPA earns their fee when the tax they save, the penalties they prevent, and the decisions they get right are worth more than what they cost. Below a certain size, a plain return does not need one. Past it, not having one is the expensive choice.
Get one who knows construction
This is the part that matters most and gets overlooked: hire an accountant who understands construction, not just any CPA. The trades have their own accounting quirks that a generalist can miss, including job costing, work-in-progress (WIP) reporting, retainage, the cash-versus-accrual and completed-contract choices, and percentage-of-completion for larger contracts. A CPA who does not know construction can set your books up in a way that hides whether jobs are profitable or costs you at tax time. When you interview one, ask directly how many construction clients they have and whether they work with WIP and retainage. The right answer is fluent, not puzzled.
You are still responsible
Hiring help does not mean checking out. A bookkeeper or CPA works from what you give them, so garbage in is garbage out: keep receipts, run everything through the business account, and hand over clean records (see Bookkeeping for the trades). You still sign your tax return, and you are still legally responsible for what is on it, even if a preparer made the error. The point of hiring a pro is to do the high-value work well and buy back your time, not to hand off responsibility for knowing your own numbers.
Common questions
Do I need both a bookkeeper and a CPA?
Eventually many trade businesses do, because they do different jobs, but you rarely need both on day one. A bookkeeper keeps your records current month to month; a CPA does tax strategy, returns, and advice at decision points. When you are small and simple, you might do your own books and see a CPA only at tax time. As you add payroll, more jobs, and higher profit, a bookkeeper takes the ongoing work off your plate and the CPA focuses on strategy, with the two working together. Start with whichever is costing you the most pain, usually the ongoing bookkeeping.
When should I stop doing my own taxes?
When the stakes or the complexity outgrow a simple return, typically once you hire employees, consider an S-corp, carry long jobs across year-end, or your profit climbs. A basic sole-proprietor return can be a DIY job, but each of those changes adds tax decisions where a mistake costs real money and a CPA's advice can save more than their fee. An IRS letter or a tax bill you do not understand is also a clear signal. The test is value: when a CPA saves more in tax and prevented penalties than they charge, doing it yourself is the false economy.
What is the difference between a CPA and a tax preparer?
A CPA is a licensed accountant who can do tax strategy, complex returns, entity advice, and represent you before the IRS, while a tax preparer files your return but may have neither the license nor the depth. For a simple situation, a preparer is fine and cheaper. But a preparer without construction knowledge can file a correct-looking return that still misses trade-specific issues or planning opportunities. When you have employees, an S-corp question, or real money at stake, you want a CPA, ideally one who knows construction. Whoever files it, you sign it and you are responsible for it.
How do I know if my accountant actually understands construction?
Ask them directly how many construction clients they have and whether they routinely handle job costing, work-in-progress reporting, and retainage. The trades have accounting quirks a generalist misses, including WIP, retainage, and the cash-versus-completed-contract method choices, and getting those wrong can hide whether your jobs are profitable or cost you at tax time. A construction-fluent accountant will answer without hesitation and may ask you about your job-costing setup unprompted. If the terms puzzle them, keep looking; a good generalist is not the same as someone who knows your industry.
Is a CPA worth the money for a small contractor?
Once you are past the simplest stage, usually yes, because a good CPA typically saves more than they cost. The savings come from lower tax through proper deductions and entity choices, avoided penalties from correct filings and deposits, and the billable hours you get back by not doing it yourself. Below a certain size, a plain return may not justify one, but as soon as you hire, weigh an S-corp, or carry serious profit, the value tilts clearly toward hiring one. The measure is simple: if the tax saved, penalties avoided, and time freed beat the fee, it is worth it.
The honest bit
- What a bookkeeper or CPA charges varies widely by region, complexity, and the person, so this guide frames the decision around value rather than carding fees that would be stale and misleading. Get quotes and weigh them against what you would save.
- Nothing here varies by state, but the tax and entity decisions a CPA helps with often do, and those route to Working in Your State and the relevant tax guides.
- This is general guidance, not tax or accounting advice. The whole point of hiring a pro is to get advice tailored to your specific numbers, which a national guide cannot give you.
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